Strategic Analysis of Estia Aged Health Care

This report provides a strategic analysis of Estia Aged Health Care, including background information, macro environmental analysis, industry analysis, and internal strategic capabilities and analysis. The report evaluates the political, economic, socio-cultural, technological, environmental, and legal factors influencing the operations of Estia Aged Healthcare. The analysis of the industry of residential health age care is done by the application of Porter’s five forces. The report concludes by diagnosing the strategic capabilities of Estia Health aged care.

Running head: STRATEGIC ANALYSIS
Strategic analysis
Name of the University
Name of the Student
Authors Note

1
STRATEGIC ANALYSIS
Table of Contents
Introduction:...............................................................................................................................2
Background information on Estia Aged Health care:................................................................2
Macro environmental analysis:..................................................................................................5
Industry analysis:.......................................................................................................................7
Internal strategic capabilities and analysis:................................................................................9
Conclusion:..............................................................................................................................11
References list:.........................................................................................................................13

2
STRATEGIC ANALYSIS
Introduction:
The report is prepared to conduct strategic analysis of an Australian public listed
company that is Estia Health aged care by focusing on business of residential aged care.
Discussion incorporates the background information of organization in terms of its size,
history, ownership business scope, major markets and major products and services of selected
organization. Macro environmental analysis of industry in which Estia Health aged care
operates is demonstrated in the report and this will assist in drawing implications for
organization in terms of opportunities and threats. Competitive analysis of industry is
undertaken using the model of Porters five forces. Resources providing sustainable
competitive advantage to business are identified by the application of VRIO that helps in
determining strategic capabilities of organization.
Background information on Estia Aged Health care:
History:
Estia Health Aged care (EHC) is one of the largest aged care providers to resident of
Australia that was established in year 2005 (estiahealth.com.au 2018). Organization is
historically present in four states of Australia that is Victoria, New South Wales, Queensland
and South Australia and the group is well positioned to pursue and identify opportunities for
acquisition in each of these states. 88% of residential aged care is placed in these four states
of Australia. Prior to merger of company in year 2014, the company has a history of
expanding into number of facilities and places where it operated (estiahealth.com.au 2018).
Business components and aggregate number of places of Estia increased to 3203 in year 2014
compared to 1264 in year 2008. In year 2015, Estia entered into contracts for acquiring
further five facilities and the expansion have been achieved via the expansion of existing
facilities, acquisitions and new facilities development. Increased revenue per bed and

3
STRATEGIC ANALYSIS
increased occupancy rates have been achieved by acquisition of nine facilities and
development of further three facilities over the period of 2012 to 2014 (Gioia, 2014).
Major products and services:
Focus of organization is to provide resonate choices to families and residents, helping
in organizing program for families, straightforward services by creation of family codes. The
family code is incorporate some elements such as always approachable, creating happiness,
pushing limits, generating daily best and saying something by seeing something. Dedicated
services and increased bed proportion are the focus of organization in terms of their services
and products (E. Dobbs, 2014).
Well being and health-
 Entertainers and concerts
 Active games, bus trips and air and crafts
 Guided and physic exercise
 Religious services
Clinical care-
 Personal care
 24 hour nursing care
 Occupational and physiotherapy
 Arranging on site visits for external medical practitioners
 Administrative pharmaceutical and wound management
Dining and nutrition-
 Dining and family meals
 Nutritional requirement and dietary needs
Major markets:
Estia aged health carries out its operation in fragmented and growing industry and the
expanding existing facilities of business intends to provide beneficial opportunities to
company. Organization has market capitalization of $ 931.51 million. In the current scenario,
organization operates in four states of Australia with the target of reaching 10000 beds
through targeted acquisitions and development of strong organic pipeline by year 2020
(estiahealth.com.au 2018). Care requirement in the country will be driven by increased age of

