Order custom Harvard Business Case Study Analysis & Solution. Starting just $19
Health Net SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Health Net managers to do a situational analysis of the firm . It is a handy technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Health Net is facing in its current business environment.
The Health Net is one of the leading companies in its industry. Health Net maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework enables an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Health Net to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The central purpose of SWOT matrix is to identify the strategies that an organization can use to exploit external opportunities, counter threats, and build on & protect Health Net strengths, and eradicate its weaknesses.
Step by Step Guide to Health Net SWOT Analysis
Strengths of Health Net – Internal Strategic Factors
As one of the leading organizations in its industry, Health Net has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Health Net are –
- Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
- Strong distribution network – Over the years Health Net has built a reliable distribution network that can reach majority of its potential market.
- Superb Performance in New Markets – Health Net has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
- Strong Free Cash Flow – Health Net has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- Highly skilled workforce through successful training and learning programs. Health Net is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Successful track record of developing new products – product innovation.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Weakness of Health Net – Internal Strategic Factors
Weakness are the areas where Health Net can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
- Limited success outside core business – Even though Health Net is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Health Net
- The profitability ratio and Net Contribution % of Health Net are below the industry average.
- The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Health Net has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Health Net is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
Opportunities for Health Net – External Strategic Factors
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
- The new technology provides an opportunity to Health Net to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Health Net’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Health Net. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Health Net to drive home its advantage in new technology and gain market share in the new product category.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Health Net an opportunity to enter a new emerging market.
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Health Net in other product categories.
- The market development will lead to dilution of competitor’s advantage and enable Health Net to increase its competitiveness compare to the other competitors.
Threats Health Net Facing - External Strategic Factors
- Imitation of the counterfeit and low quality product is also a threat to Health Net’s product especially in the emerging markets and low income markets.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- Liability laws in different countries are different and Health Net may be exposed to various liability claims given change in policies in those markets.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Health Net in those markets.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
Limitations of SWOT Analysis for Health Net
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Health Net
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Health Net
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Health Net managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Health Net
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
SWOT Worksheet & Template
If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.
References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
Previous 5 SWOT Analysis
- PNC Financial Services Group SWOT Analysis
- Nucor SWOT Analysis
- Goodyear Tire & Rubber SWOT Analysis
- Bristol-Myers Squibb SWOT Analysis
- NGL Energy Partners SWOT Analysis