Internal environment factors in strategic management

Running head: Environmental scanning

Environmental scanning 2

Environmental scanning

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Environmental scanning can be defined as interpreted data and systematic surveys about trends, relationships, occasions and patterns within the internal and external environment of an organization. It helps in identifying the external opportunities and threats of an organization and also helps management of an organization to make decisions regarding the future path and direction of company. Kaiser Permanente is a non-profit integrated managed care consortium. The organization is based in Oakland, California. Just like any other healthcare organization, external influences may have a great impact to Kaiser Permanente. Economic conditions can also have a significant impact on the performance of this organization (Lester, 2016).

Kaiser Permanente can use environmental scanning strategy to create value and also sustain its competitive advantage. Kaiser Permanente can obtain a competitive advantage through implementing value-creating strategies and those that consider both internal and external environment factors. The strategies need to be valuable, rare and non-substitutable. An organization can create value and sustain its competitive advantage when it develops or acquires a combination of attributes allowing it to outperform its competitors (Kemper, 2014). These attributes can either be related to the external or internal environment. These attributes can be disruptive innovations, creating new markets, new business models, and superior customer value. Kaiser Permanente can also provide quality health and provide extra services to their clients which their competitors do not provide. This way, they would maintain their customers and get new ones (Kemper, 2014).

Another important thing is understanding the current external and internal environments of Kaiser Permanente. Internal environments are how employees and those in the organization undertake their duties in agreement with the mission, vision, and goals of the organization. The internal environment is changeable and controllable through management and planning processes. Examples of external environments of Kaiser Permanente are human resource, organization culture, organization’s management, profits, cash flow and physical assets. They affect how any the organization operates. The SWOT analysis summarizes the external environment of any organization. The SWOT analysis of this organization will provide the strengths, weaknesses, opportunities and threats of Kaiser Permanente (Lester, 2016).

The external environment of any organization refers to the factors which are outside it and they affect the organization’s ability to operate. Some of these external environment elements can be manipulated by the marketing strategy of the company while others require the company to make adjustments. The external environment elements of Kaiser Permanente are competition, government, customers, public opinion, and economy. The management of the organization has not direct control over these factors (Stoffels, 2011).

A scan of both external as well as internal environment is a crucial part of strategic planning process. Various environmental factors which are internal to an industry may be grouped as strengths and weaknesses, as well as those that are external to an industry may be grouped as opportunities and threats. The analysis of strategic environment that established as SWOT analysis. SWOT analysis give helpful information to match capabilities as well as resources to a competitive environment where it operates (Lester, 2016).

Strength

(i) Creates employment. Kaiser Permanente is a source of employment to many people in California and others from other regions.

(ii) The organization experiences a strong relationship with partners and suppliers. This help the organization to survive and overcome the challenges.

(iii) There are limited barriers to market entry making it easier for Kaiser Permanente to get new customers.

(iv) The organization has an adequate market size which helps in keeping the organization running.

(v) The company has a high growth rate due to the nature of the services they provide.

Weaknesses

(i) The organization experience lack of strategic relationships which affects its performance.

(ii) Competitive market in the industry

(iii) The structure of the organization’s business units can be critical, and they require regular monitoring to maintain quality.

(iv) There are long adjustment periods in the organization

(v) Brand portfolio

Opportunities

(i) The company has global growth opportunities which help the organization grow.

(ii) There are new and affordable technologies which contribute to improving the quality of services provided to customers.

(iii) Growing demand for services making the company grow

(iv) New acquisition by Kaiser Permanente

Threats

(i) There are economic barriers which the organization faces.

(ii) External business risks which affect the organization

(iii) Lower profitability and growing competition

(iv) High costs of raw materials

Another environmental factor which should be considered is PEST analysis. It stands for economic political, socio-cultural as well as technological analysis. This explanation explains framework of all macro-environmental factors which are utilized in scanning environmental concept of organization’s strategic management. It deals with external analysis in time of conducting market research or performing strategic analysis. It also offer overview of various macro environmental factors which organization have to consider. This is an important strategic tool which helps people to understand the business position, understand market growth and direction for operations (Hambrick, 2015).

Political factors concern how and the degree to which the government intervenes in economy of any state. Political factors are labor laws, tax policies, environmental law, political stability, trade restrictions, as well as tariffs. Political factors are merit goods i.e. products and services provided by the government or provided with the government and demerits goods which the government is not willing to provide (Hambrick, 2015).

Economic factors include inflation rate, interest rates, economic growth as well as exchange rates. The factors have significant effect on how businesses perform as well as make their decisions. For example, interests rates influence the organization’s cost of capital also to the extent in which an organization expands and grows. Exchange rates also affect exportation costs of goods as well as prices and supply for goods imported in the economy (Hambrick, 2015).

Socio-cultural factors invpolves cultural aspects such as career attitudes, age distribution, population growth rate, health consciousness and emphasizing on safety. Trending social factors influence demand for the products of the organization in which a company operates. For instance, aging population can mean less or smaller willing workforce (Hambrick, 2015).

Finally, technological factors include aspects of technology such as the rate at which technology is changing, technology incentives, automation and R&D activity. Technological factors can be used when making outsourcing decisions when identifying the minimum efficient production level as well as determining entry barriers. Technological shifts can affect costs, quality as well as innovation levels (Hambrick, 2015).

Apart from the internal and external environment of Kaiser Permanente, organization also have the general environment where it operates. The organization is devoted to helping in shaping the future of healthcare in the United States. In fact, it is the current most recognized and foremost integrated and non-profit health care delivery system. The organization has a unique ability to provide analysis and assessment of external environment using frameworks and tools for approaching relationships which contribute to optimization of their care delivery to all people across various regions in California. Just like any other company, Kaiser Permanente faces competition, and it has to come up with strategies to outdoor their competitors. The company also makes use of social media and other platforms to create awareness about their health programs to the public (Lester, 2016).

References Hambrick, D. C. (2015). Environmental scanning: organizational strategy. Hoboken: John Wiley & Sons. Kemper, D. W. (2014). Kaiser Permanente. Boston: Pearson Education. Lester, J. W. (2016). Environmental scanning and business strategy. New York: MMcGraw-Hill. Stoffels, J. D. (2011). Strategic issues management: a comprehensive guide to environmental scanning. New York: Springer.