Understanding and Analyzing the General Environment

1. Understanding and Analyzing the General Environment HCAD 5390

2. Major Components of an Organization’s External Environment • Industry (or industries) and competitors • Market (or markets) and customers • General environmental forces

3. Strategic Benefits of External Environmental Assessment • Align the organization with its environment • Strategies more responsive to the environment • Information that informs strategic decisions • Early warning of environmental changes • Identify useful resources in the environment • Plot to effect change in the environment

4. External Environmental Assessment Process • Identify most influential environmental forces • Identify critical industry and market issues • Select forces and issues for close monitoring • Identify information sources on the forces • Conduct initial baseline assessment • Project trends and pace of change • Estimate impact of trends on the organization • What strategic decisions in response to trends • What decision makers receive environmental reports

5. External Environmental Analysis A continuous process which includes • Scanning: Identifying early signals of environmental changes and trends • Monitoring: Detecting meaning through ongoing observations of environmental changes and trends • Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends • Assessing: Determining the timing and importance of environmental changes and trends for firms’ strategies and their management

6. Categories of Environmental Factors • Political/Governmental • Legal • Profession/Industry • Economic (global, national, regional) • Sociocultural • Demographics • Technology

7. Environmental Factors:Political/Governmental • Specific election results • Specific politicians voted in or out of office • Political ideological mood of country or region • Opportunities for lobbying • Political/business leaders positions on industry-related issues • Government spending focus and levels • Government policies on industry-related issues • Governmental regulatory vigor • Government role in meeting societal needs • Media reports

8. Environmental Factors: Legal • Existing laws (long established, how are they interpreted and enforced) • New laws (recently enacted, how will they be interpreted and enforced) • Proposed legislation (working their way through the legislature, likely impact on industry and organization)

9. Environmental Factors: Profession/Industry • Professional associations • American Medical Association • American Nursing Association • American Academy of Procedural Coders • Industry trade associations • American Hospital Association • Medical Group Management Association • Pharmaceutical Research and Manufacturers of America

10. Environmental Factors: Economic At global, national and regional levels • Interest rates • Stock market prices • Venture capital deals (IPOs, M&As) • Government budget deficit or surplus • Inflation rates • Consumer income, disposable income, and debt • Employment and unemployment levels • Tax rates • Economic cycle stage (boom vs recession) • Global economic metrics • Specific effects of economic trends

11. Environmental Factors: Sociocultural • Characteristics – traditions, lifestyles, values, ideals, aspirations, principles, ethics, attitudes, beliefs, biases, opinions, tastes, political views, and behavioral patterns • People – current customers, prospective customers, influencers of customers, ends users, employees, suppliers, shareholders, bondholders, lenders, government regulators, politicians, media, general public

12. Gender Age Income levels Ethnicity Race Geographic place of residence Family size and composition Education Employment status Birth rates Life expectancies Environmental Factors: Demographics

13. Environmental Factors: Technology New capabilities, equipment, and systems in: • Clinical treatment and procedures (drugs, medical devices, diagnostic tests, surgical procedures, treatment regimens) • Researching and developing clinical technologies • Gathering, recording, and communicating clinical data (EMR, EHR, CPOE systems) • Gathering and disseminating nonclinical data (cost, quality, satisfaction, patient logistics)

14. Demand Embryonic Time Competitive Changes During Industry Evolution Stages of the Industry Life Cycle

15. Demand Embryonic Growth Time Stages of the Industry Life Cycle Competitive Changes During Industry Evolution (Continued)

16. Demand Embryonic Growth Shakeout Time Stages of the Industry Life Cycle Competitive Changes During Industry Evolution (Continued)

17. Capacity Excess Capacity Demand Units t2 t1 Time Competitive Changes During Industry Evolution (Continued) Growth in Demand and Capacity

18. Competitive Changes During Industry Evolution (Continued) Stages of the Industry Life Cycle Demand Embryonic Growth Shakeout Maturity Time

19. Demand Embryonic Growth Decline Shakeout Maturity Time Stages of the Industry Life Cycle Competitive Changes During Industry Evolution (Continued)

20. Strategies in Fragmented Industries • Fragmented industry characteristics: • Localized markets with low entry barriers (e.g., Mom’s Diner). • Few economies of scale opportunities exist. • High transportation costs (e.g., sand) for products. • Focus strategies predominate (e.g., customer group, region).

21. Strategies in Fragmented Industries • Competing in fragmented industries requires strategic consolidation by: • Chaining (Wal-Mart) • Franchising (Pearl Vision) • Horizontal mergers • Using the Internet (Lens.com)

22. Information Sources for External Environmental Assessment • Newspaper clipping services • General-purpose and narrow-focus websites • Charitable research foundations (Robert Wood Johnson Foundation, Kaiser Foundation) • Think tanks (RAND Corporation) • Consulting firms (Deloitte Consulting) • Government agencies (CMS) • Legal research databases (Lexis-Nexis, Westlaw) • Journals, magazines, periodicals • Trade and professional associations • Published survey results

23. Analyzing the External Environmental Data Gathered • Sorting and classification • Trend identification and extrapolation • Statistical modeling • Brainstorming • Alternative future scenario projections • Delphi process dialogues • Role playing • War gaming