Business Policy Analysis

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Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

THE ENVIRONMENT/INDUSTRY 1. Drivers of change

Key drivers of change begin with the availability of substitute products. Many other

companies can easily provide a substitute and the firm will have to find a way to stand

out among them. Next would be the ability to differentiate yourself among other firms that pose a threat in the industry. Last, the political sector. The the federal, state, and local governments could all shape the way healthcare is everywhere.

2. Key survival factors Key survival factors would include making the firm stand out above the rest in the

industry and creating a name for itself. Second would be making sure there is a broad

network of providers available for the customers. Giving the customer options will

make the customer happy. Providing excellent customer service is key to any firm in

the industry.

3. Product/Market and Value Proposition possibilities Maintaining the use of heavy discounts will keep Careington in the competitive market. They also concentrate on constantly innovating technology to make sure that they have the latest devices to offer their customers. To have high value proposition, Careington

will need to show their costumers that they can believe in them and trust them to do the right thing. Showing the customers that they can always be on top of the latest technology and new age products will help build trust with the customers.

STRATEGY OF THE FIRM

1. Goals Striving to promote the health and well being of their clients by continuing to provide

low cost health care solutions. A lot of this concentration is on clients that cannot afford health care very easily or that are uninsured.

2. Product focus and market focus Market focus has always been providing the low cost products no matter if it is an individual or corporation. The products include dental care, laboratory services, nursing services, alternative health and medicine, and diet and weight loss

solutions. 3. Value proposition

Always providing low cost health care and providing products and services beyond the

norm for health care, Careington has created high value within their clients. 4. Core Activities

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

Providing everything from health care solutions to everything in between including

care for the customers pets, financial needs, counseling, and much more. Careington

provides much more than just based health care. They go beyond the basics to cover

every aspect of the customers needs.

ORGANIZATIONAL CAPABILITIES OF THE FIRM 1. Noticing at all times that the customer is always looking to save money when

subscribing to their services. 2. Striving to make sure that they can offer the best customer service in the market.

This comes from sales services to after-sales service to customer service for existing customers.

3. Always investing in ways to create a product that can be offered at discount prices and packaging plans to save the customer money.

PERFORMANCE OF THE FIRM

1. Financial Performance

Careington Company has estimated annual revenue of $19.9 million. The company employs a workforce of 51 and 200 professionals. The company uses its finances equitably among its various operational sectors. Most of the company’s finances are directed towards realization of projects which helps it achieve its goals and objectives. In order to maintain a strong motivated workforce, the company operates a reasonable remuneration system for its workers. The company has had a reasonable financial record over the years with accurate record keeping and accountability in all its sectors (United States, 2006).

2. Market Performance

The company has entered into a contract with Metropolitan Life Insurance Company, Inc. to provide a free discount prescription card via MetLife’s United States Sponsored Direct business network. This is a sales channel which partners with sponsors in order to provide their clients or members with simple, cheap products which meet the requirements of the United States market. The company is able to do business with other business partners of MetLife through the agreement. These other businesses include financial institutions, loyalty clubs, associations, as well as publishers (A.M. Best Company, 2003)

The company provides cheap solutions to more than eight (8) million people who are members of the company. It has over 196, 000 dental access points and provides one of the biggest in depended provider panel in the U.S. As the holder of the industry’s biggest provider networks, the company is usually called upon to work directly with a number of most treasured PPOs, HMOs, as well as national insurance corporations (United States, 2006).

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

3. Organizational Health

The company’s solutions are designed to help and complement traditional health insurance and give significant savings for those individuals who are uninsured or are under- insured. It also provides the healthiest cost reduction twice or thrice bigger than majority of dental services companies in the country (United States, 2006). With over eight million satisfied individuals and growing, the company has strategically placed itself to become the most creative and innovative dental partner in the United States of America. Regardless of whether you are a small worker group or a big self-sponsored organization, the company will customize a dental program particularly for you. The company, in fact, asks the client to participate in designing the program. Careington has the ability to even package ancillary services like prescription and vision drug discounts with the client’s dental program (A.M. Best Company, 2003)

The discount prescription cards provided by the company though its partnership with MetLife frees of charge enables design members as well as their families to pay a discounted amount at the place of service for name-brand as well as generic prescriptions at broadly participating pharmacy sites all over the country, including independent as well as local neighborhood dispensaries. MetLife sponsor customers simply who must simply agree to provide free descriptions discount cards and Careington shall then distribute the cards to all customer members who are participating (United States, 2006). 2. ORGANIZATION AND ANALYSIS

a. The Strategy ßà Environment Link Compare the drivers of change and key survival factors of the environment with the strategy components of the firm. Identify:

● Where, if at all, there is a good fit between environmental demands and the firm’s strategy. That is, identify how the strategy does a good job of addressing/responding to specific drivers and/or KSF.

