Company Analysis Project
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Company Analysis Project

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This is a project that I did my senior year of college. It was for my Strategic Management class where we were required to pick a Fortune 500 company and do a complete analysis of said company and its ...

This is a project that I did my senior year of college. It was for my Strategic Management class where we were required to pick a Fortune 500 company and do a complete analysis of said company and its competitors. We were required to make a proposal as to how the company could further itself within its industry.

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    Company Analysis Project Company Analysis Project Document Transcript

    • WellPoint, Inc. Kaci Wubbena
    • The primary mission of the company is to improve the lives of the communities they reachby providing their customers with options to fit their healthcare needs. After evaluation ofthe firm, externally the company is facing very few threats within its strategic group.WellPoint, Inc. has a mature industry structure. Their main focus should be on their abilityto modify the processes of services and to improve on customer service. Internally,WellPoint strives when it comes to having extremely diverse suppliers but falls aboutaverage when it comes to customer service and distribution of their product. For WellPointto advance within its strategic group, it must find a way to diversify their products to standout above the rest.
    • History – Formed after merging with Anthem, Inc. in 2004, WellPoint, Inc. became the leading health benefits company in the nation. WellPoint is headquartered in Indianapolis, IN. The company serves members in 14 states directly and all 50 states through UniCare.Mission – To improve the lives of the communities they reach by providing their customers with options to fit their healthcare needs.Strategic Group Aetna -- One of the nation’s top leaders in the health care benefit programs that offers similar options and benefits to their customers as WellPoint, Inc. does. CIGNA – As a global health service company, CIGNA has help people live healthier, more secure lives for more than 125 years and provides similar options and benefits to their customers as WellPoint, Inc. does.Important Metrics Membership – WellPoint has realized that “one size does not fit all” and therefore provides different options that will benefit specific customer needs. WellPoint, Inc is able to attract a wide range of members due to their attractive health care plans. Their ability to provide options for healthcare plans provides an opportunity for WellPoint to succeed within their growing market size and customer retention. Customization – By establishing relationships with customers, physicians, hospitals and other health care partners, WellPoint is able to create a variety of healthcare options along with hybrids of current plans that they already provide. This approach enables WellPoint to offer a diverse mix of products that “preserve member choice” while focusing on the development of new plans that put them ahead of their strategic group. Financial – Determination of a firm’s financial strength is through rating agencies reviews of their financial performance and focus on financial account information. WellPoint’s net profit, return on invest, and their ability to control expenses are ways they are measured on their financial stability within the market.The General Environment Demographic – • National Accounts Customer Segment National Accounts are generally multi-state employer groups primarily headquartered within the service area with 2,500 or more eligible employees. These accounts broaden the segment of customers that the company is serving by reaching out to states all over the country. • Local Group Customer Segments Local Group includes customers with less than 1,000 employees eligible to participate as a member in the offered health plans. Local groups allow the firm to reach customers within their regional area.
    • • Individual Customer Segments Individual customers under age 65 and their covered dependents allow the company to work directly with the beneficiary of the health insurance that is being offered. Sociocultural -- Consumers want to have options of the products and health care professionals they use, and they want more control over their health care decisions. Employers want the maximum amount of cost control while also being sensitive to employee needs. Economic – The recession has economically affected the health care industry negatively by forcing employers to either cancel health care benefits for employees or layoff the insured employee altogether. Political and Legal – Insurance laws and regulations vary state to state and are a way for the government to control the way insurance companies conduct their marketing, underwriting, and rate making activities. These restrictions limit the company’s ability to cancel or discontinue a policy once it is in place. Technological – Software programs enable each health care insurance provider to work efficiently within their own company. Technology issues that must be monitored would be privacy issues for customers, security issues for the company and its customers, and continued education for employees to stay up to date on technology advances that would allow the firm to gain a competitive advantage over the others within its strategic group. Global Events – The H1N1 outbreak in 2009 affected insurance companies by increasing patient traffic to doctor offices and calling for special policies to cover the “Swine Flu” vaccine.Analysis of the External Environment Rivals (Threat = 0) – AETNA, CIGNA – WellPoint, Inc. is financially more successful that Aetna and Cigna with revenues of $65,028.1 million and profits of $4,745 million. They also are ranked higher than the industry average on workforce diversity, employees and supply chain, and also community and society. New Entrants (Threat = 0) – New entrants are not a threat because of the barriers that have been built within the health care industry such as the ability to have product differentiation and cost leadership within the industry. Also, it would take years for a new entry to gain the brand awareness and customer base that WellPoint has already acquired. Suppliers (Threat = 1) – Blue Cross Blue Shield, Anthem, Empire – WellPoint suppliers are threat to the company because if they were to pull out of their contracts or agreements that they have with WellPoint, WellPoint would be left in a vulnerable position with no insurance companies to provide to their customers. Buyers (Threat = 0) – National Accounts Customer Segments, Local Group Customer Segments, Individual Customer Segments – Buyers are not a threat because of the security that health insurance brings to its customer. I feel that even if one
