External analysis

PEST analysis is a great tool to define the environment in which DNVHC operates in. The factors in this analysis are:

 Political factors that include government regulations, legal issues and rules which DNVHC must follow.

 Economical factors such as financial growth within the country, inflation rates and other factors that influence the purchasing power of potential buyers.

 The demographic and cultural aspects of the external macro-environment define the social factors.

 Technological factors include level of R&D activity and the rate of technological change. Technological factors can influence outsourcing decisions and lower entry barriers.⁴¹

Porter’s Five Forces

Michael Porter’s Five Forces is a tool used to analyze the attractiveness of an industry or a segment. The authors have chosen this tool, in order to highlight the attractiveness of the healthcare industry and to further create a competitive strategy for DNVHC. ⁴²

An organization can minimize its risks and strategically position itself in the market by identifying the five competitive forces. The five forces are: ⁴³

 Threat of New Entrants: High entrance barriers and low exit barriers, meaning that few new firms can enter while poor-performing firms easily can exit, makes the segment attractive. When entry and exit barriers are high, the profit potential is high, but firms are facing more risk because poor-performing firms stay in. When entry and exit barriers are low, firms

41http://www.quickmba.com/strategy/pest/

42Hitt, Ireland and Hoskisson (2007:33)

Figure 7: Porter’s Five Forces

easily enter and leave the industry. The worst scenario is when entry barriers are low and exit barriers are high, meaning that firms can easily enter the industry and find it hard to leave during bad times.

 Bargaining Power of Suppliers: The bargaining power of suppliers tends to be significant when a limited number of suppliers operate in several

different industries. Suppliers can become a competitor when integrating forward.

 Bargaining Power of Buyers: If the buyers bargaining power in a segment grows or becomes strong, the segment would be unattractive. Buyers can become a competitor by integrating backward.

 Threat of Substitute Products: Potential substitutes for a firm’s product, makes the segment it is linked to, unattractive. Prices of a product and profits from a segment can be limited by substitutes. Firms have to closely monitor price trends in substitutes.

 Intensity of Rivalry among Competitors: A segment already containing numerous, strong or aggressive competitors, is unattractive. The segment is even more unattractive if the segment is stable or declining, the fixed costs are high, the exit barriers are high, or the competitors have high stakes in staying in.

Porter’s Five Forces will also provide the authors useful inputs when conducting a SWOT-analysis.

Competitor analysis

Porter’s Five Forces gives an idea of the competition situation; the authors can further identify the competitors giving DNVHC the opportunity to achieve competitive advantages. DNVHC can defend itself and be able to use its competitors’ ideas and strategies to their own benefit.⁴⁴

43Kotler, Keller and Lu (2009:228)

44Zigler and Paulsen (2004:74)

Figure 8: Continuum of Evaluation for Different Types of Products

Customer analysis

Buyer behavior in the business-to-business (B2B) market is to contribute the organization with more value.⁴⁵ Risk is something the purchase groups want to eliminate. The risks are divided into objective risk and subjective risk. The subjective risk includes incomplete information, and other subjective factors that influence the purchase group. In B2B these risks include uncertainty and consequences.⁴⁶ Uncertainty can be divided into external and internal uncertainty.

External uncertainty is the uncertainties from the environment and surrounding.

Internal uncertainty is the lack of ability to judge or evaluate the results from actions.

When buying a product the evaluation of the products can be done differently for a search product, experience product, or credence product.⁴⁷ Service products are generally high in experience and credence qualities, where there is more risk involved, and even more difficult to evaluate.

⁴⁸

45Biong and Nes (2003:74)

46Biong and Nes (2003:88)

47Kotler, Keller and Lu (2009:318-319)

48Kotler, Keller and Lu (2009:319)

Figure 9: SWOT

It is important to eliminate risk from buying decisions, and identifying decision-makers that are involved. The number of decision-decision-makers varies depending on: 1) the risk involved, 2) if it is first-time purchase, 3) time pressure, and 4)

decentralized organization.⁴⁹

SWOT Analysis

The authors have chosen to use the SWOT analysis to identify the important underlying factors that are essential to know when developing a strategy to reach DNVHC’s goals. This analysis will enable DNVHC to take advantage of its strengths, improve its weaknesses, develop opportunities and be better prepared for potential threats.

The SWOT analysis is an analytical tool that identifies and analyzes a firm’s external and internal environment. The SWOT analysis scans and evaluates a firm’s strengths, weaknesses, opportunities and threats.⁵⁰

⁵¹

49Biong and Nes (2003:78)

50 Kotler, Keller and Lu (2009:44)

51 Storås et al. (2008:29)

The firm has to monitor and identify the associated marketing opportunities and threats in the macro environment forces and the microenvironment actors.

Marketing opportunities is an area of buyers’ needs and interests that the firm profitably can satisfy. Environmental threats are posed by external trends or development, and can lead to lower sales or profit if the marketing actions are defensive. Firms do not necessarily have to correct all its weaknesses, nor should it triumph all its strengths.⁵²

After an accomplished SWOT analysis, the firm can develop specific, hierarchically, quantitatively, realistic and consistent goals.⁵³

The SWOT analysis has a tendency to misplace factors into categories which they necessarily do not fit in. What has been seen as a threat might turn out to be opportunities.⁵⁴