▪ The Firm has made a good fit for itself in the environment because the environment is full of consumers that are under or uninsured and that is the perfect market base for Careington. Carington has made adaptations to the environment by responding to the need for individual consumer suplementation as well as Business needs.

● Where, if at all, there is a misfit between the environmental demands and the firm’s strategy. That is, identify how the strategy does a poor job of addressing/responding to specific drivers and/or KSFs

▪ There may be a gap between Careington’s current strategy and the technology race that has flooded the country. Their website doesn’t pull

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

on google unless you ask specifically for “Careington”. That could be a possible place that they loose business.

● Where there are potential future misfits (given current industry trends). That is, identify where the strategy is likely to fall short of addressing/responding to specific drivers and/or KSFs in the future

▪ There may be a gap in the marketing sector. They have built a good brand and need to be able to get their name out to the potential individual customers rather than focusing all of their energy on B2B.

b. The Strategy ← → Org.s Capabilities Link

Now look inside the firm and compare the package of Org. Capabilities created by Resources, Management Preferences, and Organization with the strategy components of the firm. Identify:

● Where, if at all, there is a good fit between the org. capabilities of the firm and the firm’s strategy. That is, show how the capabilities support specific aspects (value proposition, goals, etc.) of the firm’s strategy

▪ There is a good fit between the organizations customer capabilities and the strategy. Customer service is important to the company and they show that through their Member services department’s support of the customers.

● Where, if at all, there is a misfit between the org. capabilities of the firm and the firm’s strategy. That is, show how the capabilities fail to support specific aspects (value proposition, goals, etc.) of the firm’s strategy

▪ The place that there is a misfit between the strategy and the capabilities is in their provider portal. They could utilize this instrument much more efficiently.

▪ Management decisions to improve communications to the outside. Public relations needs to get the name out in the open.

● Where there are potential future misfits (given current trends within the firm). That is, show where/how the capabilities may fail to support specific aspects (value proposition, goals, etc.) of the firm’s strategy in the future

▪ There is a potential for future misfits in their innovative capabilities. They have a good network now, but in the future they will need to be able to more technologically advanced to serve the providers and members better.

c. Firm Performance and Strategic Gaps

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

Theory and empirical research inform us that firm performance is closely related to the firms position vis-à-vis the criterion of consistency. That is, the better the fit among the three components of in the criterion of consistency framework, the better is the firm’s performance. Review the results of your “fit” analysis and attempt to document how the fits/misfits identified in your analysis may explain the achievements or lapses in firm performance on one or more of the three dimensions: financial performance, market performance and organizational health The presence of fits and misfits within an organization can have a substantial influence

on Careington’s financial performance, market performance, and it’s organizational health. Though successful they still continue to improve their market performance and organizational health. Currently, Careington has been working hard to not only retain but also expand their market share as well as build and sustain a more competitive advantage in the market place. Careington has used several successful approaches to maintain its competitive advantage over its competitors. One way they keep a competitive advantage over competitors is by offering deep discounts with a reliable network, they do this getting low discounts then negotiating lower discounts which makes it difficult for competitors to compete with them. Another way Careington provides excellent service is by building, nurturing and maintaining a good relationship with their service providers. They do this by having staff dedicated to taking care of different issues with members and their providers. Careington is also good at complying with the strict licensing guidelines. they do this by making sure they are up to date with the most current legislation and keeping up with the state regulatory requirements. Their main focus and strongest competitive advantage is to keep a strong and enduring relationship with their B2B customers. They maintain this strong by having face to face meeting, as well as networking rather than the traditional efforts of marketing and promotions. By them going through all this trouble to maintain a good relationship with their providers and clients, while still offering a good product for a low price this helps them increase not only their market performance and organizational health but help them increase their financial performance.

