External and Internal Environmental Analysis Essay
External and Internal Environmental Analysis
“Environmental scanning is the internal communication of external information about issues that may potentially influence an organization’s decision-making process” (Albright, 2004, p. 34). For organizations like Fresenius Medical Care, a worldwide company, the awareness of external environmental factors is vital to maintain competitive on the dialysis industry. Even though there are multiple external factors to analyze, in recent years the government works as an element of change on the medical industry with the biggest health reform in United States history.
The health reform will affect the way Fresenius makes business because the company needs to adapt the new payments-per-service coverage and sustain quality of service as well as profitability. External Environmental Scan Remote Environment “The remote environment comprises five factors that originate beyond, and usually irrespective of, any single firm’s operating situation: economic, social, political, technological, and ecological factors” (Pearce II & Robinson, 2012, p. 87). The organization has no control or regulation over these factors.
The remotes environmental factors influence the way Fresenius Medical Care offers dialysis services, especially the economic and political factors. The economic factor describes the organization awareness of the “general availability of credit, the level of disposable income, and the propensity of people to spend” (Pearce II & Robinson, 2012, p. 87). Fresenius target market is end-stage-renal-disease patients with health care insurance. The economic factor will affect Fresenius target and the ability to pay for dialysis treatment and medications.
The “political factors define the legal and regulatory parameters within which firms must operate” (Pearce II & Robinson, 2012, p. 90). A good example of political factor is the Obama Care Law or Patient Protection and Affordable Care Act. The president Barak Obama signs the law in 2010 with the purpose of providing accessibility to affordable medical care to the Americans and to reduce the government expenses. For-profits entities like Fresenius Medical Care have to adapt the new regulations and create a strategic plan to avoid the potential reduction on profit.
Industry Environment “Industry environment is the general conditions for competition that influence all businesses that provide similar products and services” (Pearce II & Robinson, 2012, p. 97). There are five forces that Michael E. Porter, a Harvard University professor, uses to describe the industry competition (Pearce II & Robinson, 2012). These forces are entry barriers, supplier power, buyer power, substitute availability, and competitive rivalry (Pearce II & Robinson, 2012). Fresenius Medical Care major competitor in the United States is Davita Dialysis Center.
Fresenius recognizes and study the competitor’s strategies to strength the organization. The Obama Care law affects the dialysis industry by changing the medication coverage. Fresenius competitor owns pharmaceuticals with capability to serve the dialysis patients as soon the law becomes active in 2016. Fresenius identifies the threat of substitute of the competitor and create a program that provides medications to the patients and increase the company profitability even before the law is effective.
The goal for Fresenius is to enroll a 100% of patients with Medicare in Fresenius Rx program by the end of 2013. So far Fresenius is at 20% of the goal in California. Operating Environment The external operating environment seems to be closer to the firm than the remote and the industry environments. Operating environment includes the following factors: competitors, creditors, customers, labor, and supplier (Pearce II & Robinson, 2012). The proximity of these factors implies that the company may have more interaction and more awareness of the environmental changes.
For example, Fresenius study the effect of the new health reform on the main competitor, Davita Dialysis, the patients, the employees, the pharmaceutical suppliers, and medication distributors. Fresenius uses this information to create new strategies and reform the internal environment. Internal Environmental Scan Strengths “A strength is a resource or capability controlled by or available to a firm that gives it an advantage relative to its competitors in meeting the needs of the customers it serves” (Pearce II & Robinson, 2012, p. 151).
