Assignment 08: Internal Strengths and Weaknesses
HA4110D – Healthcare Planning and Evaluation
Assignment 08: Internal Strengths and Weaknesses
Directions
.READ chapters 17, 18, 19, 20 and 21
.REVIEW PowerPoints on chapters 17, 18, 19, 20 and 21
.COMPLETE Exercises in chapters 17, 18, 19, 20 and 21
.Write a two-page paper that discusses internal strengths and weaknesses as it would apply to your chosen organization. Seek a secondary source if needed.
.Use third person writings do not use “I think” or “in my opinion” keep it factual, third person and follow APA standards a minimum of two references are required.
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Strategic Analysis for Healthcare
Chapter 17
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SWOT: Internal Strengths and Weaknesses
As we discussed in Chapter 9, SWOT analysis looks at a company’s strengths, weaknesses, opportunities, and threats.
It brings together information from various analyses to help form a cohesive assessment of the company.
SWOT does not identify particular strategies, but it identifies issues that may need to be strategically addressed.
The SWOT analysis is split into two dimensions: internal issues and external issues.
In Chapter 9, we examined the external factors—opportunities and threats (OT). In this chapter, we will look at the internal strengths and weaknesses (SW).
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SWOT: Internal Strengths and Weaknesses
A strength can be thought of as any internal attribute of the organization that is helpful in achieving corporate objectives.
Strengths have positive impacts on your organization’s profitability and competitive well-being.
Positive impacts could involve such conditions as strong cash position, effective corporate culture, or superior manufacturing capability.
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SWOT: Internal Strengths and Weaknesses
A weakness can be thought of as any internal attribute of the organization that is a hindrance in achieving corporate objectives.
Weaknesses pose obstacles to your organization’s profitability and competitive well-being.
Such obstacles could be in the same categories as the issues mentioned above—for instance, poor cash position, weak corporate culture, or inferior manufacturing capability.
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SWOT: Internal Strengths and Weaknesses
To begin the SW portion of your SWOT, first focus on the internal factors that, either now or in the future, could impact your organization.
Consider the critical success factors that pertain to your organization’s environment.
This information should draw upon your research about the organization in particular, as well as the industry and external environment in general.
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SWOT: Internal Strengths and Weaknesses
You have previously assessed these issues to develop your financial ratio analysis, BCG matrix, GE matrix, McKinsey 7S analysis, life cycle analysis, and organizational culture analysis.
Your Porter’s five forces analysis, PEST analysis, and competitive benchmark analysis may provide additional clues.
A publicly traded company’s Security and Exchange Commission filings—such as the annual report, 10-K, and 10-Q—can also provide a clue.
Review all those analyses and identify the issues that could become a competitive threat or could create a competitive opportunity for your organization.
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SWOT: Internal Strengths and Weaknesses
Typically, you should identify about ten strengths and ten weaknesses.
Note again that you are not proposing strategies or solutions here.
You are identifying critical issues that will need to be addressed in subsequent strategy development sections.
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Exercise
Divide the class into groups.
Complete the external portion of the SWOT analysis for your project organization in the space provided in your book.
Be sure to review your previous analyses and consider the critical success factors in the industry.
What are the implications for strategy?
The issues you identify in this exercise will be used to complete the IFE in the next chapter and later will be transferred into the TOWS strategy development chart in Chapter 24.
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Strategic Analysis for Healthcare
Chapter 18
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Internal Factor Evaluation
Just as an external factor evaluation (EFE) organizes and evaluates the OT section of SWOT, an internal factor evaluation (IFE) addresses the SW section—the internal strengths and weaknesses.
The IFE produces a numeric score that reflects the gravity of each issue listed.
The score will correspond to certain standard strategies that will be discussed in Chapter 19.
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Internal Factor Evaluation
As you did with the EFE analysis, note that not every item you identified in the SW section of your SWOT analysis is of equal strength or equal weakness.
Some distinction needs to be made between the “great” strengths and weaknesses and the “could be” strengths and weaknesses.
To begin to make these distinctions, review the SW section of SWOT from the previous chapter.
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Internal Factor Evaluation
The strategist evaluates each strength and weakness and applies a weighting system.