On the other hand, with the the discounted health care plan market competition rising, differentiating the selves from consumer is key to success for Careington. Careington currently suffer from low awareness of their company and products. they also lack the technology to stay competitive with the rising popularity of telemedicine. The also prefer to improve all their other aspects of their company rather than improving their brand. Since the current market is trending to a more individual model, Careington is looking into entering that potentially profitable market. They also would like to continue to increase customer awareness of their discount products through face to face meeting, and networking. They recognize that they are in need of mass

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

marketing to reach a larger segment so people know about what they have to offer. Their fears of mass marketing are that their ROI won't be high enough to cover what their going to be spending on mass marketing since it tends to be very expensive. Another one of their fears is that they don't know exactly what their customers use their discounts for since they don't require their providers to them with data, which makes it harder for them to figure out who and what they should target. If they keep lacking at awareness, with the rise in competition they are bound to lose their good market performance and organizational health, as well as a decline in their financial performance.

3. CONCLUSIONS AND RECOMMENDATIONS

Given the above, answer the following questions:

a. Overall FIT and Symptoms: Taken together, how do you see the overall alignment among the elements of the “criterion of consistency”? That is, is there a good fit, an ok but weakening fit, a poor fit, a really bad fit, etc.? Be sure to explain WHY you believe this is the case. Next, refer back to your assessment of firm performance and show how this fit (or lack of fit) is reflected in the performance of the firm. That is, can the “symptoms” of underlying problems (e.g., decreasing sales or market share, poor profitability, disgruntled employees, etc.) identified in your analysis of the firm’s performance be traced to specific strategic “fit” problems?

b. Selecting the Most Significant Issues Facing the Firm:

Based on the fit/misfit identified above, highlight the areas that you see as the biggest issues/problems. That intent here is to move beyond the symptoms identified through performance and other previous analysis above to reveal the underlying causes that the firm must address. That is, what is causing the symptoms (e.g., decreasing sales or shrinking market share, poor profitability, disgruntled employees, etc.) that were identified above? Where possible, these causes should be expressed in terms of the alignment (or misalignment) between specific strategy components and specific aspects of the environment and/or org. capabilities (e.g., the product/market focus is no longer appropriate for the environmental conditions of … because; the … org. capabilities do not support the value proposition because ..., etc.).

Technological/innovative growth overtaking many of the services provided in Careington’s

industry, reducing value of their particular service by replacement with technology. Need for an increase in business or else will flat compared to competitive alternatives-

hesitance in mass-marketing (a weaker part of their strategy) could result in inability to surpass growing competition and lose customer basis.

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

c. Project Future Performance of the Firm Given the Challenges identified in “a’ and “b” above: Given your descriptions of this “current state” of the firm, what would you expect performance to be like in the next few years if they do not make any changes to their strategy and/or operations? Undertake the following: I. Briefly describe the likely future state of the firm in words, showing where/how the

issues identified above are likely to affect the actions and outcomes of the firm. In the future, Careington is likely to continue to experience growth similar rates as the past, per indications in the steady growth rates. 5 years from now, however, they might experience a static or smaller rate of growth, because the industry which it performs is growing in competitiveness and Careington is not showing in their financials any action to improve the rate of growth which it falls align to. -Issues (listed above) likely effect on the future outcomes and actions:

II. Use techniques taught in earlier classes (e.g., accounting, finance, marketing, etc.) to project a 5-year pro forma income statement that assumes a logical progression of the firm’s current strategic fit and performance levels. Specifically, do the following: ● Use a 5-year timeframe ● Use the common-size (sometimes called “vertical analysis”) technique/tool to

project the performance of the firm over the next five years, assuming that (a) it makes no changes to its current strategy or capabilities and, (2) industry changes will occur in the direction predicted by you in Part-1A of the SBI process

● Provide this projection, in a table, and on a single page ● Use additional sheets (if needed) to identify the “base components” line

item used in the computations of other line items, any assumptions made, and any clarifications that are deemed necessary

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

Like mentioned before, Careington is likely to keep experiencing steady growth at similar rates as in previous years. A trend projection analysis was performed using a regression line (Sales Revenue = 123.56 + 17.65*Period) taking in count sales revenue for the past three years and any expected industry changes that could occur in the following five years.

