RMIT Strategic Analysis: Estia Health Aged Care Services Report

This report provides a strategic analysis of Estia Health Aged Care, utilizing models such as PESTLE, SWOT, VRIO, and Porter's Five Forces to evaluate the external and internal factors influencing the organization. It identifies both positive and negative factors affecting Estia's operations, including strengths such as a long heritage of service and specialized healthcare teams, and weaknesses like high operating costs and potential labor shortages. Opportunities include the growing demand for aged care services, while threats involve increasing regulations and economic downturns. The analysis also examines the competitive rivalry, the threat of new entrants and substitutes, and the bargaining power of buyers and suppliers within the Australian aged care market. The report concludes with recommendations aimed at addressing the identified challenges and enhancing Estia Health's strategic position. Desklib provides a platform to access this and other solved assignments for students.

Running head: STRATEGIC MANAGEMENT
Strategic management
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Executive summary
The aim of this report is to discuss about the external and internal factors being faced by Estia
aged care services. In due so, this report used the models such as PESTLE, SWOT, VRIO and
Porter five forces model. Various positive and negative factors are being identified in this report
of Estia aged care services. This report concludes that, the recommended steps discussed in this
report will help to overcome the issues identified in this report.

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Table of Contents
Introduction......................................................................................................................................3
Company profile..........................................................................................................................3
SWOT Analysis:..............................................................................................................................4
Porter’s five force model:................................................................................................................6
Analysis of the macro environment.................................................................................................8
Discussion..................................................................................................................................12
VRIO framework...........................................................................................................................13
Valuable.....................................................................................................................................13
Rarity of the resources...............................................................................................................14
Inimitability of the resources.....................................................................................................14
Organizational capability...........................................................................................................15
Recommendations..........................................................................................................................15
Conclusion:....................................................................................................................................16
Reference.......................................................................................................................................17

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Introduction
Health care is one of the most sensitive and potential business sectors in the current
business scenario. Moreover, in the current business state of affairs, health care for the aged
peoples are becoming more complex. This is due to the reason that, a major section of the elderly
people is dealing with loneliness and they are in the need of the personalized health care in the
homey atmosphere (Brownie and Nancarrow 2013). In accordance to these market requirements,
various organizations have started to offer residential aged care services. Estis health is one such
leading organization providing aged care services in the Australian market.
However, with the increase in the market size, the competition is also going higher due to
the entry of more number of competitors in this sector. In accordance to the increase in the
competition in the market, it is of urgent requirement for Estia health to come up with effective
business and marketing strategies. This report will identify the external and internal
environmental factors being faced by them in their business operation along with providing some
recommended steps to overcome the challenges.
Company profile
Estia health is one of the leading aged care service providers in the Australia regions.
They are founded in 2005 and are based in Melbourne, Australia. They offer quality aged acre
services for the elderly people in homely environment (Estia Health 2018). Apart from the
providence of health care services, they also look after the wellbeing of the residents by initiating
various activities in their daily life. According to their official website, their vision is to create
the concept of one family in serving the aged people.

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With having holistic service offerings and expertise in this sector, Estia health is going
ahead to be the market leader in this business segment. The service offerings of them are being
designed in such way that, the aged people will lead a happy and nutritious life apart from health
care. Their major offering is providing health care services to the aged people from their various
homes across Australia. Currently, they are having their homes in different locations around
Australia. They do not have their presence in the international market as of now.
SWOT Analysis:
Estia health aged care facilitates in providing services to the seniors and aged people by
maintaining independent living. The organization provides best healthcare facilities for the aged
people. With an increase in aging population n the country, this industry seems crucial for
growth. Estia health care facility can easily take advantage of the existing market condition by
making profit. On the other hand, weaknesses also tend to threaten the growth and success of the
entity. Conducting a SWOT analysis demonstrates the organization’s strength, weaknesses,
opportunities and threats (XIA et al. 2015).
 Strengths:
Estia’s has its proud heritage of serving its nation for almost 50 years. Specialized
healthcare teams, quality and innovation are the key strength of the organization. Estia provides
quality aged care facilities besides providing caring and inclusive experiences all across
Australia. The major purpose of the organization is to create their Family Code. The family code
is initiated to create happiness for the senior citizens. Specialized care is offered to those seniors
with dementia, memory loss and Alzheimer’s disease (Hilmi and Emenyeonu 2014). The health
care is well designed with modern facilities to meet the demands or needs of all the aged people.

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For example, walk- in closet besides implying luxury also becomes easier for the aged people to
ascertain what they happily want to wear (Tucker et al. 2015). Estia focuses on this little feature
as it reassures the adult children about the well-being of their aged parents. The organization
assures in providing comfort, support and caring of the aged people in all aspects.
 Weaknesses:
Developing an aged care living facility is expensive and costs money. These can
constraint growth of the company if there is low access to capital or limited financial capital.
Expenses like liability insurance can lead to drain the revenue of Estia’s health care centre.
Moreover, lack of trained and skilled workers in the healthcare agencies can also limit the
growth prospect of the organization. While operating in areas where trained workers are
unavailable can lead to increase in the expenditure by training and importing them the workers
from elsewhere (Unuvar, Kaya and Bilge 2017). This further creates communication barriers that
have an adverse affect on the customer experiences.
 Opportunities:
In the current scenario, economic forces leave health care centre in a strong position in
the business environment. Demand is growing at a rapid rate than supply as the population ages
more quickly than the availability of home care facilities being constructed. This shows that
expansion of healthcare industry faces less market risks as compared to other industries (Francis
and Ponnuswami 2014). A well organized and targeted marketing campaign that could increase
the awareness of Estia’s services and facilities. Moreover, adding services like extensive lineup
for medical personnel and on-site pharmacy. Allowing senior residents to share their voice in the