The total when all of the weights have been applied and added is exactly 1.00.
Each individual factor, therefore, receives some portion of 1.00.
The size of that portion reflects the strategist’s subjective evaluation of how important each internal factor is to successful competition within the firm’s industry.
The more important the factor, the higher is the weight assigned.
The total of 1.00 is the sum of the whole column, including both strengths and weaknesses.
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Internal Factor Evaluation
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Internal Factor Evaluation
The previous slide shows, for instance, that the weakness associated with managing a significant population without health coverage is deemed to be more significant than the strength of the organization’s technology, administration, or facilities.
Note that there is no one “correct” weight for any factor.
The accuracy of the analysis depends on the strategist; careful research and a clear understanding of the company and industry are essential.
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Internal Factor Evaluation
Once weights have been assigned to the importance of each factor in the industry, the strategist now focuses on how significant each strength or weakness is for the organization.
Strengths and weaknesses are rated on a scale of 3–4 for strengths and 1–2 for weaknesses, as shown here:
4 = major strength
3 = minor strength
1 = major weakness
2 = minor weakness
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Internal Factor Evaluation
The rating for each factor is once again subjective on the part of the strategist and should be based on research.
These ratings are not added up, so there are no constraints on how the numbers may be distributed.
Once the ratings have been applied, each factor’s rating is multiplied by its weight to yield a weighted score for the factor.
The next slide continues this example.
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Internal Factor Evaluation
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Internal Factor Evaluation
The IFE analysis yields a total score when the column of individual scores is summed.
This score can be used in an internal–external (I/E) matrix, which corresponds to a standard table of strategic responses.
We will explore these steps in the next chapter.
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Internal Factor Evaluation
Note that the weight is industry specific.
The rating is organization specific.
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Exercise
Break into groups and complete an IFE chart in the space provided on page 123 of your book.
You will need the SW portion of SWOT that you completed in the last chapter.
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Start of IFE Analysis
Strengths
Weight
1. Local Market Dominance
0.100
2. Caring staff
0.050
3. Excellent administration
0.050
4. Good location
0.025
5. Outstanding facilities
0.050
6. Strong community support
0.025
7. Excellent Board of Trustees
0.025
8. Expanding to meet growth
0.050
9. Center of regional health care
0.050
10. Technology
0.075
Weaknesses
1. Weak process to manage low -income
population
0.050
2. Inability to manage population without health
coverage
0.100
3. No process to address transient market
0.025
4. Difficulty recruiting providers
0.025
5. Reputation of the facility
0.050
6. Changes in Reimbursement
0.100
7. Staff turnover
0.050
8. Nursing shortage
0.025
9. Need for technical staff
0.025
10. Limited resources in mental health
0.050
TOTAL WEIGHT:
1.00
Start of IFE Analysis
Strengths
Weight
1. Local Market Dominance
0.100
2. Caring staff
0.050
3. Excellent administration
0.050
4. Good location
0.025
5. Outstanding facilities
0.050
6. Strong community support
0.025
7. Excellent Board of Trustees
0.025
8. Expanding to meet growth
0.050
9. Center of regional health care
0.050
10. Technology
0.075
Weaknesses
1. Weak process to manage low-income population
0.050
2. Inability to manage population without health coverage
0.100
3. No process to address transient market
0.025
4. Difficulty recruiting providers
0.025
5. Reputation of the facility
0.050
6. Changes in Reimbursement
0.100
7. Staff turnover
0.050
8. Nursing shortage
0.025
9. Need for technical staff
0.025
10. Limited resources in mental health
0.050
TOTAL WEIGHT:
1.00
IFE Analysis
Strengths Weight Rating Score
1. Local Market Dominance 0.1 4 0.4
2. Caring staff 0.05 3 0.15
3. Excellent administration 0.05 4 0.2
4. Good location 0.025 4 0.1
5. Outstanding facilities 0.05 3 0.15
6. Strong community support 0.025 4 0.1
7. Excellent Board of Trustees 0.025 3 0.075
8. Expanding to meet growth 0.05 4 0.2
