Community Health Systems PESTEL Analysis Russia Ukraine War

PESTEL Analysis of Community Health Systems in light of Russia Ukraine War

Community Health Systems business operations are impacted by Russia Ukraine war and it has to adapt to the changes in the business environment in the industry. Some of the PESTEL Analysis factors that are impacting the Community Health Systems business environment are –
War in Russia and Ukraine, loss of market opportunities in Russia & Ukraine, high inflation , increasing defence spending , increasing interest rates , increasing wages and risks of stagflation , crypto currency frauds and crash , technological changes such as ChatGPT and AI , end of an era of easy liquidity, slowing growth rates across the world , increasing credit card default rates and car loan payment defaults , increasing food and fertilizer prices , and financial collapse in emerging markets
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Increasing cost of doing business [Economic Factors]

– As the growing considerations are on diversifying supply chain away from China, geographical diversification, friendshoring – building manufacturing and other supply chain in friendly countries, it will increase the cost of doing business not only for transnational companies but also on the local companies. Businesses have to make higher inventory provision, tolerate greater inefficiencies, and ensure high due diligence in source of material and its usage.

Extremely high government debt [Political & Economic Factors]

– The debt levels in both the developed countries and emerging markets have increased because of the COVID spending and strengthening dollar. This has put financial health of numerous countries in danger. In October 2022, we saw a run on GBP when government declared tax cuts. Similarly the Debt to GDP ratio in most developed countries is above 80%, which is not sustainable in the long run.

Emerging Markets Financial Collapse [Political & Economic Factors]

– In 2022 a number of companies have either defaulted are on the verge of declaring bankruptcy and defaulting on sovereign bonds. Countries such as Argentina, Venezuela, and Turkey have inflation above 80%. Sri Lanka has already defaulted and Pakistan is on verge of defaulting. Bangladesh, Ghana, and many other African countries have asked for IMF withdrawing facility in case the local currency comes under pressure because of strengthening USD.

Increasing cost of fertilizers [Social & Economic Factors]

– According to World Bank, fertilizers prices are likely to remain high given that Russia and Belarus are two of the biggest suppliers of fertilizers to the emerging markets – Russia and Belarus accounts for 40% of total global MOP exports, a key ingredient for Brazilian and Argentine farmers. Secondly because of the rising gas prices there are significant cut backs in the production of ammonia in Europe. Russia accounts for 16% of global urea exports.

Lockdowns in China [Political & Economic Factors]

– The continuous zero lockdown policy in China not only disrupted the global supply chains but also reduced the demand for players such as Apple. Apple has decided to reduce the production of iPhones in 2023 not only because of supply chain disruptions in China but also because it expects lower demand from China and other major economies.

Increasing defence budgets [Political & Economic Factors]

– The war between Russia and Ukraine has put an end to an era where governments can put defence resources into healthcare and education. Now as governments across Western Europe and North America focus on putting minimum 2% of the GDP on defence spending, we will witness a reduction of spending in healthcare and education. It will also lead to less money for foreign aid and donations to build in infrastructure in developing world. This can result in not only fewer resources for health agencies and education departments, but also can increase immigration to the Western European countries and United States.

Rising Interest Rates in United States and other Developed Economies [Economic Factors]

– – As the inflation rate is above 8% in the most of developed world, central banks are actively cutting rates to control the inflation. Community Health Systems should strive to cut costs by streamlining operations and workforce, reduce dependence on customers’s discretionary spending.

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Slowing Growth Rate [Political & Economic Factors]

– As the Fed has decided to do whatever it takes to bring down the inflation to 2%, it will result in high interest rates and slowing growth rates across the world. Community Health Systems needs to build resilience to survive in the slowing economy. It can do so by focusing on fast developing emerging economies, building product offerings that can cater to lower spending rates of the consumers in the industry.

Emergence of AI and other automation technologies [Technology Factors]

– ChatGPT has brought new excitement to the field of Artificial Intelligence and automation. Even though the technology right now is in nascent stage, it has potential to disrupt the economic system in the coming decade. The Chinese government has even banned the use of ChatGPT in the country.

Increase in commodities prices [Political & Economic Factors]

– As Russia is one of the biggest suppliers of commodities in the world, the sanctions on Russia by United States and European Union has led to the increase in cost of commodities across the world. Community Health Systems needs to keep a close eye on the commodities prices to have a sustainable business model.

