Importance Of Strategic Management For Estia Health Aged Care In Australia: An Essay.

You are required to conduct strategic analyses for Estia Health Aged Care, an Australia’s publicly listed company (http://www.estiahealth.com.au/), for this assignment, focusing on its residential aged care business only. You are advised to conduct research such as Internet searching for industry and media reports, and browsing the website and annual reports of Estia and other relevant organisations.

Write a 3000 word report, excluding references and appendix. In this report, you are required to perform the following tasks:

1. Describe briefly the background information (strategic context) of the organisation (Estia). This information should be brief and relevant to the discussion of your assignment and thus may include ownership, history, size, business scope, major products/services, and major markets of the organization selected.

2. Conduct a macro-environment analysis (focusing on Australia only in this assignment) for the entire industry within which the organisation operates. You should use the analytical framework provided in the textbook. Foci will be placed on the understanding of the purpose of this analysis, the identification of key factors and their implications in terms of key opportunities and threats, and the discussion of their overall impact on the industry growth in the future. Draw your conclusion based on your macro-environment analysis.

3. Undertake an industry (competitive) analysis using Porter’s 5-forces model. You are required to pay attention to the purpose of this analysis, the inter-connectedness of different aspects of the competitive forces, the links between the competitive forces and macro-environment, and their overall impact on the industry and the organization selected in terms of main driving forces in the competitive environment. Draw your conclusions based on your five-force analyses.

4. Identify those resources and competences of the organization that are likely to provide sustainable competitive advantage. Justify why these resources and competences can be regarded as strategic capabilities using the four criteria (VRIO) covered in the textbook.
 

Macro-Environmental Analysis using PESTLE analysis

The role of strategic management is vital for the organization because it ensures that goals of the organization are set and internal environment is set for attaining the objectives. More and more organizations have become aware about the strategic planning which is the fundamentals aspect in successfully facilitating them by an kind of contingencies either internally or externally, organizations have initiated to attract strategy management initiating from the  most basic administration levels (Freeman, 2010). The report will be described about the Estia Health Aged Care, Australia. Macro environmental analysis will be mentioned in this report to define the Pestle analysis of the chosen organization. Porter has recognized five competitive forces that provide the shape to every industry. These forces decide the strength of the competition. VRIO framework analysis will be helpful to determine the capabilities of the organization. It is considered as an analytical technique to evaluate the resources of the company and thus the competitive advantages. It is a short form from the starting of the names of the evaluation dimensions such as Value, Rareness, Imitability and Organization.

Estia Health Aged Care was formed in 2005 and now it is one of the well known residential aged care providers in Australia with 68 facilities, more than 5500 operating places and 7,000 employees across Queensland, South Australia and Victoria. The main reason behind the rapid growth of this industry is upon the consolidation in July 2014 of three residential aged care businesses. All of them have strong positions and modern facilities. The aim of Estia is to provide the high rate aged care services to its customers in an innovative and supportive way. The staff of this organization has trained and educated which underpinned with a committed and skilled workforce. The operational efficiency of Estia is to deliver results by using its corporate centre in Melbourne. This organization has the proud heritage of giving the quality aged care across Australia for nearly 50 years. The business scope of the organization is to expand its business globally by providing efficient services to the aged people. It has been evaluated that there are certain reasons to choose Estia Health such as everyday living, wellbeing and lifestyle, a nutritious experience, quality clinical healthcare and respite care (Estia Health, 2018).

In the context of everyday living, it provides help with everyday living in well maintained environments that are protective and adaptable to the individuals needs. People are not wanted to get bound with the rules and strictness, they are looking for places to call home that permit them to live their life in free way but provide support, security and stable. Hobbies and interest of people are focused by this organization to make them realize that they are valuable. Under wellbeing and lifestyle, an organization understands the need of the people at any stage of life. People are eager to maintain the balance an inspiring life with one that permits time for personal understanding and space. This organization has trust on equality and provides the health nutrients food to the residents of health aged home. The chefs of this organization are encouraged to make interesting options that show the personal preferences of residents. The nurses are qualified in this organization and clinical care is an ongoing process that involves constant reviews. It involves daily medication, specialist dementia care, medical services such as dental, pharmacy, podiatry and physiotherapy. The major market of this organization is in South Australia, Queensland, New South Wales and Victoria. Each home shows the unique and individual personalities of the residents that are effective. It has been cleared that Estia has the strength in the form of effective staff and polices which is followed by the staff of this organization. Residents of this Aged care home are satisfied due to effective services (Estia Health, 2018). 