9. Center of regional health care 0.05 3 0.15
10. Technology 0.075 4 0.3
Weaknesses
1. Weak process to manage low -income
population 0.05 1 0.05
2. Inability to manage population without health
coverage 0.1 1 0.1
3. No process to address transient market 0.025 2 0.05
4. Difficulty recruiting providers 0.025 1 0.025
5. Reputation of the facility 0.05 2 0.1
6. Changes in Reimbursement 0.1 1 0.1
7. Staff turnover 0.05 1 0.05
8. Nursing shortage 0.025 1 0.025
9. Need for technical staff 0.025 1 0.025
10. Limited resources in mental health 0.05 1 0.05
1.00
Total
Score:
2.400
IFE Analysis
Strengths
Weight
Rating
Score
1. Local Market Dominance
0.1
4
0.4
2. Caring staff
0.05
3
0.15
3. Excellent administration
0.05
4
0.2
4. Good location
0.025
4
0.1
5. Outstanding facilities
0.05
3
0.15
6. Strong community support
0.025
4
0.1
7. Excellent Board of Trustees
0.025
3
0.075
8. Expanding to meet growth
0.05
4
0.2
9. Center of regional health care
0.05
3
0.15
10. Technology
0.075
4
0.3
Weaknesses
1. Weak process to manage low-income population
0.05
1
0.05
2. Inability to manage population without health coverage
0.1
1
0.1
3. No process to address transient market
0.025
2
0.05
4. Difficulty recruiting providers
0.025
1
0.025
5. Reputation of the facility
0.05
2
0.1
6. Changes in Reimbursement
0.1
1
0.1
7. Staff turnover
0.05
1
0.05
8. Nursing shortage
0.025
1
0.025
9. Need for technical staff
0.025
1
0.025
10. Limited resources in mental health
0.05
1
0.05
1.00
Total Score:
2.400
Strategic Analysis for Healthcare
Chapter 19
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Internal–External Matrix
The internal–external (I/E) matrix uses the data that was originally assembled in the SWOT analysis (Chapter 9 and Chapter 17) and transferred into the EFE (Chapter 10) and IFE (Chapter 18) analyses, and it helps make sense out of the EFE and IFE results.
The I/E matrix positions an organization in a nine-cell display, with placement determined by EFE and IFE total scores.
To begin constructing the I/E matrix, the range of possible EFE scores is placed on the vertical axis, and the range of IFE scores is placed in the horizontal axis.
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Internal–External Matrix
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Internal–External Matrix
The horizontal axis of the matrix reflects internal strength and is divided into three categories:
weak (1.0–1.99),
average (2.0–2.99), and
strong (3.0–4.0).
The vertical axis reflects industry attractiveness and is divided into
low (1.0–1.99),
medium (2.0–2.99), and
high (3.0–3.99) categories.
The three categories on each axis combine to form nine boxes in the matrix.
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Internal–External Matrix
The organization is then plotted based on the intersection of its IFE and EFE scores.
The locations in the I/E matrix correspond to certain standard implied strategies.
The strategic groups are marked in Exhibit 19.2 by the letters A, B, and C. The implied strategies corresponding to each letter are listed below the matrix.
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Internal–External Matrix
Within the I/E matrix, the organization is represented as a circle.
As with the General Electric matrix and the Boston Consulting Group matrix, the size of the circle represents the size of the market and the pie slice represents the organization in terms of sales or profit within that market.
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Internal–External Matrix
Integration Strategies
Forward integration: Ownership or increased control over distributors or retailers
Backward integration: Ownership or increased control over suppliers
Horizontal integration: Ownership or increased control over competitors
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Internal–External Matrix
Intensive Strategies
Market development: Introducing new products or present products into new areas
Product development: Improvement or modification of products for increased sales
Market penetration: Increased share for present products by increased effort
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Internal–External Matrix
Defensive Strategies
Joint venture: Two or more firms joining and creating a third co-owned firm
Retrenchment: Regrouping via cost- and asset-reduction techniques
Divestiture: Selling a product line, division, or business unit
Liquidation: Selling all company assets
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Internal–External Matrix
Later, as you begin to develop specific strategies, you can refer back to the I/E matrix and see if your strategy development is consistent with the implied directions.
