Encompass Health (EHC) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Encompass Health (United States)

Based on various researches at Oak Spring University , Encompass Health is operating in a macro-environment that has been destablized by – there is backlash against globalization, wage bills are increasing, increasing commodity prices, increasing transportation and logistics costs, increasing energy prices, geopolitical disruptions, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , etc

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Introduction to SWOT Analysis of Encompass Health

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Encompass Health can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Encompass Health, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Encompass Health operates in.

According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Encompass Health can be done for the following purposes –
1. Strategic planning of Encompass Health
2. Improving business portfolio management of Encompass Health
3. Assessing feasibility of the new initiative in United States
4. Making a Healthcare Facilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Encompass Health

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Strengths of Encompass Health | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Encompass Health are -

Operational resilience

– The operational resilience strategy of Encompass Health comprises – understanding the underlying the factors in the Healthcare Facilities industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.

Analytics focus

– Encompass Health is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Healthcare Facilities industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Strong track record of project management in the Healthcare Facilities industry

– Encompass Health is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Low bargaining power of suppliers

– Suppliers of Encompass Health in the Healthcare sector have low bargaining power. Encompass Health has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Encompass Health to manage not only supply disruptions but also source products at highly competitive prices.

Training and development

– Encompass Health has one of the best training and development program in Healthcare industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Cross disciplinary teams

– Horizontal connected teams at the Encompass Health are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.

Highly skilled collaborators

– Encompass Health has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Healthcare Facilities industry. Secondly the value chain collaborators of Encompass Health have helped the firm to develop new products and bring them quickly to the marketplace.

Successful track record of launching new products

– Encompass Health has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Encompass Health has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.

Learning organization

- Encompass Health is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Encompass Health is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Encompass Health emphasize – knowledge, initiative, and innovation.

Sustainable margins compare to other players in Healthcare Facilities industry

– Encompass Health has clearly differentiated products in the market place. This has enabled Encompass Health to fetch slight price premium compare to the competitors in the Healthcare Facilities industry. The sustainable margins have also helped Encompass Health to invest into research and development (R&D) and innovation.

Effective Research and Development (R&D)

– Encompass Health has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Encompass Health staying ahead in the Healthcare Facilities industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

High brand equity

– Encompass Health has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Encompass Health to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

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Weaknesses of Encompass Health | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Encompass Health are -

Employees’ less understanding of Encompass Health strategy

– From the outside it seems that the employees of Encompass Health don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.

Products dominated business model

– Even though Encompass Health has some of the most successful models in the Healthcare Facilities industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Encompass Health should strive to include more intangible value offerings along with its core products and services.

Capital Spending Reduction

– Even during the low interest decade, Encompass Health has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Healthcare Facilities industry using digital technology.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Encompass Health is slow explore the new channels of communication. These new channels of communication can help Encompass Health to provide better information regarding Healthcare Facilities products and services. It can also build an online community to further reach out to potential customers.

Slow decision making process

– As mentioned earlier in the report, Encompass Health has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Healthcare Facilities industry over the last five years. Encompass Health even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.

Skills based hiring in Healthcare Facilities industry

– The stress on hiring functional specialists at Encompass Health has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

Slow to strategic competitive environment developments

– As Encompass Health is one of the leading players in the Healthcare Facilities industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Healthcare Facilities industry in last five years.

Interest costs

– Compare to the competition, Encompass Health has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.

Aligning sales with marketing

– From the outside it seems that Encompass Health needs to have more collaboration between its sales team and marketing team. Sales professionals in the Healthcare Facilities industry have deep experience in developing customer relationships. Marketing department at Encompass Health can leverage the sales team experience to cultivate customer relationships as Encompass Health is planning to shift buying processes online.

Increasing silos among functional specialists

– The organizational structure of Encompass Health is dominated by functional specialists. It is not different from other players in the Healthcare Facilities industry, but Encompass Health needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Encompass Health to focus more on services in the Healthcare Facilities industry rather than just following the product oriented approach.

High cash cycle compare to competitors

Encompass Health has a high cash cycle compare to other players in the Healthcare Facilities industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

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Encompass Health Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Encompass Health are -

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Encompass Health can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Encompass Health in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Healthcare Facilities industry, and it will provide faster access to the consumers.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Encompass Health can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Encompass Health to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Encompass Health to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Encompass Health to hire the very best people irrespective of their geographical location.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Encompass Health is facing challenges because of the dominance of functional experts in the organization. Encompass Health can utilize new technology in the field of Healthcare Facilities industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Learning at scale

– Online learning technologies has now opened space for Encompass Health to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

Building a culture of innovation

– managers at Encompass Health can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Healthcare Facilities industry.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Healthcare Facilities industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Encompass Health can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Encompass Health can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.

Reconfiguring business model

– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Encompass Health to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.

Use of Bitcoin and other crypto currencies for transactions in Healthcare Facilities industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Encompass Health in the Healthcare Facilities industry. Now Encompass Health can target international markets with far fewer capital restrictions requirements than the existing system.

Low interest rates

– Even though inflation is raising its head in most developed economies, Encompass Health can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

Creating value in data economy

– The success of analytics program of Encompass Health has opened avenues for new revenue streams for the organization in Healthcare Facilities industry. This can help Encompass Health to build a more holistic ecosystem for Encompass Health products in the Healthcare Facilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Using analytics as competitive advantage

– Encompass Health has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Healthcare Facilities sector. This continuous investment in analytics has enabled Encompass Health to build a competitive advantage using analytics. The analytics driven competitive advantage can help Encompass Health to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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Threats Encompass Health External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Encompass Health are -

Instability in the European markets

– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Encompass Health will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.

New competition

– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Encompass Health in the Healthcare Facilities sector and impact the bottomline of the organization.

Aging population

– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.

Environmental challenges

– Encompass Health needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Encompass Health can take advantage of this fund but it will also bring new competitors in the Healthcare Facilities industry.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

Regulatory challenges

– Encompass Health needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Healthcare Facilities industry regulations.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Healthcare Facilities industry are lowering. It can presents Encompass Health with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Healthcare Facilities sector.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Encompass Health in Healthcare Facilities industry. The Healthcare Facilities industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.

Consumer confidence and its impact on Encompass Health demand

– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Healthcare Facilities industry and other sectors.

Backlash against dominant players

– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Encompass Health business can come under increasing regulations regarding data privacy, data security, etc.

Easy access to finance

– Easy access to finance in Healthcare Facilities industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Encompass Health can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Increasing wage structure of Encompass Health

– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Encompass Health.

Capital market disruption

– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Encompass Health.

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Weighted SWOT Analysis of Encompass Health Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Encompass Health needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants. We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –

First stage for doing weighted SWOT analysis of Encompass Health is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.

Second stage for conducting weighted SWOT analysis of Encompass Health is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.

Third stage of constructing weighted SWOT analysis of Encompass Health to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Encompass Health needs to make to build a sustainable competitive advantage.

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