Porter's Five Forces analysis of Estia Health Aged Care

Macro environmental analysis will be effective for the organization to understand the opportunities and threats for the organization by evaluating the various terms such as political, economical, social, technological, legal and environmental. Pestle analysis will be mentioned below with clear understanding that which aspect can put the impact into the environment of the company.

Political

Political factors have the ability to determine the factors that can influence the long term profitability for Estia Health Limited in a certain country or market. Estia Health limited is running its business in aged care services in number of countries and reveal itself to various kind of political environmental and system risk. In Australia, these industries need to analyze the various political terms and tax policies. Estia should analyze various factors such as political stability, reduced costs, skilled government and international trade agreements in the context of Australia (Buysse and Verbeke, 2003). These industries need to analyze the taxation, wage legislation and mandatory employee benefits of Australia. It has been analyzed that the healthcare expenditures shows 9% GDP, near to the OECD median which is less than the United States.  

Economical

There are numerous macro environmental factors such as saving rates, inflation rates, foreign exchange rate and interest rate which determine the aggregate investment in an economy. Micro environmental factor is focused on the competitive advantages of the firm (Clemens, 2009). Estia Health Limited can utilize the numerous factors of economy such as inflation, growth rate and industry’s economic indicators. Estia Health Limited should consider the various factors such as kind of economic system in Australia of operation and what kind of economic system there is. Exchange rates and stability of Australia’s currency should be evaluated by the organization. Economic growth rate and unemployment rate of Australia should be recognized by the company (Mahoney and Kor, 2015). Estia healthcare can facilitate make up for a softening resource sector. Recently, the firm healthcare exports of Australia lie in health merchandise by including medical equipments and instruments which consisted AU$4.7 billion (US$3.5 billion) in the economy of Australia in 2013. It has been found that the both real and nominal growth is strong and the workers of this country are productive.

Figure 1: Role of healthcare in economic development

Source: (Productivity Commission, 2005).

Social

It is cleared that the impact of society culture and the way of doing things influence the environment of the organization. To understand the customers’ preference and choice, the role of shared beliefs and attitudes of people play integral role in Estia Health Limited. Demographics and skill level of population of Australia should be analyzed by Estia. However, Estia is able to provide the efficient services to its residents but to provide the satisfied job Estia should analyze the Class structure, hierarchy and power structure in the society. Care provider for this country should be educated and skilled and for this Estia should analyze the income level in a constant way (Shtal, Bondarenko and Yarkovyi, 2017).

VRIO framework analysis for Estia Health Aged Care

Technological

Technology is rapid trouble making number of industry across the board. To illustrate this point, transportation industry would be good case. It has been evaluated that over the last 5 years this industry has been transforming really fast and it did not give the single opportunity to the established players to cope with the changes (Kasim and Dzakiria, 2016). Similarly, Estia Health Limited should focus on the latest technology to adapt the change in the organization. Along with the Estia should analyze the impact of produced technology on the offering products. It would be good for the organization as it increase in development costs. Australia is an advanced country and it is vital for surviving in an efficient manner to adapt the latest technology. Estia healthcare is more concerned about the drinking water quality, food safety, disease control and housing conditions. It has been found that Australian Government funds approximately 46 per cent of entire healthcare expenditure. Medical technology involves instruments, pharmaceuticals, clinical procedures and knowledge and support system.

Figure 2: health expenditure for medical technology

Source: (Productivity Commission, 2005).