4
STRATEGIC ANALYSIS
residents and with increase in industry growth, Estia is required to grow at double rate.
Size and Business scope:
The organization has 5910 operating place, have more than 700 employees and 68
facilities across New South Wales, Victoria, Queensland and South Australia. Story of its
rapid and recent growth is based upon three residential aged business consolidations and each
of it having modern facilities, strong reputation and experienced management
(estiahealth.com.au 2018). Objectives of Estia are to provide their customers with aged care
services with highest standards in a supporting, innovative and caring environment.
Supporting regional networks of home across Australia, using corporate centres for delivering
their results, state of art clinical care utilization, people and financial system are the
operational efficiency of organization. These would help in ensuring that the group serves
complex and higher quality services with increase in demand. Some of the fundamental
concepts for fulfilling the purpose of organization are providing quality care using specialized
healthcare terms, innovation, access to helpful advice and providing caring and inclusive
experience that aged care in meeting the needs of aged family.
Estia health has many homes in several states of Australia, they are well placed for
meeting the demand of increasing healthcare, and they have a well-defined and clear strategy
for enhancing the existing home and increasing bed capacity. Company for driving future
earnings undertook a material capital-spending program and this would help in business
enhancement (Dess et al., 2016). In order to focus on high quality assets, the organization
recognized the needs for stabilizing business and strategy refinement.
Macro environmental analysis:
Macro environmental factors influencing the operations of Estia Aged Healthcare are
evaluated using the PESTEL analysis.
Political factors- Health care in Australia is a joint responsibility of state and federal
government and the political framework of the healthcare sector is in state of unrest. The
potential for future cooperative arrangement between healthcare organizations and federal
government is undermined by the budget outcome that is representing massive shift in cost to
states. The state of political environment is impacted by change in Commonwealth
arrangement and ending their traditional form as they are exposed to sovereign risk (Bettis et
al., 2016). Operations oh healthcare companies such as Estia is impacted by the political

5
STRATEGIC ANALYSIS
conditions prevailing in Australia. Increased cost for government might reduce the access of
health care organizations to government funding.
Economic factors- The highest performing sector economically is the healthcare
sector of Australia. Growth of healthcare sector is double the pace of growth of gross
domestic product of country. In terms of public private partnership and ability of healthcare
sector to attract overseas talent, Australia is ranked top three. In order to serve Australian
public and to become strong contributor to economic development, healthcare companies are
required to consider their roles by boosting their research and development potential and
reducing unnecessary expenditures (Jenkins et al., 2017).
Socio-cultural factors- The practice and operations of healthcare companies is impacted by
two main changes in social environment. Ageing of the population is the first factor followed
by a big sociological shift influencing residents to move to individualized care. Current
healthcare system requires drastic change due to prevailing unsustainability. Mandating co
payment for medical care is likely to increase medical cost for families. However, funds
generated from mandating of co payment will help in expanding medical research by
assigning capital fund (Barney & Hesterly, 2015). Leadership of Estia is also affected by
culture and educational level of Australian residents. Therefore, it is essential for Estia to
revise the strategies in increasing medical cost for acquiring strong customer base.
Technological factors- The advancement in modern technology has considerable
impact on healthcare industry of Australia. There is an increased scope for expanding use of
technologies that will bring variations in cost effectiveness of companies. Accelerating
ageing population, income growth, and expectation of communities, subsidised consumer
price will place increased pressure on public and private health system resulting from
interaction of technological advances with increasing health services demand that are driven
and bet available treatment will make a potential mix (Certo et al., 2016). In recent years,
medical technology advancement have been a major driver of increased health spending and
this has contributed to increased spending on part of health organization on technologies and
thereby reflect a significant increase un number of people being treated and improved
treatment.
Environmental factors- The health system of Australia is great compared to other
countries and the environmental factors are now aligned and present due to shifting to patient
centric and coordinated care. The income of traditional healthcare providers is threatened by

