Strategic Management for Estia Health Aged Care in Australia

This report provides a strategic management analysis of Estia Health Aged Care in Australia, including a macro environmental analysis, Porter's 5 model, and VRIO analysis. The report includes background information about the organization, its business scope, and its aim to provide high-quality aged care services. The macro environmental analysis covers political, economical, social, technological, legal, and environmental factors. The Porter's 5 model covers the threat of new entrants, bargaining power of suppliers and buyers, threat of substitutes, and rivalry between existing companies. The report concludes with a VRIO analysis to evaluate the resources of the company and its competitive advantages.

Running head: Strategic Management 1
Strategic Management

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Contents
Introduction......................................................................................................................................3
Background information about the organization.............................................................................4
Macro environmental analysis.........................................................................................................5
Porter’s 5 model...............................................................................................................................6
VRIO analysis..................................................................................................................................8
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

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Introduction
The role of strategic management is vital for the organization because it ensures that goals of the
organization are set and internal environment is set for attaining the objectives. More and more
organizations have become aware about the strategic planning which is the fundamentals aspect
in successfully facilitating them by an kind of contingencies either internally or externally,
organizations have initiated to attract strategy management initiating from the most basic
administration levels (Freeman, 2010). The report will be described about the Estia Health Aged
Care, Australia. Macro environmental analysis will be mentioned in this report to define the
Pestle analysis of the chosen organization. Porter has recognized five competitive forces that
provide the shape to every industry. These forces decide the strength of the competition. VRIO
framework analysis will be helpful to determine the capabilities of the organization. It is
considered as an analytical technique to evaluate the resources of the company and thus the
competitive advantages. It is a short form from the starting of the names of the evaluation
dimensions such as Value, Rareness, Imitability and Organization.

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Background information about the organization
Estia Health Aged Care was formed in 2005 and now it is one of the well known residential aged
care providers in Australia with 68 facilities, more than 5500 operating places and 7,000
employees across Queensland, South Australia and Victoria. The main reason behind the rapid
growth of this industry is upon the consolidation in July 2014 of three residential aged care
businesses. All of them have strong positions and modern facilities. The aim of Estia is to
provide the high rate aged care services to its customers in an innovative and supportive way.
The staff of this organization has trained and educated which underpinned with a committed and
skilled workforce. The operational efficiency of Estia is to deliver results by using its corporate
centre in Melbourne. This organization has the proud heritage of giving the quality aged care
across Australia for nearly 50 years. The business scope of the organization is to expand its
business globally by providing efficient services to the aged people. It has been evaluated that
there are certain reasons to choose Estia Health such as everyday living, wellbeing and lifestyle,
a nutritious experience, quality clinical healthcare and respite care (Estia Health, 2018).
In the context of everyday living, it provides help with everyday living in well maintained
environments that are protective and adaptable to the individuals needs. People are not wanted to
get bound with the rules and strictness, they are looking for places to call home that permit them
to live their life in free way but provide support, security and stable. Hobbies and interest of
people are focused by this organization to make them realize that they are valuable. Under
wellbeing and lifestyle, an organization understands the need of the people at any stage of life.
People are eager to maintain the balance an inspiring life with one that permits time for personal
understanding and space. This organization has trust on equality and provides the health nutrients

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food to the residents of health aged home. The chefs of this organization are encouraged to make
interesting options that show the personal preferences of residents. The nurses are qualified in
this organization and clinical care is an ongoing process that involves constant reviews. It
involves daily medication, specialist dementia care, medical services such as dental, pharmacy,
podiatry and physiotherapy. The major market of this organization is in South Australia,
Queensland, New South Wales and Victoria. Each home shows the unique and individual
personalities of the residents that are effective. It has been cleared that Estia has the strength in
the form of effective staff and polices which is followed by the staff of this organization.
Residents of this Aged care home are satisfied due to effective services (Estia Health, 2018).