Legal

There are so many countries in which the legal framework and institutions are not strong enough to prevent the intellectual property rights of an organization (Zalengera, Blanchard, Eames, Juma,   Chitawo and Gondwe, 2014). It is vital for Estia to carefully evaluate the market of Australia as it may lead to theft the secret of the organization thus the overall competitive edge. There are number of legal factors which should be considered by Estia Health Limited such as discrimination law, employment law, health and safety law and consumer protection and e-commerce. Estia is providing the efficient services to the aged people and it is required for it to analyze the legal terms carefully.

Environmental

There are number of markets in all over the world and different markets have different environmental standards or norms which can influence the profitability of an organization. The environmental standards are not different for only country, it can be different for number of states within one country (Islam and Mamun, 2017). It is necessary for Estia to analyze the various factors such as weather, climate change, endangered species and attitudes towards green products. Sustainability should be considered by the organization to expand its business operation within Australia.

From the above discussion, it can be concluded that Estia has good skilled employees and it can evaluate the numerous factors regarding political, environmental, legal, social, technological and economical for enhancing its business in all over Australia and for maintaining the business sustainability. Estia should focus on different country as well because it has good staff and efficiency to handle Aged people and treat them as home.

Threat of new entrants

New entrants brings the innovation in an industry and the new ways of performing the task put pressure on established players by efficient pricing and able to provide the new value propositions to the consumers. When the new entrants are dividing their core business, they can easily overcome the well-established players’ benefits of capital needed. There are number of competitors of Estia that can enhance its business globally to provide the services to aged people. The threat of new entrants keeps a limit to profitability within the industry (Porter, 2008). If industry has ability to enter in easy manner and have high range of benefits then new entrants will rapidly bring down the benefits of the well-established players. The threat of new entrants can be tackled by the organization by providing new innovative services to its service user because new services cannot only bring the new customers but also give the reason to old customers for enjoying the services of Estia. 

Bargaining power of suppliers

It can be seen that if the industry has the powerful suppliers then those powerful suppliers keep the ability to reduce the scope of the profitability for the organization as based on their power of the suppliers which make the most margins and leave the little room for left partners in the supply chain to make money. Estia can tackle the bargaining power of suppliers by creating the efficient supply chain with multiple suppliers. Shifting suppliers can be considered as an expensive attempt for Estia and may hurt the aged care home for a long run (Grundy, 2006). The bargaining power of suppliers is lower in the context of Estia Health Limited.

Bargaining power of buyers

Powerful buyers are able to compress the margins for the organization by demanding access value and forcing prices downs and it can be done by asking extra services and going against from one firm to another in the market player (Porter and Heppelmann, 2014). Estia is able to provide the efficient services to its residents but if industry has number of competitors than people will prefer best one and keep the option with them. The bargaining power of buyers can be tackled by Estia to build a huge base of customers. This would be beneficiary for it in two ways. It will decrease the bargaining power of the buyers including it will offer a chance to the organization to streamline its sales and the process of production (Narayanan and Fahey, 2005).

Threat of substitutes

Industry profitability has to suffer in the time of launching of new products and services meets similar consumers’ desires in different terms. The threat of substitute of product or service is high if it provides a value proposition that is exclusively different from present offerings of the industry (Porter, 2008). Estia can handle the situation of the threat of substitutes by being service oriented in comparison of product oriented. The threat of substitutes can be decreased by understanding the need of the service users and analyzing the services of competitors so that possible changes can be done. The switching cost for the customers can be increased (Siaw and Yu, 2004).

Rivalry between existing companies

If the competition among the existing players in an industry is strong then it will force to down the prices and reduce the overall profitability of the industry. Rivalry among existing players of Estia can match the similar form such as introduction of new products, discounting products, improvement in services and advertising campaigns (Chang, Ting, Woon, Chiu and Hong, 2016). Estia Health Limited can tackle Intense Rivalry among the Existing Competitors by developing the sustainable differentiations. Scale can be made by the company to compete in better way. Collaboration with competitors should be done for increasing the market size rather than competing for small area or competition (Porter, 2008). 