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programming events and enriching the aspects of user experiences would be a vital opportunity
for growth (Li et al. 2014).
 Threats:
Increase in regulations could raise the costs related with the Estia’s health care agency. In
the increasing trend of social media, if any stories associated with other healthcare agency about
dangerous or unethical issues related to aged people can create negative impact on the daycare.
As it become difficult to gain the trust of the potential customers and quiet impossible to retain
them. Furthermore, an economic downturn could also affect the healthcare market condition as
senior people and their families would re-evaluate the feasibility for lower-cost solutions.
Porter’s five force model:
Porter’s five forces framework would help in analyzing the major forces affecting Estia
aged health care centre in Australia (Dobbs 2014). The underlying demand driver in the health
services would be the ageing Australian population.
Competitive Rivalry:
The intensity of rivalry in the health care centre is huge though for aged health care
centre is relatively low as there is only limited level of options and choices regarding service
provider for aged people in Australia. The industry is also able to gain maximum benefit due to
increasing switching cost (Porter and Heppelmann 2014). If the policy for health services is
signed by an individual, he is unable to switch to other health care facilities.
Threats of new entrants:

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As the start up cost for setting the healthcare services for aged people is very high so the
threat of new entrant is relatively low. Moreover, the duration for setting up the franchise
agreement could increase up to 10 years. Generally people tend to avoid such long –term
contracts. Moreover, proper or adequate training and well-skilled labor forces is vital for
providing aged care services (Montgomery and Oladapo 2014). This kind of business deals with
the people’s life. Moreover, license approval is required from the government, which is lengthy
and difficult to enter into aged care service industry. Therefore high degree of entry barriers
results in low degree for the threat of new entrants.
Threat of substitutes:
The equipments and development of robotics that is used in assisting with aged and
health care is still developing as it faces huge price and cost barrier besides low social
acceptance. In the current scenario, the aged people prefer to receive services at home than being
served by residing in age care facilities (Išoraitė 2018). Therefore the threats of substitutes in this
healthcare segment can be considered very low. Moreover, in the digital age, people want to
adopt trends that would allow them to remain connected with the latest technology by keeping
most of the healthcare equipments at home.
Bargaining power of buyers:
To avail efficient healthcare services adequate price should also be paid. Value
generation is highly significant than the price. The ultimate goal is to provide high quality care
with low price to gain margin by value based competition. There is fair level of option and
choice regarding the age care service provider in Australia. There is generally very limited power

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exceeding demand. Moreover, the sick and old aged people will like to be treated in any
scenario, irrespective of the economical condition of the country.
Bargaining power of suppliers:
The issues related to limited skilled and trained workers limits the ability to recruit
potential individuals. This increases the bargaining power of supplier for providing workers for
aged care facilities. The labor cost represents the maximum fixed costs for associated age care
service providers. Health care segment is totally dependent on the service provided by its
suppliers (Montgomery and Oladapo 2014). Despite the growth in healthcare cost, the demand
for proper care of age old people does not stop as the government and residents of Australia is
highly concerned about the health and quality of life of senior citizens.
Analysis of the macro environment
Political  The political scenario is more or less favorable for Estia due to the
reason that, complications is less in health sector.
 However, challenges include corruption in the regulation of health care
services.
 Taxation rate is favorable for them in Australia due to the reason that,
health care services attract less rate of tax (Burkhauser, Hahn and
Wilkins 2015).
 Interference of the government in the health care services will pose as
potential challenge for Estia (Musacchio, Lazzarini and Aguilera 2015).
This is due to the reason that, it will create barriers in the decision

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making process of them.
Economical  Australia is having open market economy and thus it will be beneficial
for Estia to design their policies according to the market trend (Uy, Yi
and Zhang 2013).
 Australia is already a developed economy and their economy is
showing growth. Thus, the potential customers for availing the services
of Estia are increasing.
 However, entry of new players in the market is increasing the
competition in the market along with reducing the profitability.
 The rate of unemployment is going up and thus, the purchasing power
of the average population will get reduced, which will reduce the
customer base of Estia.
Figure: 1
Rate of unemployment in Australia

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Source: (Mulligan 2018)
Social  According to the reports, Australia is having good number of aged
population and thus, the potential customer base for Estia health is
favorable.
 Need for aged care services are increasing due to busy work schedule in
the current times.
 With the change in time, health concern among the average population
is increasing. It is provoking more people to opt for health care services
(Naujokas et al. 2013).
 Estia health with their distinctive services attracts more patients
compared to the conventional health care services.
 Social inclination for medical services on homely atmosphere is more
compare to other health services.
Figure: 2

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Demography of Australia
Source: (Indexmundi.com 2018)
Technological  In the current business scenario, technology is rapidly developing in
every business sector. Thus, it is important for Estia health also to have
updated technologies in place.
 However, huge capital investment is required to upgrade the existing
technology. This may have negative impact on the cost structure of
them.
 Technological development will help them to provide more effective
and efficient service to the patients (Frishammar et al. 2015). However,
the compatibility of the target segment with the latest technologies is
also important. This is due to the reason that, the target segment of
Estia is the aged people who will have fewer preferences for updated
technologies.
Legal  Australia is having various legal obligations related to the health
services. Thus, it is important for Estia to comply with these laws.
 Laws related to the employee welfare should also be complied by them.
This is due to the reason that, they are having more than 7000
employees in place (Zhu et al. 2014).
 However, modification of the existing laws will have adverse impact on
their business operation. This is due to the reason that, Estia will face
the difficulty in changing their existing organizational policies
frequently.