Health Administration Press Strategic Analysis for Healthcare Chapter 9 Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press SWOT: External Opportunities and Threats • Analysis of an organization’s strengths, weaknesses, opportunities, and threats is commonly called SWOT analysis. • SWOT brings together analyses from the previous chapters and starts to form a cohesive assessment of the organization. • SWOT does not identify particular strategies but rather identifies issues that may later need to be strategically addressed. • Specific consideration is given to critical success factors in the firm’s industry. The SWOT categories are examined in two dimensions, covering internal and external issues. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press SWOT: Internal and External Internal: Strengths Weaknesses External: Opportunities Threats Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press SWOT: Internal and External • Internally, every organization has both strengths and weaknesses. • As a prelude to developing strategy, the analyst must understand what these strengths and weaknesses are, particularly in relation to the industry’s critical success factors. • Opportunities and threats, described in greater detail later in this chapter, are regarded as the external SWOT factors. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press SWOT: Internal and External • The SWOT analysis will serve as the basis for two lines of analysis that we will explore in the chapters ahead. • The first line will involve developing an internal factor evaluation (IFE) and an external factor evaluation (EFE), leading to an internal–external (I/E) matrix that suggests broad strategic directions. • In the second line of analysis, SWOT will form the basis of a TOWS (SWOT written backwards) matrix that will be used to develop specific strategies. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press SWOT: Lines of Analysis Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press SWOT: The External Analysis • Most strategy texts instruct the analyst to complete all four SWOT boxes at one time. • This text, however, separates the internal and external components and addresses them separately. • Doing so allows the strategist to focus on the external issues first and to draw upon the previous analyses that were primarily external in focus. • We will examine the internal SWOT factors in Chapter 17, after having had an opportunity to perform additional analyses of the inner workings of the company. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press SWOT: The External Analysis • The external factors account for SWOT’s O and T—the opportunities and the threats. • An opportunity can be thought of as any market possibility for which your organization can take action and make a positive impact. • Such impacts could include – – – – – – organizational growth, market share increase, potential entry into new markets, increased profits, chances to exploit competitors’ weaknesses, or any other positive outcome. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press SWOT: The External Analysis • A threat can be defined as any possibility for your organization to be negatively affected by an external action of the market or of a competitor. • Threats represent negative impacts on your firm’s profitability and competitive well-being. • Negative impacts could involve such things as – competitor plans to introduce new technology or services to attract your current customer base, – economic forces, – the potential of a hostile takeover, – the chance of a new entrant entering into your market, – or looming price wars. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press SWOT: The External Analysis • When you begin your SWOT analysis, first focus on the external factors that could, either now or in the future, impact your organization. • Consider the critical success factors that pertain to the external environment. • Where does this information come from? • It should draw upon your research about the organization in particular, the industry, and the external environment in general. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press SWOT: The External Analysis • You have previously assessed these issues to develop your industry map, five forces analysis, PEST analysis, and competitive benchmark analysis. • Review those analyses and identify the issues that could become competitive threats against your organization or could create competitive opportunities for your organization. • Typically, you should identify about ten opportunities and ten threats. • Note that you are not proposing strategies or solutions at this time. You are identifying critical issues that will need to be addressed in subsequent strategy development sections. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Exercise • Divide the class into groups. • Complete the external portion of the SWOT analysis for your project organization in the space provided. • 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 EFE in the next chapter and later will be transferred into the TOWS strategy development chart in Chapter 24. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Strategic Analysis for Healthcare Chapter 10 Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press External Factor Evaluation • An external factor evaluation (EFE) organizes and evaluates the OT section—opportunities and threats—of SWOT. • The EFE produces a numeric score that reflects the gravity of each issue combined with management’s current response to it. • The resulting score will correspond to certain standard strategies that will be discussed in Chapter 19. • As a starting point, consider that not every item you identified in the OT section of your SWOT analysis is of equal threat or has equal opportunity value. • Some distinction needs to be made between the “great” opportunities and the “could be” opportunities. • To help make these distinctions, review a list of each opportunity and threat. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press External Factor Evaluation • The strategist evaluates each opportunity and threat and applies a weighting system. • The total weight is 1.00 when all of the weights have been applied and added. • 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 external factor is to successful competition within the 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 opportunities and threats. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press External Factor Evaluation Opportunities Weight 1 Expansion of Existing Services 0.050 2 Additional Locations 0.100 3 Greater Exposure and Branding 0.050 4 Addition of Trauma Center 0.025 5 Purchasing Additional Practices 0.025 6 Expand into Surrounding Counties 0.075 7 Government Contracts 0.025 8 Residency Programs/Teaching 0.025 9 Expansion of Ancillary Services 0.050 Demographic Changes 0.050 10 Threats 1 Multiple Competitors 0.100 2 ED Over-crowding 0.100 3 Power of Suppliers 0.025 4 Recent Lawsuits 0.025 5 Low SES 0.050 6 Transient Market 0.075 7 Dependence on Suppliers 0.025 8 Difficulty Recruiting Providers 0.075 9 Changes in Reimbursement 0.025 Decrease in Population 0.025 Total Weight: 1.00 10 Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press External Factor Evaluation • The table shows that the threat related to emergency department overcrowding is important; it has been deemed by the strategist to be much more significant than the threat posed by recent lawsuits or the opportunity of obtaining more government contracts. • Note that there is no one “correct” weight for any factor. • The accuracy of the analysis rests squarely on the shoulders of the strategist. • For that reason, significant research and a clear understanding of the company and industry are vital to the process. