Business Management Report: Estia Health Case Study Analysis

This report provides a comprehensive analysis of Estia Health's business management strategies. It begins by examining Estia's use of a growth strategy combined with cost leadership, highlighting how the company outsources manufacturing to minimize costs and offer affordable, specialized aged care. The report then delves into the four generic strategies, emphasizing the effectiveness of the cost leadership strategy in gaining market share. It explores Estia's implementation of this strategy, including managing inbound logistics, investing in technology, and marketing its services. The report further discusses Estia's strategic initiative: marketing, explaining how it will attract customers, grow the brand, interact with customers, understand market segments, and achieve economies of scale. The analysis also incorporates a SWOT analysis, identifying Estia's strengths (skilled staff, technology, geographical presence), weaknesses (poor coordination, poor non-urban services), opportunities (rising income, aging population), and threats (budget cuts, labor costs). The report concludes by underscoring the importance of these factors in shaping Estia's overall business strategy, making it a comprehensive study of Estia Health's approach to aged care.

Running head: BUSINESS MANAGEMENT ESTIA
Business Management Estia
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Q1.
Estia Health Care uses growth strategy along with the cost leadership strategy to help
it achieve business and corporate objectives (Hill & Jones, 2010). Estia Health Aged care is a
public listed company based in Australia. The company specializes in taking specialized care
for the aged. Estia was formed in the year 2005 at presently,its one of the largest residential
aged care providers in Australia. It has 68 facilities,and it operates in more than 5,900 places
across Australia. The company has at least 7,000 employees who work at various facilities
across the country. From the analysis of the strategic corporate strategy,it is clear that the
company uses cost leadership strategy. Estia health outsources its manufacturing to ensure
that the company minimizes cost. Outsourcing helps the company to focus on its core
activities. Manufacturing would otherwise be so costly for the company because it means that
the company would not enjoy economies of large-scale production (Geel, 2011). The
objective of the strategy that it uses is to offer all customers affordable and specialized aged
care which is tailor-made for their personal needs. This leadership strategy involves
minimizing the cost of production or cost of providing goods and services. Estia Health Care
uses the same. There are four types of generic strategies. They include cost leadership
strategy, differentiation strategy, cost focus strategy and differentiation strategy. For a firm to
compete effectively in the market, it is important that the organization chooses one of the
above generic strategies. Using the strategies helps an organization to position itself in the
industry which helps it to gain substantial market share. The cost leadership strategy was
developed by Michael Porter. The strategy is all about ensuring that the company offers its
goods and services at the lowest prices. An organization using cost leadership strategy offers
goods and services at lower prices than those of competitors. The strategy is highly effective
in gaining market share. The strategy is used as a marketing tool by most organizations but it
ends up failing since maintaining low cost is a difficult task. The management team of the

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organization has to constantly work to ensure that the costs are low while at the same time
ensuring that the products and services offered are of superior quality. Estia Health focuses
on maintaining low costs for customers while at the same time offering specialized health
care for the aged (Braithwaite, Makkai& Braithwaite, 2007). By managing its inbound
logistics,the organization ensures efficiency in all its operations. The organization can be able
to source for cheap and high-quality raw materials used in manufacturing. By managing
inbound logistics,Estia Health ensures wastage of resources is minimized and hence helping
the organization to maintain low costs. Supply is made more efficient and also the cost of
storage of commodities remains low level ( Freeman, 2010). The organization has also
invested in technology to keep costs of running the organization low. Cost leadership strategy
helps an organization to attract many consumers who are price sensitive. It helps the
company to gain a competitive advantage over its competitors and hence its ability to gain
higher market share. Estia Health is also able to maintain low cost by marketing its products
and services. It can, therefore, be able to balance its marketing expenses since it understands
its own financial capabilities better (Hill& Jones,2012). The cost leadership strategy applied
by Estia as well as consumer-focused goods and services has made the prices of the services
low and hence has attracted many customers.
Despite the fact that this strategy is difficult to implement, it has various advantages
such as higher profitability for the organization. Estia Health is an organization whose
primary objective is to make profits while at the same time offering high quality aged care
services. Since the organization attracts many customers, the revenues are higher, and hence
the profits are better. The strategy is also more sustainable in the long run compared to other
generic strategies used in strategic management.It is because an organization using the cost
leadership strategy can survive tough economic times since they the organization is used to
optimizing efficiency.