If it is, great! You are on the right path.
But if the strategies you are developing are inconsistent with those suggested by the matrix, some serious consideration is needed.
For example, if the strategies you develop are all aggressive and the I/ E matrix is suggesting retrenchment or divestiture, a disconnect exists somewhere.
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Exercise
Break into groups and create an I/E matrix for your project organization using the space on page 131 of your book.
You will need IFE and EFE scores from previous chapters.
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EFE Score
IFE Score
Weighted IFE Score
Strong 3.0- 4.0 Average 2.0 to 2.99 Weak 1.0 to 1.99
Weighted EFE Score
High 3.0-
4.0
A
A B
Medium
2.0 to
2.99
A B
C
Low 1.0
to 1.99
B C C
Implied Strategies-
A Grow and Build Integration strategies, intensive strategies
B Hold and Maintain Market penetration, product development, joint venture
C Harvest or divest Retrenchment, divestiture, liquidation
Weighted IFE Score
Strong 3.0- 4.0
Average 2.0 to 2.99
Weak 1.0 to 1.99
Weighted EFE Score
High 3.0- 4.0
A
A
B
Medium 2.0 to 2.99
A
B
C
Low 1.0 to 1.99
B
C
C
Implied Strategies-
A
Grow and Build
Integration strategies, intensive strategies
B
Hold and Maintain
Market penetration, product development, joint venture
C
Harvest or divest
Retrenchment, divestiture, liquidation
Strategic Analysis for Healthcare
Chapter 20
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Grand Strategy Matrix
Grand strategies are overarching, long-term strategies that set the direction for a company.
The grand strategy matrix (GSM) is intended to assist a strategist in deciding which grand strategies are most appropriate.
The GSM is a four-block matrix that considers a company’s competitive position in the market as well as the growth rate of the market.
These factors are similar to the concepts used in the BCG matrix and the GE matrix.
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Grand Strategy Matrix
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Grand Strategy Matrix
Definitions of each strategy are in your book on page 134.
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Grand Strategy Matrix
Companies in Quadrant 1 of the GSM are in a great strategic place because they have a strong competitive position in a rapidly growing market.
These companies should leverage their existing competitive advantages and focus on their current products and markets.
Strategies such as market penetration, market development, and product development are appropriate.
If a company in this quadrant has extra cash on hand, it might consider integration strategies such as backward, forward, or horizontal integration.
If the company is heavily dependent on a single product or limited customer base, or is in some other way narrowed in scope, concentric diversification may be appropriate.
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Grand Strategy Matrix
Companies in Quadrant 2 of the GSM are in a weak competitive position in a growing market.
They need to reevaluate their existing strategies to determine why that is.
Because the market is growing rapidly, they need to employ intensive strategies such as market penetration, market development, and product development.
If a company does not have a tangible competitive advantage, it may try to gain efficiency and economies of scale through horizontal integration.
If the strategist believes that a significant competitive advantage cannot be developed and horizontal integration is not an option, the company may choose to sell off the business and use the proceeds from the sale to reinvest in other businesses that may produce a greater return on investment.
If a buyer is not available and the business is a cash drain on the parent company, liquidation might be a last resort.
In such cases, the company is shut down and its assets are sold to pay debts. Obviously, liquidation is not an attractive strategy, but it could save a parent company from further losses.
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Grand Strategy Matrix
Companies in Quadrant 3 have a weak competitive position in a slow growth market.
These companies have to take quick action to ensure a turnaround and avoid being driven out of business.
Retrenchment tactics, such as cost reductions and sale of assets, can help conserve cash.
Alternatively, diversification strategies designed to reposition the business into different areas may be appropriate.
These strategies may include horizontal diversification and conglomerate diversification.
If all else fails, the company may be sold off or liquidated.
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Grand Strategy Matrix
Companies in Quadrant 4 have a strong competitive position but are in a slow growth market.
Because of their strength and cash flow, these companies have the ability to reallocate assets into more attractive markets or grow their dominance of the current market.
They may pursue these goals through concentric diversification, horizontal diversification, or conglomerate diversification.
Additionally, by combining with another company in a strategic joint venture, they can gain further leverage in the market.