Emergence of Two Different Global Orders [ Political Factor]

– The war between Russia and Ukraine is fast resulting into emergence of two rivalling groups in the international orders. Ukraine is backed by the western countries and Russia is backed by the world’s second biggest economy China. This can result into not only geo-strategic competition but also economic rivalries based on the political leanings.

Technology war / Chips war [Technology Factors]

– CHIPS and Science Act passed in 2022 has not only aimed to encourage more CHIP investment in United States but also preventing companies to manufacture and ship high end chips to China that could be used in military hardware. This only marks the beginning of technology restrictions and economic competition. It also makes tech companies vulnerable to not only direct sanctions but also to secondary sanctions by United States.

Increase in Wages in United States, EU, and China [Social & Economic Factors]

– Increasing interest rates, high employment levels, slowing economy has created a perfect storm for stagflation in the US economy. The increase in wages has made it difficult for Community Health Systems to drastically cut costs without impacting the operational performance. There are numerous case studies in the industry, when companies are failed to cut costs fast enough to remain viable in a slowing economy.

High Inflation Rate across the Western World [ Economic Factor ]

– United States and other western countries are witnessing inflation above 7-8% in 2022 and it has not come down significantly enough to allow central banks to reduce the interest rates. The high inflation is because of multiple reasons such as – commodities shortages because of war between Russia and Ukraine, COVID stimulus that slushed huge amount of liquidity in the system, and China’s zero Covid policy and supply chain disruptions.

Check out the SWOT analysis of Community Health Systems

High Private Debt [Political & Economic Factors]

– In 2023 in an environment of rising interest rates, private debt in United States is extremely high. There is 16.1 trillion USD in household debt, 12 trillion USD in mortgage debt, 1.6 trillion USD in auto loans, and 1 trillion in credit card debt. 67% of the retired Americans already have an unpaid credit card debt. This point towards an extremely fragile situation if US enters into a recession.

Increasing Housing Payments [Social & Economic Factors]

– Over the last one year the mortgage payments have increased almost 60%. The mortgage payment now accounts for almost 33% of the average US homeowner income. The 33% share is far higher than the long term average of around 24% and just below the all time high of 34% in 2006. The trend suggests that a lot of households will be either struggle to make their payments or drastically cut down on the spending, or both. It points towards a looming housing market crash and recession.

Food Crisis [Social & Economic Factors]

– Ukraine and Russian war is impacting the global food market in two ways – first Russia, Belarus, and Ukraine are few of the biggest fertilizer suppliers in the world, secondly Russia and Ukraine accounts for nearly 25% of the global wheat exports. The reduction on both fertilizer and wheat exports can lead to increase in food crisis in not only least developing countries in Africa but also in wealthy countries in Middle East such as Saudi Arabia, Qatar, UAE and Egypt.

Increasing cost of climate change and natural disasters [Environmental Factors]

– The increasing intensity of hurricanes into United States, extreme heat season in Canada and Europe, floods in Pakistan, and extreme winter temperatures in United States suggest that the governments have to deal with increasing costs of climate change both in terms of infrastructure damage and rising energy costs to manage the extreme weather.

High probability of Recession in United States [Economic Factors]

– As Federal Reserve intends to bring the inflation back to 2%, it will require interest rates above 6%. The high interest rates and monetary tightening will result in United States going into recession. Community Health Systems has to prepare its business model to be recession resilient. It has to bring down the costs, focus only on lucrative customer segments, and build a diversified revenue stream in the industry.

Community Health Systems SWOT Analysis, SWOT Matrix, Weighted SWOT Case Study Solution & Analysis

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Books and References

Paul Ingram and Yoojin Choi (2022) "What does company really stands for?", Harvard Business Review , 92
Martin Reeves and Annelies O'Dea (2022) "6 Factors Driving Changes to Today's Corporate Strategies", Harvard Business Review , 92
Ian Bremmer (2005) "Managing Risk in an Unstable World", Harvard Business Review , 92
Ahir Gopaldas and Anton Siebert (2022) "What You’re Getting Wrong About Customer Journeys", Harvard Business Review , 92
Linda A. Hill, Emily Tedards, and Taran Swan (2021) "Drive Innovation with Better Decision-Making", Harvard Business Review 86
Dyer, J. H., & Hatch, N. (2004). Using Supplier Networks to Learn Faster. Sloan Management Review, 45(3), 57–63
Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99–120
Dyer, J. H., Kale, P., & Singh, H. (2004, July–August). When to ally and when to acquire. Harvard Business Review, 109–115

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