MBA FPX 5006 Assessment 1 The Strategic Process

The Strategic Process

Strategic Analysis of Aetna Inc.  

Student Name

Capella University 

MBA-FPX 5006: Business Strategy 

Dr. Rob Shah 

May 7, 2023

Executive Summary

This strategic analysis aims to guide Aetna, a company in determining its future direction and achieving a competitive advantage. By employing analytical techniques, we can provide insights and recommendations to align the company with its mission and strategic goals.

To plan the direction of Aetna effectively, it is crucial to assess both internal and external strategic factors. This analysis involves evaluating the company’s internal resources and capabilities using the VRIO framework, as well as examining the external environment through PESTLE and Five Forces analysis to identify opportunities and threats.

By conducting a comprehensive analysis, we will identify the factors that hinder Aetna’s progress towards its mission and determine areas where the company is already performing well in terms of achieving a competitive advantage. Based on these findings, we will present a course of action and strategic recommendations to enhance Aetna’s competitive position and drive future success.

Strategic Analysis of Aetna Inc.

Role of Leadership

Strategic leaders play a crucial role in shaping the vision, mission, and values of an organization. They utilize their power and influence to direct the activities of others and achieve the organization’s mission (Rothaermel, 2021). To develop a course of action for Aetna, we will explore the tools and frameworks that aid in achieving these goals. Ethical values, which underlie the vision statement, are essential for long-term success and maintaining a competitive advantage (Rothaermel, 2021).

Strategic Planning Framework

A strong strategy is vital for a company to achieve high-quality performance and gain a competitive advantage. Rothaermel explains that the AFI (Analysis, Formulation, and Implementation) framework consists of three steps: diagnosing the competitive challenge, formulating a guiding policy, and implementing coherent actions (2021). To assess competitive advantage, we will compare Aetna’s quality to other companies in the health insurance sector. By employing these steps, performance can be improved and a competitive advantage can be achieved (Rothaermel, 2021).

Internal Analysis

Aetna’s mission, as stated on their website, reflects a strong commitment to providing innovative benefits, products, and services to individuals, employers, healthcare professionals, and producers (About us & Company information, 2022). Conducting a VRIO analysis allows us to evaluate the value, rarity, cost to imitate, and organization of resources to determine if they are being fully utilized to achieve a competitive advantage.

While Aetna faced challenges in the past, including negative perceptions and network restrictions, the company has made changes to address these issues (Brino, 2015). However, it is important to acknowledge the lingering impact of these challenges during both internal and external analyses. Research and development can be considered a competitive disadvantage and should be explored further to improve public perception and attract more stakeholders.

The policy for telemedicine coverage, implemented by Aetna in 2020, is valuable but not rare compared to other insurance companies (Updated policy for Telemedicine, 2020). Skilled and knowledgeable employees are valuable and rare, but their expertise is not inimitable as other healthcare insurers can train their employees to understand similar policies.

Aetna’s financial resources, as the third-largest insurer worth $49.4 billion, provide a competitive advantage (Macroaxis LLC., 2022). Additionally, the merger with CVS has significantly expanded the distribution network, allowing for better access to care at a lower cost (Chain Drug Review, 2021).

External Analysis

The external analysis of Aetna can be conducted using the PESTLE analysis, which examines the political, economic, social, technological, legal, and environmental factors impacting the company. Political factors, such as healthcare laws and regulations, taxation, and price regulations, affect the company’s operations. Economic factors include the impact of unemployment, inflation, and the ongoing effects of COVID-19. Social factors encompass changing attitudes toward public interactions and a shift toward healthier lifestyles. Technological factors involve advances made by competitors in the healthcare industry, while legal factors consider health and safety laws, employment regulations, and potential changes in response to recent events. Environmental factors encompass sustainability and consumer preferences for renewable energy and environmental protection.

A Five Forces analysis further contributes to the strategic analysis by evaluating the threat of new entrants, bargaining power of providers and buyers, the threat of substitutes, bargaining power of suppliers, and rivalry among existing competitors. Aetna can address these forces by strengthening other services offered, improving its reputation, enhancing service orientation, and considering partnerships or acquisitions to eliminate competition.

The threat of substitutes can be mitigated by implementing strategies such as increasing fees for canceling services and enhancing Aetna’s focus on customer service. Aetna’s reputation is still in the process of recovering, which makes the threat of substitutes a concern. To address this, it is necessary to implement changes that improve operational efficiency, such as timely reimbursement and appropriate approval of prior authorizations. These actions would help enhance Aetna’s reputation and minimize the risk of customers switching to alternative options.