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Macro environmental analysis
Macro environmental analysis will be effective for the organization to understand the
opportunities and threats for the organization by evaluating the various terms such as political,
economical, social, technological, legal and environmental. Pestle analysis will be mentioned
below with clear understanding that which aspect can put the impact into the environment of the
company.
Political
Political factors have the ability to determine the factors that can influence the long term
profitability for Estia Health Limited in a certain country or market. Estia Health limited is
running its business in aged care services in number of countries and reveal itself to various kind
of political environmental and system risk. In Australia, these industries need to analyze the
various political terms and tax policies. Estia should analyze various factors such as political
stability, reduced costs, skilled government and international trade agreements in the context of
Australia (Buysse and Verbeke, 2003). These industries need to analyze the taxation, wage
legislation and mandatory employee benefits of Australia. It has been analyzed that the
healthcare expenditures shows 9% GDP, near to the OECD median which is less than the United
States.
Economical
There are numerous macro environmental factors such as saving rates, inflation rates, foreign
exchange rate and interest rate which determine the aggregate investment in an economy. Micro
environmental factor is focused on the competitive advantages of the firm (Clemens, 2009). Estia

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Health Limited can utilize the numerous factors of economy such as inflation, growth rate and
industry’s economic indicators. Estia Health Limited should consider the various factors such as
kind of economic system in Australia of operation and what kind of economic system there is.
Exchange rates and stability of Australia’s currency should be evaluated by the organization.
Economic growth rate and unemployment rate of Australia should be recognized by the company
(Mahoney and Kor, 2015). Estia healthcare can facilitate make up for a softening resource sector.
Recently, the firm healthcare exports of Australia lie in health merchandise by including medical
equipments and instruments which consisted AU$4.7 billion (US$3.5 billion) in the economy of
Australia in 2013. It has been found that the both real and nominal growth is strong and the
workers of this country are productive.
Figure 1: Role of healthcare in economic development
Source: (Productivity Commission, 2005).
Social

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It is cleared that the impact of society culture and the way of doing things influence the
environment of the organization. To understand the customers’ preference and choice, the role of
shared beliefs and attitudes of people play integral role in Estia Health Limited. Demographics
and skill level of population of Australia should be analyzed by Estia. However, Estia is able to
provide the efficient services to its residents but to provide the satisfied job Estia should analyze
the Class structure, hierarchy and power structure in the society. Care provider for this country
should be educated and skilled and for this Estia should analyze the income level in a constant
way (Shtal, Bondarenko and Yarkovyi, 2017).
Technological
Technology is rapid trouble making number of industry across the board. To illustrate this point,
transportation industry would be good case. It has been evaluated that over the last 5 years this
industry has been transforming really fast and it did not give the single opportunity to the
established players to cope with the changes (Kasim and Dzakiria, 2016). Similarly, Estia Health
Limited should focus on the latest technology to adapt the change in the organization. Along
with the Estia should analyze the impact of produced technology on the offering products. It
would be good for the organization as it increase in development costs. Australia is an advanced
country and it is vital for surviving in an efficient manner to adapt the latest technology. Estia
healthcare is more concerned about the drinking water quality, food safety, disease control and
housing conditions. It has been found that Australian Government funds approximately 46 per
cent of entire healthcare expenditure. Medical technology involves instruments, pharmaceuticals,
clinical procedures and knowledge and support system.

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Figure 2: health expenditure for medical technology
Source: (Productivity Commission, 2005).
Legal
There are so many countries in which the legal framework and institutions are not strong enough
to prevent the intellectual property rights of an organization (Zalengera, Blanchard, Eames,
Juma, Chitawo and Gondwe, 2014). It is vital for Estia to carefully evaluate the market of
Australia as it may lead to theft the secret of the organization thus the overall competitive edge.
There are number of legal factors which should be considered by Estia Health Limited such as
discrimination law, employment law, health and safety law and consumer protection and e-
commerce. Estia is providing the efficient services to the aged people and it is required for it to
analyze the legal terms carefully.
Environmental
There are number of markets in all over the world and different markets have different
environmental standards or norms which can influence the profitability of an organization. The

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environmental standards are not different for only country, it can be different for number of
states within one country (Islam and Mamun, 2017). It is necessary for Estia to analyze the
various factors such as weather, climate change, endangered species and attitudes towards green
products. Sustainability should be considered by the organization to expand its business
operation within Australia.
From the above discussion, it can be concluded that Estia has good skilled employees and it can
evaluate the numerous factors regarding political, environmental, legal, social, technological and
economical for enhancing its business in all over Australia and for maintaining the business
sustainability. Estia should focus on different country as well because it has good staff and
efficiency to handle Aged people and treat them as home.
Porter’s 5 model
Threat of new entrants
New entrants brings the innovation in an industry and the new ways of performing the task put
pressure on established players by efficient pricing and able to provide the new value
propositions to the consumers. When the new entrants are dividing their core business, they can
easily overcome the well-established players’ benefits of capital needed. There are number of
competitors of Estia that can enhance its business globally to provide the services to aged people.
The threat of new entrants keeps a limit to profitability within the industry (Porter, 2008). If
industry has ability to enter in easy manner and have high range of benefits then new entrants
will rapidly bring down the benefits of the well-established players. The threat of new entrants
can be tackled by the organization by providing new innovative services to its service user