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Q2.
A strategic initiative is an endeavor that aims at achieving three interrelated outcomes.
When deciding a strategic initiative for a business organization, it is important to understand
the goals and objectives of that organization. It will help to choose a strategic initiative that
suits the business best and that which will enable the organization to meet its end goal. The
strategic initiative that Estia Health will use is the marketing initiative. The choice of the
initiative is because it will enable the organization to attract a huge number of customers who
are in need of aged care(Kossowski, 2007). By doing this,the organization will be able to
increase its profit margin and hence run its operations smoothly. The marketing initiative will
enable Estia Health brand to grow (Hubbard & Galvin, 2014).
Marketing is defined as the process of creating, communicating and delivering value
to customers (Kachru, 2005). Marketing is one of the most important aspects of any business
organization. It is a very wide field, and it plays a great role in determining the success of a
business organization. Marketing is an activity that is consumer focused. An organization
using strategic marketing initiative focuses on the needs of the customers and strives to fulfill
their needs. It helps the organization to remain relevant in the industry and to gain a
competitive advantage over its competitors.
Marketing strategic initiative is a good strategic choice for Estia Health. It is because
most of the competitors in this industry do not pay good attention to marketing. The
competitors invest very little money in marketing the aged healthcare organizations
(Bhandari&Verma, 2013). Most of the competitors depend on word of mouth advertising.
Most of the competitors are local, and they have operations in few regions. It means that
these organizations do not need to invest much in marketing since the organization can easily
market itself when it's operating within a small geographical region(Zoephel, 2011). By

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marketing its products and services, ESTIA will become more popular, and most of the
potential customers in need of aged care services will buy its services. Through
marketing,Estia will educate customers on the variety of products it offers
customers(IrudayaRajan,Risseeuw&Perera, 2011). It will give the organization a competitive
advantage over its competitors since customers will be aware of what the organization offers
and hence will buy its services.
Another reason why marketing is a strategic initiative for Estia is that the initiative
will help the organization to interact better with customers(Prasad, 2015). Through this, Estia
will get feedback which is very crucial in improving the services offered to customers.The
company will be able to build upon its strengths and find ways of dealing with the weakness.
It helps the company to become more solid and gain a loyal customer base.Marketing will
also enable Estia to understand the specific needs of customers in each market segment.
Through this, the organization can offer aged care services that suit the needs of the specific
market segment as well as the needs of the individual consumer. Customers end up being
highly satisfied and hence will recommend the organization to other potential customers
( Croft, 2012).In addition to this, the organization will have achieved one of its objectives;
customer satisfaction is one of the major objectives of the organization.
Marketing as a strategic initiative helps Estia Health enjoy economies of scale in the
long run. Marketing helps an organization to attract more customers and hence help the
company to pool resources together(Buttigieg, Rathert&Eeif, 2015). It is very important in
the service industry since the customers can utilize the facilities owned by the organization.
The large pool of resources helps the company to minimize costs of caring for the aged and
therefore helping the organization to gain a competitive advantage over its rivals. Marketing
of Estia Health can also create a competitive advantage for the company by promoting the
brand of the company. The brand name of Estia Health is very important in attracting new

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customers as well as ensuring sustainability in the long term (CHO & MOON, 2013) A
strong brand ensures that customers have a positive and favorable attitude towards the
company as well as the products offered by that organization.Therefore the company can
maintain its market position. The value of the company also increases and hence benefiting
the shareholders of the organization.
Marketing Estia will be a great source of competitive advantage for the company
since the organization will be able to expand easily into new markets. Through marketing,
more customers will be aware of the company and the products that it offers. The costs that
the organization incurs in attracting new customers reduces. The organization will be able to
expand into new geographical areas and therefore gain an additional market share. By
expanding into new markets, the organization will be able to counter competition from other
players in the aged care industry in Australia (Britnell, 2015). Expanding into new
geographical areas ensures that the organization spreads risk. It means that in case one of the
facilities makes losses or fails due to other reasons, the losses compensated by branches that
make good profits. The risk of business failure is therefore effectively managed. Through
marketing, Estia will be able to introduce a new product into the market with ease. The
organization will do little advertisement to inform customers of the existence of the new
product since there are already good marketing structures in place. The initiative helps to
build the brand of the organization and as a result, increasing consumer base for the
organization. The marketing initiative also ensures that the organization gets a competitive
advantage by making it easy for the company to increase its geographical presence and hence
helping the organization to reach more potential customers.
Like any other business, ESTIA has various strengths and weaknesses. There are also
opportunities and threats that exist in the operating environment of the company. These
factors are very important in shaping strategy for the organization. ESTIA has highly skilled

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and experienced nursing staffs that help the organization to offer high-quality services to the
aged and hence making it the company of choice for the customers (Kachru, 2005). The
organization has also embraced technology and unique training systems in its various
operations, and this has contributed towards increased efficiency. The wide geographical
presence of the organization gives the organization a competitive advantage over its
competitors (Rasche, 2008). Furthermore, it is a forefront in innovation in aged care. One of
the major weaknesses of ESTIA is that the company lacks proper coordination and
relationship with the suppliers. Their services in the non-urban areas are also poor. Strict laws
governing centers for the aged are also a threat to the organization. The following is a
combined SWOT analysis of ESTIA.
Appendix:
Strengths
 Highly experienced and qualified
Weaknesses
 Poor and low service in the non-urban

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nursing staff
 Unique training systems
 Forefront in innovation in aged care
areas
 Limited use of technology
 Lack of strategic relationships with the
suppliers
Opportunities
 Rise in disposable income
 Ageing Australian population
 New technology available at reasonable
costs
Threats
 Budget cuts by the Australian
government
 Huge labour costs
 High supplier power
 High economic barriers
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