    • customer were to cancel their policy, another customer would be easy to gain due to the assurance that health insurance brings to individuals. Many Americans consider it “risky” to go even a month without health insurance. Substitutes (Threat = 0) – No health care insurance – This is not a threat because it cannot overcome the policies and benefits that WellPoint offers within its plans. Complementors (Threat =0 ) – Dental and vision plans – I don’t feel that the complementors would be a threat due to the fact that they are not near as valuable when they are offered alone as to when they are offered as an addition. They would not take health insurance customers away from their health plan due to the fact that a dental or optical visit is usually secondary to other doctor visits or checkups. __________________________________________________________________________ Opportunities Based on the Industry Structure – Based on WellPoint, Inc’s mature industry structure, the main focus should be on their ability to modify the processes of services and to improve on customer service. By focusing on these two opportunities, the firm should be able to continue to maintain a competitive advantage within its strategic group.Analysis of the Internal Environment Customer Service (VRINE Score = 1) – WellPoint’s customer service does add value to the firm. It is a key factor in the success of the firm, but since it is not rare and is available to their competitors, it only gives WellPoint, Inc. a competitive parity within its strategic market. Supplier Relationships based on diversity (VRINE Score = 4) -- A wide range of suppliers is needed to support WellPoint’s business operations. They work to include diverse suppliers in every bidding opportunity which is one of the building blocks that support WellPoints overall success. Distribution (VRINE Score = 1) – Though WellPoint’s distribution of services adds value to the company; they target the same areas as their competitors.Business-Level Strategies HMO plan – The strategy for HMO plans is cost leadership by using sources like economy of scale (employee specialization), economies of learning, and improvement of product design. The focus is to be able to serve a large amount of people (groups) in order to bring the cost down. Value Curve Analysis [HMOs] – Within the strategic market, WellPoint, Inc. is performing within a red ocean. Its competitors have been able to succeed within the same areas, therefore causing WellPoint to be under heavy competition within their strategic group. (Please see Exhibit 1)
    • PPO plan– Cost leadership is the strategy used for this product. Again, the focus is to be able to cover a large amount of people (groups) in order to bring the cost down. Sources like economy of scale, economies of learning, and improvement on product design are used to maintain this strategy. Value Curve Analysis [PPOs] – In this market, WellPoint, Inc. is performing in a red ocean. Its competitors are able to keep up with them within the different metrics and attributes that they deliver alongside their product.(Please see Exhibit 2)Corporate-Level Strategies Level of Vertical Integration – Since WellPoint, Inc. is a distributor of Anthem and BlueCross/BlueShield insurance policies, their important roles within the value chain (both for HMO and PPO plans) would be the marketing of the product, the customization of the specific plans to meet each individual need, and the finalizing of the sale (the signing of the policy with the soon-to-be insured).Though WellPoint does its own research and development to measure how the market reacts to certain health insurance plans and how marketable certain plans will be, they do not control what kind of plans and coverage that their suppliers offer. Level of Product Diversification – After viewing the portfolio analysis graph in exhibit 4, you can see that WellPoint’s products are not very well diversified. Two sets of products (HMO & PPO plans and Dental & Vision insurance) actually overlap one another while one product (health programs) stands alone and is doing well for the company. This shows that though the products are valuable to the firm, WellPoint, Inc. needs to figure out a way to make the overlapping products stand out from the others. Global-Level Implications – For WellPoint, Inc. to geographically diversify itself, I would recommend them to move into the Canadian market. There would be little to no adaptation for health care plans. WellPoint may have to open a site there in Canada (aggregation), but again, projects could be handled remotely from the US. And with little to no changes made to the product, WellPoint can continue practices the same way they are in the US because there minimal regional differences between Canada and the US. WellPoint should take advantage of this opportunity due to the small degree of differences between the US and Canada.
    • Exhibit 1: HMO Value CurveCoverage – the areas that each insurance company reachesPhysicians – the amount of physicians available through insurance providerCustomer support – call centers, 24hr hotlines, information lines on specific health informationSpecial programs – programs available through the insurance provider such as maternity and cancer educationprogramsAdditional plans – dental, optical, life & disability plansMember discounts – discounts available on health services like acupuncture and weight managementE-commerce – customer’s ability to access account information onlineReferrals – customer’s restrictions on whether referrals are needed in order to see “specialists” doctors
    • Exhibit 2: PPO Value CurveCoverage – the areas that each insurance company reachesPhysicians – the amount of physicians available through insurance providerCustomer support – call centers, 24hr hotlines, information lines on specific health informationSpecial programs – programs available through the insurance provider such as maternity and cancer educationprogramsAdditional plans – dental, optical, life & disability plansMember discounts – discounts available on health services like acupuncture and weight managementE-commerce – customer’s ability to access account information online
    • Exhibit 3: Value ChainsHMO & PPO:Exhibit 4: Portfolio Analysis VRIO External Treats Percent of Score Score Total Revenue(A)HMO 2 3 34.5(B)PPO 2 3 34.5(C)DentalInsurance 2 2 11(D)VisionInsurance 2 2 11(E)HealthPrograms 4 2 9 Low CD EExternal ABAnalysis Score High Low VRINE Score High