6
STRATEGIC ANALYSIS
shift in preference for localised care. Complying of organization with environmental laws
will help in reducing carbon emissions and comes with several health benefits for population.
Organizations operating in healthcare industry should comply with the environmental laws
and standards (Frynas & Mellahi, 2015).
Legal factors- Operations and business of healthcare industry is influenced by legal
factors of region where the organization is operating. Some of the laws impacting the
operations of organization such as Estia healthcare in Australia are antitrust law, copyright,
health and safety law, data protection law, discrimination law and consumer protection.
Healthcare practitioner is required to comply with privacy policies. Privacy act of Australia
set out the principles that are applicable to public and private healthcare service providers.
Any overseas hiring of healthcare talent should have proper disclosure and practitioners are
obliged to make confidentiality of patients (Henderson et al., 2017).
Industry analysis:
The analysis of industry of residential health age care is done by the application of
Porter’s five forces. It is a tool of strategic management for understanding the level of
competitive forces of industry and accordingly help in development of strategy.
Suppliers bargaining power- For the management of business of health organization
such as Estia heath care, this particular variable is utmost critical. Most of companies in heath
organization buy their equipments from numerous suppliers. Margins earned by organizations
in industry can be reduced if the suppliers are in dominant position. Powerful suppliers in the
industry can extract higher prices from the firms that help in lowering the profitability
position of company (Trigeorgis & Reuer, 2017).
Buyer’s bargaining power- The bargaining power of buyers is quite limited in the
field of healthcare. They seek best and quality care from the health organizations and due to
existence of fewer good players in the health industry, buyer does not enjoy a high bargaining
power. Customers bargaining power can be reduced by building large customer base that
helps in streamlining production process and sales of organization. Bargaining power can
also be limited by making rapid innovations of new products and providing offerings on
existing products (Rothaermel, 2015).
Threat of substitutes- The profits of company is greatly impacted by types of
services offered by other health organizations prevailing in the industry. Depending upon the

7
STRATEGIC ANALYSIS
types of services offered by health organizations in the industry, the threats faced varies from
low to medium. If the value proposition offered by company is considerably different from
the present offering of health industry, then the substitute threat is substantially higher.
Existence of rivalries- There is an increased demand for health services driven by
ageing and growing population of Australia. Estia faces a very intense competition in the
industry in which it operates because of increasing healthcare players. Increased player in the
industry is attributable to economies of scope, access to funding provided by government and
usage of effective methods of controlling cost. Overall profitability of company reduces due
to prevalence of increased players in the industry.
Threat of new entrants- In the health industry of Australia, there are moderately
high barriers because of higher cost of capital and building of new hospitals in locations that
are nearby viable locations. The strategy that could be viable for new entrants to enter into
this particular industry is by way of acquisition. New entrant require substantial amount of
funds for acquiring diversified geographical markets (Hubbard et al., 2017). It can be
concluded that new entrants would find considerable amount of difficulties unless they enter
by employing appropriate strategy and have adequate capital for investment.
From the analysis of aged healthcare industry of Australia, it can be inferred that the
main driving force in the competitive environment is increasing growing and ageing
population. Estia aged healthcare enjoys a fewer threat of new entrants due to several
difficulties faced and many prerequisites for entering into industry. However, the group
experiences increased competition from their rivalries due to availability of various facilities
such as government funding and economies of scope. Therefore, it is required by Estia to take
measures for building substantial differentiation and rather than just competing for smaller
share of market, they should prefer collaboration when it seems feasible for enhancing their
market size and serving old age Australian residents.
Internal strategic capabilities and analysis:
Estia health aged care has grown to be one of the largest aged care providers in
Australia and enhance their service offerings that range from boutique services to community
like villages. Strategic capabilities of organization are diagnosed by determining the four
criteria that provides the basis of achieving sustainable competitive advantage (Greenspan,
2015).

