strategic plan II Environmental Analysis

An environmental analysis is an important component, and indeed a prerequisite, to the strategic plan. It stands to reason that you cannot set a course for the future without knowing the route you will take, and you cannot know the route until you have the lay of the land. The environmental analysis is "a process in which you look at the outside factors that can have an impact on your business" (Arthur, 2014). The strategic plan depends on the information you gather about the trends in and nature of the external environment, so it is incredibly important that the environmental analysis is taken seriously. There are a number of different tools that have been developed in the management literature that can assist with creating an effective environmental analysis, including the SWOT Analysis, the PESTLE analysis, the Five Forces analysis and the value chain analysis (Downey, 2007).

Implications

There are many implications for the environmental analysis in the strategic plan. To understand these perhaps we should look at the two types of environments -- internal and external. The external environment reflects all of the conditions in which your company operations. The organization has limited control at best over these variables, so must understand quite acutely how these external variables affect the organization. The internal analysis highlights internal capabilities, strengths, and weaknesses. The organization has control over these. Strategy, therefore beings with setting objectives, but then the implementation must take into account the internal and external environments that govern an organization. The business should use the environmental analysis in order to formulate better strategy, to get competitive advantage and to understand how best to implement the strategy (WiseGeek, 2014).

Competitive Analysis

Ultimately, every organization needs to be competitive. Even in health care, an industry where many providers are not-for-profit entities, it is important that the company is competitive in terms of attracting good staff an in terms of bringing in enough revenue that the organization at least breaks even. At a for-profit institution, the need to be competitive...

What a competitive analysis allows the organization to do is to accurately understand through impartial analysis what it needs to do in order to succeed. A competitive analysis helps managers understand the internal strengths and weaknesses of a company. Too often managers assume that they have genuine competitive strength when the reality is that they are merely competent at doing the same things as every other organization. A competitive analysis should provide management with the opportunity to make an honest assessment of the firm's capabilities, before the market does.
Competitive analysis is a critical component of strategic planning. One of the outcomes of strategic planning is that the organization needs to be more competitive. Thus, it is essential to understand how competitive the organization is today, why it is competitive, and what things it can improve upon in order to become more competitive. Many such things might come up in a SWOT analysis, but ultimately the competitive framing of the firm's attributes helps the managers think about the market better. This in turn allows for greater focus on what tactics will genuinely increase competitiveness, rather than improving the firm in things that do not have an impact on competition.

Other Issues

The environmental analysis will typically take a look at economic, legal and political issues, for example in a PESTLE analysis. These are critical frameworks over which the firm has little control, but that can have a tremendous effect on the company. In healthcare, the economic environment is not always that important, because demand for health care is more related to demographic factors than economic ones -- healthcare is not considered to be discretionary demand. The political and legal environments, being related, are very influential on healthcare organizations in the United States, as healthcare is a highly-regulated industry, and government has a keen interest in both the public health aspects and the economic aspects.

There are many examples of political and legal issues affecting health care. The Affordable Care Act is one, having dramatically changed the payer landscape, and that in turn should spur strategic changes at some facilities. FDA regulations affect the industry, and the legal system does as well. Changes in the legal environment, for example, dramatically increased the liability risk to healthcare provider when they introduced unlimited punitive damages. Malpractice insurance rates skyrocketed,…