PART 2-B

SELECTING A NEW STRATEGY In the previous steps, you evaluated the current fit in the company and, in doing so, highlighted the major issues/problems faced by the firm. Your task now is to generate and evaluate possible solutions. Given your previous work, you probably have a number of ideas of what the company “could do”. Note that this is very different from what they “should do”. Following the process outlined below will help you move from generic “coulds” to justifiable “shoulds”. 1. DATA COLLECTION

This is where you can collect all your ideas, new and old, about what the company could do. Try to brainstorm here, being open and not rejecting things at this point. The intent is to get

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

all of the ideas out on the table, and the only caveat is that the ideas be directed at solving the issues/problems addressed in the previous step. However, do try to channel your thinking into two broad categories:

Strategic Adjustments: These are changes in strategy components (goals, product

focus/market, focus, value proposition and core activities) that the firm could consider

Focus the company on getting the name out to potential individual consumers. Technological advancement to the current technological era. Capability Changes: These are changes in org. capabilities that the firm could consider to

address the strategic adjustments proposed (above) by you. They could add more strength to their marketing department. Right now Marketing is left to each department. They need to emphasize marketing the Careington brand as well as marketing to the business customers.

2. ORGANIZATION AND ANALYSIS OF DATA

With all the ideas on the table, you now need to sort through and organize them into at least two viable strategic proposals (you are welcome to do more than two if you want). For each proposal, you need to document the following: a. Describe the specific changes in strategic components being recommended b. Clearly explain how and why you believe the proposal addresses the major

issues/problems facing the company c. Describe, in general, the changes to the current capabilities that need to be made so that

the firm can successfully implement its new strategy d. Identify (at least broadly) the impact that all these changes would have on both the

revenues and expenses of the company. .

Note: While there can be some overlap in the two proposals, they need to be unique in substantive ways.

Proposal-1 a. Mass Marketing on a smaller scale (B2P focus)

b. Targeted Social Media ads, Radio ads, Billboards, etc.referral systems

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

c. Switch the focus from B2B to B2C while creating a new “Intro Portal” to capture clients. Also building a more complete marketing department that includes corporate level executives to monitor and promote the new programs.

d. There will be a large upfront cost of capital for the cost of the advertising, but the exposure of return will give at least a 10% ROI, helping to significantly grow the B2C portion of the company.

Proposal-2 a. Build a second office on the west coast for Recruiting in major markets.

b. Some west coast states, namely California, want easier access to the company.

c. Switch the focus from B2B to B2C

d. Big up front expense but saving on travel expenses. More direct contact with the

customers will bring in more revenues. 3. CONCLUSIONS AND RECOMMENDATIONS - STRATEGIC CHOICE

Now you must make a choice between your proposals. Use the information in your tables as well as any other thoughts you have to determine your preferred proposal. Then answer the following questions.

● Which proposal do you prefer?

We prefer the first proposal. ● Why do you prefer this proposal?

We think that this is the better all around approach to the needs and challenges that Carington is facing today. It provides a way for the company to expand their growth into the B2C sector while not abandoning the B2B side of the company. It will also come at minimal costs to other mass-marketing campaigns, and based on the ROI, the program could be expanded in the future.

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

● Which proposal carries more risk? Why?

The second proposal carries more risk due to the large upfront cost of placing a new location. All business operations can be taken care of out of the central office in Texas. While there would be a reduced cost of travel, it is unknown if there would be enough business to support the cost of the new building.

● What might occur (inside or outside the firm) that would make your preferred

proposal fail?

If there are major changes in the way that discount dental plans are regulated, or if there is a major change in the way health care is used in the United States.

PART 3-A DEVELOP NECESSARY CHANGES TO ORG.

CAPABILITIES AND A PLAN TO IMPLEMENT THEM Now that you have selected a strategic proposal, you need to provide an analysis of the changes to various organizational components that are necessary to develop the org. capabilities that will make the strategy a success. This includes recommendations on both how and when these organizational components need to be adjusted to meet the needs of the new strategic proposal as well as reasonable forecasts of the cost and revenue implications of each change. Use a 5-year time-frame for the analysis. Readings in the book and supplements highlight a number of broad issues to consider in putting together your implementation plan. Class material offers additional specific ideas. We suggest that you carefully review this material and consider the ideas suggested.

1. DATA COLLECTION To accomplish the task laid out for you, the following information must be generated or collected. Completing this analysis in the sequence provided will help to ensure a logical flow between the pieces.

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

Note: This is a long and labor-intensive exercise!!!! Budget your time accordingly.