8
STRATEGIC ANALYSIS
Values- Value network and value chain can be used to perform the diagnosis of tool
that is considered valuable to customers. Value chain helps in understanding the cost position
of Estia health aged care and the value of each activities that are being delivered. The primary
activities of this particular health organization are to provide residents and their families in an
inclusive, safe and caring environment and providing support whenever they required. On
other hand, supporting activities is to make diversification across homes that make home
personal to residents and providing assistance that helps in finding the right place. Homes are
designed in such a way that it provides support to changing personal requirements of
residents in a dignified and seamless way. Residents are involved with the activities and
people they love by maintain independent and well being of hard work.
Rarity- For determining the rarity criteria, it is required to perform competitor
analysis of Estia Health aged care. The unique criteria of Estia compared to other healthcare
providers in the Australia are that each of homes has their distinct personality. Such distinct
personality represents employees and residents within along with maintaining highest clinical
care standards. It is well understood by organization that Australian residents need choices
and each of services and programs are designed in a way that is easily adaptable by homes for
supporting the preferences and needs of residents care and their family and friends (Peteraf et
al., 2014). This uniqueness feature of homes of Estia supports the rarest criteria.
Inimitability- Inimitability of strategic capabilities of an organization can be
explained in terms of casual ambiguity, complexity, culture, history and change. Continuous
improvement is pursued by organization in all aspects of personal and health care as an effort
to keep themselves ahead of competitors. Estia always indulge themselves in innovative
activities for enhancing residential care of Australian residents.
In recent years, no competitors of Estia have provided diversified healthcare service
to residents and this diversification is far from non-imitable. The current number of
operational beds offered by Estia health aged care is 2705 and total number of current
facilities at 34 (estiahealth.com.au 2018). Estia that has an extensive portfolio of facilities
acquires business of quality aged care service models. This acquisition provided Estia an
opportunity to expand their business into Qld and market of New South Wales. Service
offering by Estia has always increased and this might place small operators at competitively
disadvantageous state when an appropriate aged home care is to be chosen by residents.
Factors that lead to higher valuations of health care companies involves potential of selling

9
STRATEGIC ANALYSIS
value added items, having multiple facilities, locating facilities in areas where demands are
unmet, food standards and high care, quality refurbishments, good base of nurses and ability
to develop and scale facilities (Wheelen et al., 2017).
Organizational support- Various platforms will continue to be used by Estia for
their growth enhancement such as Greenfield expansion, Brownfield expansion, acquisition
of single facilities that will help in meeting the acquisition criteria of Estia. Some other
measures incorporate making improvement in existing operations and acquisition of new
facilities intended to increase occupancy rate and revenue. The dining facilities offered by
Estia are nutritionally balanced for meeting the needs of residents. Chefs that incorporate
seasonal and local produce reflecting residents’ personal preferences create interesting
options (Varabyova & Müller, 2016). The lifestyle of coordinators at Estia has close
association with clinical teams for ensuring that programs are tailored for meeting the needs
of residents. Employees are always encouraged for supporting the interest of residents
including the management, kitchen, and maintenance, clinical and domestic teams (Brooks et
al., 2015). Clinical care at Estia is an ongoing process that includes regular medication,
specialist dementia care, pain management programs, high level of personal care and medical
services such as pharmacy, physiotherapy, optometry, dental and podiatry. The growth of
Estia has been supported by its continuous expansion during the past three years that is
acquisition of Padman Healthcare and Cook care group (Ginter et al., 2018).
Estia is taking advantage of the capability of changing their service lines. With
increased acquisition of other healthcare providers, organization is pushing themselves for
reaching new patient populations and creation of new service lines (Foss & Hallberg, 2014).
VRIO analysis of Estia Health aged care:
Value Rare Imitable Organizational
support
Competitive
implication
Yes No Yes Yes Competitive
advantage over
small health care
providers. It can
be exploited if
the competitors
imitate such

10
STRATEGIC ANALYSIS
diversification
of services.
Conclusion:
The healthcare industry of Australia is becoming intensely competitive due to
increased number of healthcare providers. In order for organization to sustain their
competitive advantage, it is required to keep upgrading their service and enhancing products
and service lines. Macro environmental analysis of healthcare industry depicts that the ageing
population of Australia has been attributable to increased demand in healthcare services. In a
continually changing environment of high demanding expectations of age care, organizations
are required to focus on strategies and practical solutions for achieving best value in terms of
procurement. Analysis of strategic capabilities depict that Estia provides valuable services to
its customers and their strategy of diversification of their service line is somewhat imitable.
Therefore, in this regard appropriate steps should be taken to maintain and build their
speciality and uniqueness. Estia Health is involved in major acquisitions that have led to its
significant growth and efforts should be taken for responding to challenges they face by
providing greater choice to patients, curtailing cost through process of procurement and
streamlining of operations. They should be able to find opportunities for strategically
sourcing products and services of aged care. Growing demand of healthcare and increasing
players in healthcare market might pose threats to the business of Estia. Therefore, it is
recommended to respond appropriately for sustaining their position and further increasing
their market size and number of residents being served and thereby contributing to economic
situation of Australia.