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Exercise
Complete a grand strategy matrix for your project organization using the chart on page 137 of your book.
Which strategies are appropriate and which are not? Why?
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Quadrant 2
Market penetration
Market development
Product development
Horizontal integration
Divestiture
Liquidation
Quadrant 1
Market penetration
Market development
Product development
Horizontal integration
Forward integration
Backward integration
Concentric diversification
Quadrant 3
Concentric diversification
Horizontal diversification
Conglomerate diversification
Retrenchment
Divestiture
Liquidation
Quadrant 4
Concentric diversification
Horizontal diversification
Conglomerate diversification
Joint venture
Weak Competitive Position
Strong
Competitive Position
Slow Market Growth
Rapid Market Growth
Strategic Analysis for Healthcare
Chapter 21
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SPACE Matrix
The strategic position and action evaluation (SPACE) matrix is a four-direction system used to analyze whether conservative, aggressive, defensive, or competitive strategies are most appropriate for a company’s approach (Rowe et al. 1982).
The analysis looks internally at the organization’s financial strength and competitive advantage, as well as externally at the stability of the environment and the strength of the industry in which the organization competes.
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SPACE Matrix
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SPACE Matrix
In the SPACE matrix, financial strength (FS) is plotted against environmental stability (ES), and competitive advantage (CA) is plotted against industry strength (IS).
A position in the top left quadrant of the SPACE matrix suggests a conservative strategy is appropriate for the company.
The top right quadrant suggests an aggressive strategy.
The bottom right suggests defensive strategies, and
The bottom left suggests competitive strategies.
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SPACE Matrix
The steps in completing the SPACE matrix are as follows:
Determine what variables to measure. You should have approximately five per factor.
The variables should involve critical success factors in the industry and be good indicators of financial strength, competitive advantage, environmental stability, and industry strength.
For example, for the issue of financial strength, what are the five or six key indicators of financial health for a company in your industry?
Obviously, the variables will change by industry (retail may have very different indicators of financial health than does a hospital), but certain key indicators are common.
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SPACE Matrix
Some examples are provided below:
Financial strength (FS) variables: return on investment (ROI), return on equity (ROE), earnings per share (EPS), leverage, liquidity, other measures from the ratio analysis
Competitive advantage (CA) variables: market share, product quality, life cycle position, customer loyalty, manufacturing capability, other factors from the five forces analysis or SWOT
Environmental stability (ES) variables: technology, inflation, other factors from PEST and environmental analysis
Industry strength (IS) variables: growth potential, profit potential, productivity, other factors from the five forces analysis and environmental analysis
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SPACE Matrix
Give a score ranging from +1 (terrible) to +6 (great) for each of the variables that make up financial strength (FS) and industry strength (IS).
Give a score ranging from –1 (great) to –6 (terrible) for each of the variables that make up environmental stability (ES) and competitive advantage (CA).
Find the average score for the FS variables, then for the ES variables, then for the CA variables, and finally for the IS variables.
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SPACE Matrix
Plot the values for each dimension on the appropriate axes of the SPACE matrix.
Add the average score for FS to the average score for ES to yield the y value.
Add the average score for CA to the average score for IS to yield the x value. Once you have both an x value and a y value, you will be able to plot a single point on the SPACE matrix.
Find the intersection of the x-axis score and the y-axis score. Draw a line from the center of the SPACE matrix to the intersection point. This line points to the type of strategies the organization should pursue.
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SPACE Matrix
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SPACE Matrix
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Exercise
In the space provided on page 143, create a SPACE matrix for your project organization.
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Financial Strength (FS)
Environmental Stability (ES)
Competitive Advantage (CA)
Industry Strength (IS)
-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6
+6
+5
+4
+3
+2
+1
-1
-2
-3
-4
-5
-6
Conservative
Aggressive
Competitive Defensive
Financial Strength (FS)
Environmental Stability (ES)
Competitive Advantage (CA)
Industry Strength (IS)
-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6
6
5
4
3
2
1
-1
-2
-3
-4
-5
-6
Conservative
Aggressive
Competitive Defensive
Y:2.60; X:2.20
Exhibit 21.4