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Good afternoon, ladies and gentlemen. Today I want to turn your attention to the problem of the AETNA company's diversification strategy. Nowadays company seeks to make certain changes in it's basic strategy and performance plan, so I find it necessary to make certain presentation of the evaluation of the such important point as company's diversity initiative.
So, every major diversified company strives to maintain its organizational structure, a balance between centralization is conducive to better governance and minimizing costs, and decentralization, helping to respond to current market needs and develop an entrepreneurial spirit among managers in the field.
AETNA company is one of the nation's leading diversified health care benefits companies, until recently it made an unambiguous bid to decentralize, but now management is trying to connect its unquestionable merits with some advantages centrally controlled structures. It includes 5 member companies: Active Health Management, Aetna Student Health, Goodhealth Worldwide, Schaller Anderson and Strategic Resource Company.
So, why is embracing diversity a challenge?
If an organization does not take on this challenge, it will soon become extinct or left far behind. There are too many competitors who are striving to become the best.
Strategy for diversification of the company is one option to strategic development. Under the strategy of diversification should be understood set of rules and methods of simultaneous development of multiple unrelated to each other modes of production, expanding the range of manufactured products within the company aimed at improving the efficiency of its production and competitiveness.
Diversification's basis of the company is the so-called portfolio component, that is determined by how diversified company adopts its business principles in various sectors, as well as actions and approaches aimed at improving the performance of groups of companies in that diversified company.
Therefore, a diversified AETNA company is a combination of various strategic business areas, each of which has its own opportunities for future growth, increase profitability, or requires a special competitive approach.
In the strategy plan the combination of various strategic areas of business, where the firm will seek to achieve it's goals, is determined. Competitive strategy also identifies the various approaches, in which the company will operate in each strategic area.
To fully understand the AETNA diversity efforts, first of all let's make a closer at the company's background and performance data.
Now AETNA remains competitive in many areas, providing a wide range of insurance products and related services: medical, pharmacy, dental, behavioral health, group life and disability plans,etc.
Aetna's health care network includes 4,919 hospitals, more than 843,000 health care professionals, and more than 490,000 primary care doctors and specialists. It serves about 37.2 million people, among which are 17.5 million medical members, 14.2 million dental members and 10.9 million pharmacy members. This numbers show us the significance of the network, and complexity of the systems of both employees and customers.
I want to point out the main economic conditions of the company, that will help to make a full picture of the company's performance.
So, despite the global recession process, that covers practically all economic spheres during last years, the results of the company remain good. Aetna enters 2010 in a strong financial position.
Let's see the "Full-Year 2009 Financial Results" of the company in the annual report:
The full-year 2009 operating earnings for Health Care were $1.4 billion, medical membership growth was 1.2 million, net income was $1.4 billion. (AETNA.com)
I fully agree with Ronald A. Williams, chairman and CEO, who said: "As we worked through a very challenging 2009, we took significant actions to improve our operational performance and we are moving in the right direction". (AETNA. com)
To see the impact of diversification on various indicators of the company, in my opinion, it is necessary to assess the implementation of diversification strategies, and it is appropriate to use a balanced scorecard - a system of assessment of strategic business development company, based on a system of indicators that characterize it's work in the mainstream.
So, I will try to show and evaluate the system of strategic business development of the company, based on a system of indicators describing it's activities in key areas: finance, customers, internal business processes, training and staff development. This system is not only an evaluation system, but serves as a tool for strategic management, as it allows not only formulate the development strategy of the AETNA company, but also transform it into specific strategic objectives and targets of their determinants.
It includes targets and indicators units:
1) financial component,
2) a client component;
3) component of the internal business processes;
4) component of training and staff development.
The financial component involves establishing the relationship between strategy of diversification of production companies and financial goals which are a kind of guidance on the tasks and parameters of other components. At the same time in establishing financial variables that affect the implementation of the strategy of diversification production must take into account the life cycle stage of the enterprise.
For example, at the stage of growth of the enterprise as such a measure could be adopted by the growth of income and sales volumes for the target market segment. At the stage of sustainable development - ROI, return on equity and debt capital, etc. At the later development stage it includes cash flows from various activities of the enterprise and reduce of working capital needs.
The client component defines the target consumer segments
market and target group of customers. The key indicators of the client component are: the proportion market, customer retention, increased customer base, customer satisfaction, customer profitability. At the same time for the diversified AETNA company it seems appropriate to assess a client component for each activity of the company.
The component of training and development company formed to adequate staffing. Key indicators of component allow to assess the staffing situation in the AETNA company. They are employee satisfaction, retention of staff and effectiveness of the employee. This employee satisfaction is
conditions that allow to assess the other two indicators. At that satisfaction with the employee influence such motivational factors as:
- Areas of competence of staff,
- IT infrastructure company
- A favorable climate.
In my opinion, decentralization, adopted in AETNA, promotes education of these leaders - educated, enterprising and powerful (in a good sense) managers who are not afraid of responsibility and able to make decisions.
Therefore, corporate culture AETNA enough tolerance of mistakes. The most important thing - to have extracted experiences, and a separate slip is not an insurmountable barrier to achieving the ultimate goal.
Training managers in AETNA is paid much attention to. About 40% of their time leaders give admonition to the right path of promising leaders. They personally communicate with each of the promising young managers participated in the drafting of career plans for the most talented of them, and encouraging the acquisition of the widest possible experience in the ranks of the organization.
Characteristically, in its integration policy the company does not need to introduce elements of centralization in sales, marketing, HR. In each division, working independently of the service profile, and while such a system leads to duplication of functions, all costs are compensated more rapidly to changes in consumer demand and the emergence of new trends.
HR needs to make greater efforts in effectively training. This includes such subjects as diversity, communication, and people skills that allows people to understand each other and develop good team skills. Every team member must not only be able to understand and work with all the other team members, but they must also want to. This should be HR's number one priority, to build real teams, not just groups of people.
In AETNA we can create a kind of "school for leaders" for for future top managers. Prospective candidate will receive a task: no-job-depth study of a theme, for example, the prospects of globalization for company specifically or trends in medicine. On performance given from 4 to 6 months, assistance is provided by a small group of employees, in addition, the manager takes over the patronage of one or more senior managers. Manager and his team analyzed information published in the press and the specialized literature, meet with experts and visit other companies, which also interested in these issues. Upon completion of the study group is given a week to keep everything together and prepare a report, which is discussed at the board of directors. I think a hundred besides the training of future leaders and expand their horizons, this form of work will contribute to the generation of interesting ideas for the company, its promotion and development.
In conclusion, I want to say, that diversification opens up tremendous opportunities. Our staff can try itself in different spheres of activity, to learn in small firms, to gain experience, which will then be claimed under the leadership of a large business.
I hope that my opinion is quite clear and that my speech was successful attempt to show that retaining the diversity initiative in AETNA is a key to its' further success!