11
STRATEGIC ANALYSIS

12
STRATEGIC ANALYSIS
References list:
Barney, J. B., & Hesterly, W. (2015). Strategic management and competitive advantage
concepts and cases. Pearson.
Bettis, R. A., Ethiraj, S., Gambardella, A., Helfat, C., & Mitchell, W. (2016). Creating
repeatable cumulative knowledge in strategic management. Strategic Management
Journal, 37(2), 257-261.
Brooks, P., El-Gayar, O., & Sarnikar, S. (2015). A framework for developing a domain
specific business intelligence maturity model: Application to healthcare. International
Journal of Information Management, 35(3), 337-345.
Certo, S. T., Busenbark, J. R., Woo, H. S., & Semadeni, M. (2016). Sample selection bias and
Heckman models in strategic management research. Strategic Management Journal,
37(13), 2639-2657
Dess, G. G., McNamara, G., & Eisner, A. B. (2016). Strategic Management: Creating
Competitive Advantages, ch3 pp74-106.
E. Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of
industry analysis templates. Competitiveness Review, 24(1), 32-45.
Estia Health Aged Care: Australian Aged Care | Aged Care Facilities | Residential Aged
Care Facilities | Nursing Homes . (2018). Estia Health. Retrieved 20 February 2018,
from http://www.estiahealth.com.au/
Foss, N. J., & Hallberg, N. L. (2014). How symmetrical assumptions advance strategic
management research. Strategic Management Journal, 35(6), 903-913.
Frynas, J. G., & Mellahi, K. (2015). Global strategic management. Oxford University Press,
USA.
Ginter, P. M., Duncan, J., & Swayne, L. E. (2018). The Strategic Management of Healthcare
Organizations. John Wiley & Sons.
Gioia, D. A. (2014). A 1st-Order/2nd-Order Qualitative Approach to Understanding Strategic
Management. Primer: Qualitative Research in Strategic Management.
Greenspan, R. (2015). Walmart: Five forces analysis (Porter’s model). Panamore Institute.
Henderson, J., Willis, E., Xiao, L., & Blackman, I. (2017). Missed care in residential aged

13
STRATEGIC ANALYSIS
care in Australia: An exploratory study. Collegian, 24(5), 411-416.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an
integrated approach. Cengage Learning.
Hubbard, G., Rice, J., & Galvin, P. (2014). Strategic management. Pearson Australia.
Jenkins, M., Ambrosini, V., & Collier, N. (Eds.). (2016). Advanced strategic management: A
multi-perspective approach. Macmillan Education.
Johnson, T. L., Rinehart, D. J., Durfee, J., Brewer, D., Batal, H., Blum, J., ... & Gabow, P.
(2015). For many patients who use large amounts of health care services, the need is
intense yet temporary. Health Affairs, 34(8), 1312-1319.
McKiernan, P. (Ed.). (2017). Historical Evolution of Strategic Management, Volumes I and II
(Vol. 1). Taylor & Francis
Morden, T. (2016). Principles of strategic management. Routledge.
Morschett, D., Schramm-Klein, H., & Zentes, J. (2015). Strategic international management
(pp. 978-3658078836). Springer.
Peteraf, M., Gamble, J., & Thompson Jr, A. (2014). Essentials of strategic management: The
quest for competitive advantage. McGraw-Hill Education.
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.
Trigeorgis, L., & Reuer, J. J. (2017). Real options theory in strategic management. Strategic
Management Journal, 38(1), 42-63.
Varabyova, Y., & Müller, J. M. (2016). The efficiency of health care production in OECD
countries: A systematic review and meta-analysis of cross-country comparisons.
Health Policy, 120(3), 252-263.
Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic
management and business policy. pearson.

14
STRATEGIC ANALYSIS