Humana (HUM) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Humana (United States)

Based on various researches at Oak Spring University , Humana is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, geopolitical disruptions, wage bills are increasing, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc

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Introduction to SWOT Analysis of Humana

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Humana can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Humana, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Humana 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 Humana can be done for the following purposes –
1. Strategic planning of Humana
2. Improving business portfolio management of Humana
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 Humana

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

The strengths of Humana are -

Low bargaining power of suppliers

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

Highly skilled collaborators

– Humana 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 Humana have helped the firm to develop new products and bring them quickly to the marketplace.

High brand equity

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

Strong track record of project management in the Healthcare Facilities industry

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

Analytics focus

– Humana 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.

Organizational Resilience of Humana

– The covid-19 pandemic has put organizational resilience at the centre of everthing Humana does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Ability to lead change in Healthcare Facilities

– Humana is one of the leading players in the Healthcare Facilities industry in United States. Over the years it has not only transformed the business landscape in the Healthcare Facilities industry in United States but also across the existing markets. The ability to lead change has enabled Humana in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Innovation driven organization

– Humana is one of the most innovative firm in Healthcare Facilities sector.

High switching costs

– The high switching costs that Humana has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.

Diverse revenue streams

– Humana is present in almost all the verticals within the Healthcare Facilities industry. This has provided Humana a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.

Effective Research and Development (R&D)

– Humana has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Humana 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.

Sustainable margins compare to other players in Healthcare Facilities industry

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

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

The weaknesses of Humana are -

Slow to harness new channels of communication

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

High dependence on Humana ‘s star products

– The top 2 products and services of Humana still accounts for major business revenue. This dependence on star products in Healthcare Facilities industry has resulted into insufficient focus on developing new products, even though Humana has relatively successful track record of launching new products.

High bargaining power of channel partners in Healthcare Facilities industry

– because of the regulatory requirements in United States, Humana is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Healthcare Facilities industry.

Need for greater diversity

– Humana has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.

Capital Spending Reduction

– Even during the low interest decade, Humana 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.

Products dominated business model

– Even though Humana 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. Humana should strive to include more intangible value offerings along with its core products and services.

Low market penetration in new markets

– Outside its home market of United States, Humana needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High cash cycle compare to competitors

Humana 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.

High dependence on existing supply chain

– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Humana supply chain. Even after few cautionary changes, Humana is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Humana vulnerable to further global disruptions in South East Asia.

No frontier risks strategy

– From the 10K / annual statement of Humana, it seems that company is thinking out the frontier risks that can impact Healthcare Facilities industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.

High operating costs

– Compare to the competitors, Humana has high operating costs in the Healthcare Facilities industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Humana lucrative customers.

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

The opportunities of Humana are -

Reforming the budgeting process

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

Developing new processes and practices

– Humana can develop new processes and procedures in Healthcare Facilities industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.

Better consumer reach

– The expansion of the 5G network will help Humana to increase its market reach. Humana will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

Buying journey improvements

– Humana can improve the customer journey of consumers in the Healthcare Facilities industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

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. Humana 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. Humana 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.

Using analytics as competitive advantage

– Humana 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 Humana to build a competitive advantage using analytics. The analytics driven competitive advantage can help Humana to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Manufacturing automation

– Humana can use the latest technology developments to improve its manufacturing and designing process in Healthcare Facilities sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.

Identify volunteer opportunities

– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Humana can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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 Humana 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Healthcare Facilities industry, but it has also influenced the consumer preferences. Humana can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Low interest rates

– Even though inflation is raising its head in most developed economies, Humana 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.

Learning at scale

– Online learning technologies has now opened space for Humana 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 Humana 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.

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

The threats of Humana are -

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Humana can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Humana prominent markets.

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.

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 Humana business can come under increasing regulations regarding data privacy, data security, etc.

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 Humana in the Healthcare Facilities sector and impact the bottomline of the organization.

Technology acceleration in Forth Industrial Revolution

– Humana has witnessed rapid integration of technology during Covid-19 in the Healthcare Facilities industry. As one of the leading players in the industry, Humana needs to keep up with the evolution of technology in the Healthcare Facilities sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

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.

Consumer confidence and its impact on Humana 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Humana 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.

Stagnating economy with rate increase

– Humana can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Healthcare Facilities industry.

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. Humana 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.

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 Humana.

High level of anxiety and lack of motivation

– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Humana needs to understand the core reasons impacting the Healthcare Facilities industry. This will help it in building a better workplace.

Shortening product life cycle

– it is one of the major threat that Humana is facing in Healthcare Facilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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Weighted SWOT Analysis of Humana Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Humana 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 Humana 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 Humana 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 Humana 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 Humana needs to make to build a sustainable competitive advantage.

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