Fresenius Medical Care is a German company with more than 70 years of experience in the dialysis industry. The company operates worldwide and has “more than 2,100 dialysis facilities in North America” (Fresenius Medical Care, n. d. , p. 1). In addition to the experience and knowledge, Fresenius is “the continent’s top producer of dialysis equipment, dialyzers and related disposable products and a major supplier of renal pharmaceuticals” (Fresenius Medical Care, n. d. , p. 1). Another important strength is the high quality standards on the services and products that the company provides. Weakness
With the strength comes the weakness. “A weakness is a limitation or deficiency in one or more of a firm’s resources or capabilities relative to its competitors that create a disadvantage in effectively meeting customer needs” (Pearce II & Robinson, 2012, p. 151). The weakness that the company confronts with the new health care reform is the pharmaceutical capability. The pharmacy should be ready to serve “hundreds of thousands of people throughout the United States” (Fresenius Medical Care, n. d. , p. 1) by 2016. Fresenius has two pharmacies that provide services to more than 2,000 facilities.
The prescription delivery time fluctuates between two days and two weeks, which gives advantage to the competitors. Another weakness that Fresenius has is the pressure putting into the employees to meet the project deadlines. This pressure may cause work accidents, employees’ exhaustion or the reason for knowledgeable employees to move and work with the competitors. Competitive Position and Possibilities Competitive advantage is the “company’s unique skills and resources working to implement strategies that competitors cannot implement as effectively” (Olsen, 2013, p.
1) Fresenius Medical Care (FMC) has a competitive advantage position because the company keeps the vanguard on dialysis product innovation and quality of service. FMC is the major product provider of the competitors in United States as well. A strategic alliance between FMC and the competitors may help the industry to survive the new health care reform and the implications to dialysis treatment payments. This alliance may reduce the cost of the medications and improve customer service by delivering medications the same day of the prescription order. If an alliance is impossible, the knowledge, and experience in strategic planning
that characterize Fresenius, will lead the company to a new plan to keep profitability while doing business. Other possibilities may be open more pharmacies around the United States, and diversify the medications inventory. In this way Fresenius will be able to fill any medication prescription to the patients as well as improve delivery time. Organizational Structure and Performance “Organizational structure refers to the formalized arrangements of interaction between and responsibility for the tasks, people, and resources in an organization” (Pearce II & Robinson, 2012, p. 321).
Fresenius Medical Care has a traditional matrix organizational structure “in which functional and staff personnel are assigned to both a basic functional area and to a project or product manager” (Pearce II & Robinson, 2012, p. 326). This type of structure helps large companies to concentrate in projects like the creation of strategic plan to meet the government health reform and meet the company’s goal. Conclusion The external and internal environmental analysis brings information to Fresenius Medical Care (FMC) that the company uses to strengthen the company and be aware of potential treats and opportunities.
For example, the external remote environment factor that influences the company’s structure is the new government health care reform or the Obama Care Law by changing the amount of payment per dialysis treatment. The external industry and operating environments analysis provide information about the competitor’s strategies in relation to the new regulations. Davita Dialysis Center represents FMC biggest competitor. Fresenius strengths are experience, knowledge, innovation, biggest producer of dialysis materials, and high quality measures. Fresenius weaknesses are the pharmacy capability, deadlines, and pressure.
Fresenius uses the strength to improve pharmacy services; decrease employees work pressure, and maintain competitive, and profitable in the dialysis industry. Fresenius organizational structure helps the company to meet the company’s goals, mission, and mission. The matrix structure permits functional employees to work in special projects, perform a functional work, and meet the company’s expectations. For example, Fresenius has the Registered Dietitians working on FMC Rx (Company’s pharmacy) enrollment project and performing regular dietitian job.
The dietitian reports to the manager of operations as well as the Clinical Manager. References Albright, K. S. (2004, May/June). Environmental scanning: radar for success. Information Management, 38(3), 38. Retrieved from http://www. arma. org/ bookstore/files/Albright. pdf Fresenius medical care. (n. d. ). Retrieved from http://jobs. fmcna. com/ Olsen, E. (2013). About. com. Retrieved from http://homebusiness. about. com/od/growing/a/comp_advantage. htm Pearce II, J. A. , & Robinson, R. B. (2012). Strategic Management (13th ed. ). New York, NY: McGraw-Hill Higher Education.