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because new services cannot only bring the new customers but also give the reason to old
customers for enjoying the services of Estia.
Bargaining power of suppliers
It can be seen that if the industry has the powerful suppliers then those powerful suppliers keep
the ability to reduce the scope of the profitability for the organization as based on their power of
the suppliers which make the most margins and leave the little room for left partners in the
supply chain to make money. Estia can tackle the bargaining power of suppliers by creating the
efficient supply chain with multiple suppliers. Shifting suppliers can be considered as an
expensive attempt for Estia and may hurt the aged care home for a long run (Grundy, 2006). The
bargaining power of suppliers is lower in the context of Estia Health Limited.
Bargaining power of buyers
Powerful buyers are able to compress the margins for the organization by demanding access
value and forcing prices downs and it can be done by asking extra services and going against
from one firm to another in the market player (Porter and Heppelmann, 2014). Estia is able to
provide the efficient services to its residents but if industry has number of competitors than
people will prefer best one and keep the option with them. The bargaining power of buyers can
be tackled by Estia to build a huge base of customers. This would be beneficiary for it in two
ways. It will decrease the bargaining power of the buyers including it will offer a chance to the
organization to streamline its sales and the process of production (Narayanan and Fahey, 2005).
Threat of substitutes

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Industry profitability has to suffer in the time of launching of new products and services meets
similar consumers’ desires in different terms. The threat of substitute of product or service is
high if it provides a value proposition that is exclusively different from present offerings of the
industry (Porter, 2008). Estia can handle the situation of the threat of substitutes by being service
oriented in comparison of product oriented. The threat of substitutes can be decreased by
understanding the need of the service users and analyzing the services of competitors so that
possible changes can be done. The switching cost for the customers can be increased (Siaw and
Yu, 2004).
Rivalry between existing companies
If the competition among the existing players in an industry is strong then it will force to down
the prices and reduce the overall profitability of the industry. Rivalry among existing players of
Estia can match the similar form such as introduction of new products, discounting products,
improvement in services and advertising campaigns (Chang, Ting, Woon, Chiu and Hong, 2016).
Estia Health Limited can tackle Intense Rivalry among the Existing Competitors by developing
the sustainable differentiations. Scale can be made by the company to compete in better way.
Collaboration with competitors should be done for increasing the market size rather than
competing for small area or competition (Porter, 2008).
Link between competitive forces and macro environment
The macro environment of the company comprised the threats and opportunities and competitive
forces cover the five forces which help to describe the condition of the competitive market.
Pestle analysis has been described in this report which can be linked with the competitive forces.
Competitive strategy is being used in the organization for gaining the market share against the

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competitors of the company. Pestle has the nature of indirectly and distantly but it may influence
the competitive strategy.
In the limelight of above discussion, it can be concluded that porter’s five forces analysis is
helpful to analyze the situation of the Estia. The better understanding and utilization of these five
forces of porters is helpful for strategy managers in the organization to make sensible choices
and create sustainable competitive advantages.
VRIO analysis
VRIO framework is considered as the tool of analyzing the internal resources and capabilities to
search out if the sources are able to sustain the competitive advantages (Barney and Hesterly,
2010). VRIO stands for four questions that are resources and capabilities of the organization are
valuable, rare, imitate and organized. Below table will be helpful to define the VRIO analysis of
Estia.
Tangible
Resources
Is it
Valuable
?
Is it
Rare
?
Is it
Inimitable
?
Is it
Organized?
Competitive
Outcome
Performance
Implications
 Appointment
method
 Types of
services
 Way of
Yes
No
No
No
No
No
No
No
Sustainable
competitive
advantages
Drawback of
competition
-
Average return
Come under
below average
returns

