Organizational Strategy Mid-Term
1. What is Strategy?
Strategy simply put is long term goal of an organization that you base all business functions around. Your strategy what gives you a form of differentiation between you and your competitors? A strategy is the one thing that needs to stay consistent throughout all business decisions. The business world is always changing, so strategies that focus on positioning could quickly become irrelevant once the industry has shifted. It’s the underlying concept behind a position that should be utilized as your strategy. While all companies strive to increase profits, and shareholder value, that is not a strategy, it is a “constraint”. ...view middle of the document...
This is where operational efficiency is a key tool to differentiate Aetna from their competitors. According to Michael Porter, Operational efficiently “means performing similar activities better than rivals perform them.”
What has continually put Aetna above other insurance companies is Aetna’s strategy has always focused on building and maintaining great relationships with the providers and patients of the health care industry. They quote quite often “we put the people we serve at the center of everything we do”. They realize that the success of their company completely relies on those relationships. According to a Wall Street Journal article, Aetna was “ranked first among more than 130 big health insurers in how quickly and accurately they reimburse doctors, based on factors such as how long carriers take to pay bills, the percentage of claims they resolve after one submission and their claim-denial rates.” An Aetna employee said the company has ”improved efficiency, in part, through technology and by clarifying its policies with doctors”
Aetna was one of the first companies in the industry to utilize technological advances in order to increase efficiently. CEO Ron Williams created Care Engine, which is a computer system that contains all members’ health information. These systems converted everything into logarithms, including family history, demographics, diagnosis’s and symptoms. The computer was then able to process this information, and find possible conditions a person might be suffering from, as well as information regarding medications that would be helpful or dangerous to the patient. This invention was completely in line with Aetna’s strategy of helping their members. It created a type of efficiently that was unparallel to anything in the industry. Porter says, “One activity's value to customers can be enhanced by a company's other activities”. While this specific example only focuses on one activity of the company, the fact that it aligns with the strategy behind all the other activities is what gave Aetna their advantage. As Porter said, the activities “complement one another in ways that create real economic value.”
Aetna was able to push out the “productivity frontier” of the health care industry many times throughout their history. Although there have been times were shareholder returns were limited, Aetna was still creating an intangible form of value for the company. They set the bar higher for their competition, and in turn really benefited the consumers for a better standard of health care. While Porter might argue this wasn’t a benefit for the company itself, it did help moving towards goals of the company. But Porter was correct in the fact that other companies did quickly duplicate those same procedures, and leveled out the industries competitive grounds.
2. External Environment
In order to correctly identify your opportunities and threats that align with your industry,...