The bargaining power of suppliers has significantly improved as a result of the merger with CVS. CVS has a supplier diversification program in place, which aims to integrate supplier diversity into procurement activities and collaborate with national organizations to identify and develop diverse businesses (Supplier diversity). Another approach to address this issue is by establishing Aetna’s own suppliers, which would provide more control over the supply chain and reduce dependency on external suppliers.

To mitigate rivalry among existing competitors, there are two potential approaches. Firstly, Aetna can utilize its financial resources to acquire smaller competitors, which would not only eliminate competition but also contribute to diversifying Aetna’s offerings. Secondly, Aetna can explore partnerships with existing competitors. Although this approach requires more effort and careful negotiation, partnering with hospitals or smaller insurers who have a strong market presence in their respective states can leverage Aetna’s extensive network and benefit from the reputation of these smaller companies within their communities.

Course of Action:

“CVS Health is the leading health solutions company that delivers care like no one else can. We help people navigate the health care system — and their personal health care — by improving access, lowering costs, and being a trusted partner for every meaningful moment of health. And we do it all with heart, each and every day” (Diversity). This represents the mission of CVS, the new parent company of Aetna. To achieve this goal, several changes need to be implemented.

As discussed earlier, Aetna still faces challenges related to its reputation, primarily concerning cost and lack of trust. While the association with CVS can contribute to improving this perception, further improvements are necessary. Revisiting policies and implementing changes to streamline the prior authorization process would enhance Aetna’s standing among consumers and healthcare providers. Increasing the focus on service orientation would also help address external factors impacting Aetna’s operations. Additionally, establishing partnerships or acquiring smaller competitors known for their positive reputation within their communities would strengthen Aetna’s position as a trusted partner.

Internally, Aetna’s reputation also has an impact, affecting employee attraction and retention. However, Aetna possesses strong competitive advantages, including its financial resources as the third-largest insurer in the country and its expanded distribution network through CVS. The majority of changes needed should focus on Aetna’s internal practices, such as improving prior authorization timelines and reimbursement processes. Addressing these internal and external factors will contribute to achieving a competitive advantage and fulfilling the company’s mission.

Please note that I have made revisions to improve clarity, grammar, and sentence structure while maintaining the original content’s essence. Remember to review the assignment to ensure it meets your requirements before submission.

References 

About Us & Company information. Aetna. (2022). Retrieved May 14, 2022, from  https://www.aetna.com/about-us.html

Berger C. The nursing crisis has found a scapegoat: A former Nashville nurse whose mistake at  work became a criminal charge. Fortune.com. April 2022. Accessed May 14, 2022.  https://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=156080523&site=bsilive&scope=site

Brino, A. (2015, July 24). Aetna’s long history of Struggle, growth and reinvention. Healthcare  Finance News. Retrieved May 14, 2022, from  

https://www.healthcarefinancenews.com/news/aetnas-long-history-struggle-growth-and-reinvention

Chain Drug Review. (2021, November 8). Plan from Aetna, CVS boosts access to care.  Retrieved May 14, 2022, from https://web-p-ebscohost .com.library.capella.edu/bsi/detail/detail?vid=9&sid=f727f1c4-8426-4665-958c1b64a49c1824%40redis&bdata=JnNpdGU9YnNpLWxpdmUmc2NvcGU9c2l0ZQ%3d %3d#AN=153506092&db=bth

Diversity. CVS Health. (n.d.). Retrieved May 15, 2022, from https://www.cvshealth.com/about cvs-health/diversity

Livingston, S. (2018). Six states scrutinizing Aetna prior-authorization practices. Modern Healthcare, 48(8), 0009

Longman, P., & Thakur, U. (2020). An Epidemic of Greed. Washington Monthly, 52(7/8), 26–30. Macroaxis LLC. (2022). Aetna annual financial statements from 2010 to 2022. Aetna Financial  Statements from 2010 to 2022. Retrieved May 14, 2022, from  

https://www.macroaxis.com/financial-statements/AET

Patient information about the Research Institute: Allegheny Health Network. Allegheny Health  Network. (2021, January 18). Retrieved May 14, 2022, from https://www.ahn.org/health-care-professionals/research/patient-information.html

Rothaermel, F. T. (2021). Strategic management. McGraw-Hill Education.  Supplier diversity. CVS Health. (n.d.). Retrieved May 15, 2022, from  

https://www.cvshealth.com/about-cvs-health/diversity/supplier-diversity

Updated policy for Telemedicine. Aetna. (2020). Retrieved May 14, 2022, from  https://www.aetna.com/health-care-professionals/newsletters-news/office-link-updates-december-2019/news-for-you-december-2019/updated-policy-for-telemedicine.html