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press External Factor Evaluation • Once weights have been assigned to the importance of each factor, the strategist now focuses on management’s current response to the issue. • The relevant question is, “How well does management currently respond to this factor?” • The focus is on management’s current response, not on its potential future responses or how well it responded in the past. • Management’s response is rated on a scale of 1-4 as follows: Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press External Factor Evaluation • • • • 4 = Current response is superior. 3 = Current response is above average. 2 = Current response is average. 1 = Current response is poor. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press External Factor Evaluation • The rating for management’s response to each factor is once again subjective on the part of the strategist, and once again it 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 current response ratings have been applied, the rating for each particular factor is multiplied by that factor’s weight; the resulting number is a weighted score for the factor. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press External Factor Evaluation Opportunities Expansion of Existing Services Additional Locations Greater Exposure and Branding Rating Score 0.2 0.050 4 0.2 0.100 2 0.1 0.050 2 Addition of Trauma Center Purchasing Additional Practices Expand into Surrounding Counties 0.025 0.025 0.075 1 2 2 0.025 0.05 0.15 Government Contracts Residency Programs/Teaching Expansion of Ancillary Services 0.025 0.025 0.050 3 2 2 0.075 0.05 0.1 Demographic Changes Threats 1 Multiple Competitors 2 ED Over-crowding 3 Power of Suppliers 4 Recent Lawsuits 5 Low SES 0.050 2 0.1 0.100 0.100 0.025 0.025 0.050 2 3 2 2 3 0.2 0.3 0.05 0.05 0.15 6 Transient Market 0.075 1 0.075 7 Dependence on Suppliers 0.025 3 0.075 8 Difficulty Recruiting Providers Changes in Reimbursement 0.075 0.025 3 2 0.225 0.05 Decrease in Population 0.025 1 2 3 4 5 6 7 8 9 Weight 10 9 10 Total Weight: Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. 2 Total 1.00 Score: 0.05 2.275 Health Administration Press External Factor Evaluation • Note that the weight is industry specific. • The rating is organization specific. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press External Factor Evaluation • The EFE analysis yields a total score when the “score” column is summed. • This score is used to complete the I/E matrix, which is then compared to a standard table of strategies that correlates certain strategic responses with particular I/E scores. • For now, we will not concern ourselves with the general strategies, but we will return to the subject and to the EFE rating score later. • We will address the SW factors of SWOT and the I/E matrix in later chapters as well. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Exercise • Break into groups and complete an EFE chart in the space provided on page 69 of your book. • You will need the OT portion of SWOT that you completed in the last chapter. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press Strategic Analysis for Healthcare Chapter 17 Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press 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). Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press 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 wellbeing. • Positive impacts could involve such conditions as strong cash position, effective corporate culture, or superior manufacturing capability. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press 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. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press 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. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press 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. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press 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. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Health Administration Press 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. Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale. Running head: JOHNSON AND JOHNSON COMPANY Choose An Organization Johnson and Johnson Company Johnson and Johnson Company JOHNSON AND JOHNSON COMPANY. 2 Johnson and Johnson is an American intercontinental company which deals with the manufacture of medical equipment, pharmaceutical and packaged goods for consumers. The company was founded 132 years ago that is in January 1886. The company is operational in sixty countries around the globe, but its headquarters is in one Johnson and Johnson Plaza, New Jersey, Brunswick. Their products are sold in over 170 countries worldwide and just like other companies Johnson has its website which is www.jnj.com The company specializes in the production of consumers packaged and pharmaceutical goods and medical equipment such as surgical materials. These products are such as Johnson and Johnson is a profit organization. However, they have funded several nonprofit organization to enable them to achieve their aim of reaching people with health needs widely (Johnson & Zinkhan, 2015). With Johnson's numerous outlets, they have managed to employ over 134,000 workers in their organizations. Why Johnson and Johnson? Johnson and Johnson is a company that offers a pure filed for a student in career or studies. The company presents students with career opportunities to impact the real world. The students are offered co-operative programs, internships and even full absorption where they get to experience continuous support from the company firsthand. Also, there is a connection with important job assignments through the team and leaders interactions across the company (Chattu, 2015). Also, through the experience and various opportunities offered, the students can express their interests and potential. With the global recognition and wide range of products, an individual is provided the chance to gain knowledge in different fields. With a company like Johnson that has managed to keep its profit for years despite running in over sixty countries, a JOHNSON AND JOHNSON COMPANY. 3 young entrepreneur can learn essential and underlying measures of running and growing a company. References JOHNSON AND JOHNSON COMPANY. 4 Johnson, M., & Zinkhan, G. M. (2015). Defining and measuring company image. In Proceedings of the 1990 Academy of Marketing Science (AMS) Annual Conference(pp. 346-350). Springer, Cham. Chattu, V. K. (2015). Corporate social responsibility in public health: A case-study on HIV/AIDS epidemic by Johnson & Johnson company in Africa. Journal of natural science, biology, and medicine, 6(1), 219. 
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