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Marketing
 Designs and
cultures of aged
care home
 Use of Manual
systems
No
Yes
No
No
Yes
No
No
Yes
No
No
Yes
No
Sustainable
Competitive
advantage
Competitive
disadvantage
-
Significant
returns
Dissatisfied
returns
Intangible
Resources
Valuable Rare Inimitable Non-
substitutable
Competitive
Outcome
Performance
Implications
 Well known
aged care home
in the world.
 Human
Resources
 Bonding with
suppliers
 Well mannered
organization to
provide the
quality services
Yes
No
Yes
Yes
Yes
No
No
No
Yes
No
No
No
Yes
No
No
No
Well-
efficient
Competitive
advantage
Competitive
drawbacks
Competitive
Consistency
Good Returns
Below average
returns
-

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-
Capabilities Valuable Rare Inimitable Non-
substitutable
Competitive
Outcome
Performance
Implications
 Buying Power
 Satisfied
customers with
services
 Lower pricing
strategy
 Effective
services to the
service user
 Distribution
Prospective
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
Yes
Yes
No
No
Yes
Yes
Yes
No
-
Competitive
benefits
Effective
Competitive
benefits
Effective
Competitive
consistency
Competitive
consistency
Expected
returns
“ “
“ “
Average
returns
Average
returns
Valuable

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It can be stated after analyzing the above mentioned table that the value of resources is vital for
the organization due to their support to an organization in term of satisfying the service user.
There are number of resources which are acquired by Estia Health Limited while developing its
business into Australia. Tangible resources of Estia are appointment method, types of services,
way of marketing, designs and culture of aged care home and usage of manual systems
(Richardson, 2008). The table has shown clearly that some of the resources of the company are
valuable while some of them are not keeping the same value for the organization.
Rare
Rare is the main component of VRIO framework which shows the rarity of the resources and the
capabilities in the organization. It can be seen by above mentioning table that buying power,
suppliers and labour cost are the rare resources of the organization (Butler, Armstrong, Ellinger
and Franke, 2016). These resources and capabilities are able to increase the competitive
advantages of the company and establish the competitive uniformity.
Inimitability
It has been analyzed that the resources and capabilities of the company have the feature of
expensive. Estia has some resources and capabilities that cannot be copied by others organization
because Estia provides different services to the service user by focusing on the desire of them
(Abraham, 2012). It shows that Estia aged care home will be effective in Australia to provide the
efficient services to them who want services like home. It has been evaluated that the strategies
and models of the company can be followed or copied by other organization in Australia. These
resources will be effective for the organization to maintain the profitability of the company
(Brunetti, Teixeira, de Castro and Lara, 2015).

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Organized
There are various resources and capabilities in Estia which has the nature of organized. The
labour cost and the management of the company should be managed by Estia in effective
manner. By providing the different services in comparison of others such as giving preference to
the interest of services users and dining facility, they are pushing themselves to the new services
lines. There are some resources and capabilities at Estia such as satisfaction of employee and
service user, buying power and lower pricing strategy which is able to organize the entire system
of the organization.
These resources can be regarded as strategic capabilities because Estia aged health care is well
known organization and the pricing strategy of the company is lower with quality services which
satisfy the service users. Various kind of services are provided by the company and the design
and culture of the organization is different from others organization.
From the above analysis, it can be concluded that there are various resources and capabilities at
Estia which exist in the organization as strategic strength and requirements. Estia has adopted the
core competencies in the organization to attain the competitive advantages in well efficient
manner. The resources and the capabilities of the organization will be helpful for the
organization to understand the nature of the Australian market and provide the efficient services
to the service users.

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Conclusion
It has been concluded from the above discussion that Estia has capable staff to understand the
scenario of working in effective manner for satisfying the service user. Background information
about the company has been given in this assignment to bring the clear understanding about the
organization. Macro environmental analysis has been done by evaluating the elements of Pestle
such as political, environmentally, economically, social, legal and technologically. Porter’s fiver
forces have been analyzed to know the possible threat of new entrants because there are various
competitors of Estia that can amplify its business globally to provide the services to aged people.
Bargaining power of suppliers and bargaining power of buyer has been discussed in this report
with recommendations that how Estia can handle the situation. Estia can tackle the condition of
the threat of substitutes by being service oriented in comparison of product oriented. VRIO
framework has been mentioned which is helpful to tell about the strength and weakness of the
resources and capabilities. It covered four components such as valuable, rare, inimitability and
organized. The table has been analyzed to show the rarity, inimitability, value ability and
organized of the resources and capabilities of the organization.

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1.

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