Link between competitive forces and macro environment

The macro environment of the company comprised the threats and opportunities and competitive forces cover the five forces which help to describe the condition of the competitive market. Pestle analysis has been described in this report which can be linked with the competitive forces. Competitive strategy is being used in the organization for gaining the market share against the competitors of the company. Pestle has the nature of indirectly and distantly but it may influence the competitive strategy.

In the limelight of above discussion, it can be concluded that porter’s five forces analysis is helpful to analyze the situation of the Estia. The better understanding and utilization of these five forces of porters is helpful for strategy managers in the organization to make sensible choices and create sustainable competitive advantages.

VRIO framework is considered as the tool of analyzing the internal resources and capabilities to search out if the sources are able to sustain the competitive advantages (Barney and Hesterly, 2010). VRIO stands for four questions that are resources and capabilities of the organization are valuable, rare, imitate and organized. Below table will be helpful to define the VRIO analysis of Estia.

It can be stated after analyzing the above mentioned table that the value of resources is vital for the organization due to their support to an organization in term of satisfying the service user.  There are number of resources which are acquired by Estia Health Limited while developing its business into Australia. Tangible resources of Estia are appointment method, types of services, way of marketing, designs and culture of aged care home and usage of manual systems (Richardson, 2008). The table has shown clearly that some of the resources of the company are valuable while some of them are not keeping the same value for the organization.

Rare is the main component of VRIO framework which shows the rarity of the resources and the capabilities in the organization. It can be seen by above mentioning table that buying power, suppliers and labour cost are the rare resources of the organization (Butler, Armstrong, Ellinger and Franke, 2016). These resources and capabilities are able to increase the competitive advantages of the company and establish the competitive uniformity.

It has been analyzed that the resources and capabilities of the company have the feature of expensive. Estia has some resources and capabilities that cannot be copied by others organization because Estia provides different services to the service user by focusing on the desire of them (Abraham, 2012). It shows that Estia aged care home will be effective in Australia to provide the efficient services to them who want services like home. It has been evaluated that the strategies and models of the company can be followed or copied by other organization in Australia. These resources will be effective for the organization to maintain the profitability of the company (Brunetti, Teixeira, de Castro and Lara, 2015).  

There are various resources and capabilities in Estia which has the nature of organized. The labour cost and the management of the company should be managed by Estia in effective manner. By providing the different services in comparison of others such as giving preference to the interest of services users and dining facility, they are pushing themselves to the new services lines. There are some resources and capabilities at Estia such as satisfaction of employee and service user, buying power and lower pricing strategy which is able to organize the entire system of the organization.

These resources can be regarded as strategic capabilities because Estia aged health care is well known organization and the pricing strategy of the company is lower with quality services which satisfy the service users. Various kind of services are provided by the company and the design and culture of the organization is different from others organization. 

From the above analysis, it can be concluded that there are various resources and capabilities at Estia which exist in the organization as strategic strength and requirements. Estia has adopted the core competencies in the organization to attain the competitive advantages in well efficient manner. The resources and the capabilities of the organization will be helpful for the organization to understand the nature of the Australian market and provide the efficient services to the service users.

Conclusion

It has been concluded from the above discussion that Estia has capable staff to understand the scenario of working in effective manner for satisfying the service user. Background information about the company has been given in this assignment to bring the clear understanding about the organization. Macro environmental analysis has been done by evaluating the elements of Pestle such as political, environmentally, economically, social, legal and technologically. Porter’s fiver forces have been analyzed to know the possible threat of new entrants because there are various competitors of Estia that can amplify its business globally to provide the services to aged people. Bargaining power of suppliers and bargaining power of buyer has been discussed in this report with recommendations that how Estia can handle the situation. Estia can tackle the condition of the threat of substitutes by being service oriented in comparison of product oriented. VRIO framework has been mentioned which is helpful to tell about the strength and weakness of the resources and capabilities. It covered four components such as valuable, rare, inimitability and organized. The table has been analyzed to show the rarity, inimitability, value ability and organized of the resources and capabilities of the organization. 

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