1.1 Initial Change Ideas

• In Part 2-B you developed a list of broad changes to the org. capabilities that would be needed to support your proposed strategy changes. Build on these to describe in more detail specific changes to the current org. capabilities that need to be made so that the resultant “new” capabilities (alterations to existing capabilities and/or truly new org. capabilities) can be used to successfully implement the new strategy.

a. Careington needs to switch the focus from their current B2B focus to a B2C focus to bring in the individual.

b. They need to create a new “Intro Portal” to their website to capture new clients with a more focused online experience.

c. Create and maintain a Member Portal so that members can check eligibility and providers in network.

d. Careington needs to build a more complete marketing department that includes corporate level executives and staff to monitor and promote the new programs.

• Conduct appropriate analytical drill-downs to identify necessary changes in the firms resources, managerial preferences and organizing processes and the efforts that will be needed to ensure that they are appropriately positioned and combined to achieve each of the three required new capabilities.

• Identify the departments (functional areas) that would be most significantly affected by the recommended changes to each of the three required capabilities. If a proposed capability change cuts across multiple functions, make note of this and be sure to remember it when you are developing more specific functional plans in the next section.

• You must broadly identify the impact that the proposed functional level changes would have on both the revenues and expenses of the company. That is, what will it cost to make each of the various changes that you are proposing? Will any of the changes increase or decrease existing operating costs? What, if any, impact will each of the changes have on the company’s revenues? Be as detailed as possible and do necessary research to make appropriate assumptions and forecasts.

Consider using a chart like the following to lay out all of the information that you are gathering and to help you determine where you will need to generate additional information.

Initial Ideas on

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

Changes

Capabilit y Being Addresse d (pull the appropriat e capabilitie s from your preferred strategic proposal)

Is it a New Capability or an adjustmen t of Existing Capabiliti es? Explain

Importance of this Capabi lity in Achieving Strategic Fit

(Some of the justification may be found in Part-2 B of the SBI Process)

Changes in Resources, Manageme nt Preferences and/or Organizatio nal Processes to achieve this Capability

Function al Areas Effected

Cost of Implement ing Change

Impact (if any) on ongoing operating costs or revenues

Operatio nal Capabilit y

Expandin g the Marketing Departme nt to add corporate focused employee s.

This is New Capability

Of high importance to the new strategy.

1.They will have to change resources because they will have to add additional employees to the marketing group. 2.The marketing department will be effected if the Management is against hiring more personnel. 3. Find a

1.Marketi ng Departme nt 2. HR

1. $70,000 per year for a marketing manager 2.$61,700 for a Web designer 3. $55,000 for a PR/ social media 4. $48,800 Graphics designer

This change will bring in more revenues by drawing attention to the Careington brand name. Operational cost was addressed in the hiring of new employees.

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

organization al fit for the new Employee.

Customer Capability

Adding a new focus from B2B to B2C.

This is of high importance to the new strategy.

1.Manageme nt Preference: Management will have to be more flexible and switch in focus. 2. Organization al Processes: New Marketing Strategies will have to be brought on board to focus on the customer instead of businesse s

1. Marketin g Departme nt 2. Sales Departme nt 3. IT departme nt

1. Salaries of the new employees 2. additional time spent by sales and IT

1. Revenues will increase because of hitting a new market center. 2. Costs will increase because of the additional employees added to the marketing department

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

Innovatio n Capabilit y

Create a new Intro portal for potential new B2C customers

New Capability

The importance of this strategic step is of medium importance.

1. Web design in creating the new portal, Marketing will assist in making customers aware of the new website. 2. Management will have to be on board with the new source of focus 3. Sales will have to focus on bringing in a new set of customers, Marketing will assist Sales by developing the tools needed to reach customers.

1. Sales 2. Marketin g 3. IT

Cost of Mass Marketing. Fill in later.

Large up front cost for implementati on, minimal upkeep costs. Revenue potential is high.

Create and Maintain a Member Portal for provider look ups and coverage questions.

New capability

Medium Importance, Mostly for ease of customer

1. Web design in creating the new portal, Marketing will assist in making customers aware of the new website. 2. Marketing

1. IT 2. Marketin g

1. Time spent by IT and Marketing

Minimal cost to keep the customer happy.

Wiki Template Part-‐2: Gaps, Issues and New Strategy BUSI 4940 – Business Policy

will have to make customers aware of the new tool.

References

A.M. Best Company. (2003). Best's Insurance Reports. Oldwick, N.J: A.M. Best Co.

United States. (2006). Proceedings of 87th National Convention of the American Legion,

August 23-25, 2005, 109-2 House Document 109-87.