External Environmental Analysis: Purpose, Implications, Impact and Benefits
Organizations are increasingly conscious of the environment they operate in (Smaliukien & Petrauskait, 2008). This environment can be characterized as internal and external. Strength, weakness, opportunity and threat analysis is one good way of assessing the environment of an organization (SWOT) (Atun, Ohov, & Habicht, 2005). The main aim of an environmental analysis is to identify the critical internal and external factors that may promote or hinder the achievement of an organization’s objectives either long term or short term. This helps decision makers to think about everything that could potentially affect a new strategy or project. Failure to carry out and adhere to a proper SWOT analysis could to lead to disastrous outcomes of new ventures or strategies or slow or declined progress in continuing investments.
Environmental analysis plays a significant role in promoting an organization’s stability (Wheelen & Hunger, 2012). A critical review of the weakness and threats has a potential of ensuring that the organization can overcome both internal and external adversities. While weaknesses are internal disadvantages that are inherent in an organization, threats are external happenings in an industry that are beyond an organization’s control (Osita, Onyebuchi, & Nzekwe, 2014). A good example of weakness may be declining profitability of a firm or a redundant human resource while the external threats may include rising cost of energy or a weakening currency.
Besides stability, an environmental analysis may also improve an organization’s productivity (Osita, Onyebuchi, & Nzekwe, 2014). This happens through an analysis of the organization’s strength and opportunities that may exist. The analysis could also take the form of political, economic, social, technological, legal or environmental factors that may enhance or deter the organization’s growth. Organizations need to capitalize on the strengths they have and make sure there are no chances of them being wiped out or reduced. To remain relevant in the industry, they need to be aware and take advantage of opportunities that may present themselves in the market at a faster but safer rate than their competition.
A good evaluation may attract a broad range of implications. Because an environmental evaluation exercise is cyclic in nature, the process may involve various stages of data collection and report readjustment (Wheelen & Hunger, 2012). Where data is not sufficient, new areas of focus may be called in. The final report may then suggest adjustments that would reduce the impact of threats, eliminate weaknesses and capitalize on strengths to capture existing opportunities. For instance, if the threat to the organization is a change of law, the organization may have to realign itself with the new legislation, which may even result in changes in future investment portfolios.
Common weaknesses with many organizations are usually a redundant workforce (Wheelen & Hunger, 2012). With the advent of information and communication technology, many organizations are finding a good number of their employees’ role redundant. This may call for retraining and redeployment as suggestions in the strategic plan or radical suggestions such as downsizing. Based on reports on the strength and opportunities available to an organization, the strategic plan may propose new avenues of investment such as new areas or new industries. The implications could also be that unproductive areas are dropped from a company’s portfolio.
A Health Organization’s SWOT Analysis
The health sector is one of the most regulated sectors because most governments consider public health a matter of national importance (Atun, Ohov, & Habicht, 2005). However, most governments do not provide sufficient funding for the sector hence both the public and private sectors end up playing a significant role in this sector. The SWOT analysis indicated human resources, laws, technology and incidences of disease outbreaks as cases of threats, weaknesses and opportunities hospitals like our national referral hospital face. There were also threats of strikes from the underpaid staff who demand better wages and better working conditions.
The ability to meet strategic goals and objectives to a vast extent has been hampered by perennial drug shortages and persistent strikes from nurses and doctors. These have led to the labeling of the public health system as inefficient resulting in a flight to private facilities. As part of the ongoing reform exercise, a private-public partnership agreement will increase the number of nurses and doctors as well as the most needed equipment to the national referral hospital. If all factors are held constant, this is likely to help the organization meet its medium-term strategic goal reducing the number of pending medical cases by 80 percent.
The ability of the hospital administration to respond to internal and external changes is slightly hampered because of legal, administrative and labor challenges. Binding decisions can only be made in the presence of representatives from the government, the hospital, health workers, and private investors all whom have strategic interests in the hospital. The workers union has come out very strongly to ensure that the welfare of their members is taken into account within the confines of the strategic plan. However, a previous audit report has suggested a rationalization of the workforce with possible implications for reducing the number of non-technical workforces and those whose work has fallen redundant.
Previous assessment reports also recommended the outsourcing of non-core functions for the hospital such as payroll, and sanitation services that are still being opposed by labor unions. It had been projected that these services have not been working efficiently yet they consume a significant amount of the hospital’s annual budget. The government has called in the relevant ministries to renegotiate a settlement and avoid the threats of lawsuits.
The Strategic Plan
One of the main weakness that was pointed out in previous environmental assessments was the lack of technological advancement. The hospital’s machines were found to be dysfunctional, and most of them were outdated. In addition, the dysfunctional nature of the machines was the source of high electric bills. The use of outdated and dysfunctional machines was one of the reasons why there were long queues of patients waiting for special treatments such as radiotherapy. The goal is to replace all non-functional machines and equipment in one year. The specific objective will be to ensure that each department has a functional device or equipment. The second objective will be to make sure that there are competent personnel to operate each of the equipment.
The second year will involve an employee rationalization assessment by an external audit firm. The main goal of this exercise will be to ensure there are an optimal number of staffs in the hospital. The first objective will be to assess the qualification of each employee based on the roles they are supposed to play. Employee qualification is critical in determining the performance of the organization (Smaliukien & Petrauskait, 2008). Based on the findings of the first exercise, the second objective will be to determine the optimal number of employees needed in each department and thirdly, to suggest redeployment, retraining and early retirement of employees. The organization should have enough employees that it can manage. It would be a loss to the organization if the number of employees available exceeds the task they should perform.
The third main goal is to increase revenue sources for the hospital to meet 80 percent of the budget in 3 years. The organization expects that with the technological advancement, employee rationalization program and customer service, the hospital can raise up to 80 percent of its annual budget from its services. The organization will achieve its goal through the following two main objectives. The first objective is to reduce the budget on recurrent expenditure through staff rationalization program and outsourcing. The second objective is to increase the revenue from client services two times by increasing the number of customers served.
The organization will implement fully the continuous staff rationalization program in the third year. Moreover, the affected Employees will be given the opportunity to either retrain or opt for early retirement. All the sanitary, security and payroll services will be outsourced. This has been shown to reduce not only the expenditure but also boosts efficiency through performance contracting.
The hospital also projects a reversal in trends that will lead to an increase in the number of people seeking services in the hospital. When the equipment and personnel are fully utilized, the hospital will be able to fund most of its activities through billing for services. Reduced reliance on government funding will reduce the threat to the progress and sustainability of the hospital (Wheelen & Hunger, 2012).
Atun, R. A., Ohov, E., & Habicht, J. (2005). Estonian Health System: Analysis of the Strengths, Weaknesses, Opportunities. London: World Health Organization.
Osita, I. C., Onyebuchi , I. R., & Nzekwe , J. (2014). Organization’s stability and productivity: the role of SWOT analysis an acronym for strength, weakness, opportunities and threat. International Journal of Innovative and Applied Research, 23-32.
Smaliukien, R., & Petrauskait, N. (2008). Strategic Marketing Planning: Approach of Contingency And Strategic Intent. 5th International Scientific Conference on Business and Management (pp. 444-447). Lithuania: Vilnius Gediminas Technical University.
Wheelen, L. T., & Hunger, D. J. (2012). Strategic Management and Business Policy: Towards Global Sustainability. New Jersey: Pearson Education.
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