Case Study: Humana and Tata Steel

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Humana and Tata Steel

Humana

The intent of this analysis is to analyze the strengths, weaknesses, opportunities and threats of Humana Corporation. With 11.7 million members and a health network that is one of the largest in the U.S., Humana has a strategically diverse set of services that span two business divisions, one dedicated to government accounts and a second for commercial. Both of these divisions actively participate in government-sponsored programs that support the three core businesses of company including Medicare, tricare and Medicaid (White, 2007) (Lee, 2008). Humana continues to be one of the leaders in defining how the Internet can be used to streamline the claims process, integrating automated systems and processes throughout their two divisions and three core businesses.

Strengths

Diverse and well-balanced series of business units - the depth of Humana's ability to manage both government and commercial business models is impressive and is one of the core strengths of the company. Their Humana Military Healthcare Services offers subsidized medical care for military families through the TRICARE program to approximately 2.8 million families. Another division, HumanaDental, also covers over 2.6 million subscribers in the U.S. alone. In addition the company has extensive expertise in Medicare and payment processing systems throughout the healthcare industry. The Humana Medicare Plans offers plans that include drug and medical coverage, as well as stand-alone prescription drug coverage.

Strategically broad product and services portfolio - What is strategically and competitively unique about Humana is their concentration on having a broad selection of services throughout each of their individual divisions. This translates into significant levels of services and cross-program participation across the 11.5 million members that subscribe to their plans. Humana has been able to outlast industry consolidation by being a one-stop-shop for providing services and plans.

Significant growth in the government segment with strong potential due to Stimulus Program spending - Given the passage in February, 2009 of the Stimulus Plan from Congress and signed by President Obama, a large proportion of that plan will be for healthcare. Humana is will positioned to be able to capitalize on that development.

Weaknesses

Inability to scale or flex their organization to all unmet needs in their customer base -Despite the company's ability to cover several different service categories on behalf of their customers through their three dominant businesses and two divisions, Humana stills struggles with the ability to compete against the scale of UnitedHealth Group. This competitor has proven scalability by providing services to 70 million subscribers and revenues in excess of $75B in 2007 for example. It will be increasingly difficult for Humana to grow when faced with this challenge.

Relatively weak performance of the commercial segment - Despite extensive process-related expertise in the core areas of their business, Humana struggles with increases sales in the commercial segment. Sales in this segment have grown only 1.7% in 2007 and had declined in previous years. This is a strategic weakness of the company today.

Opportunities

Significant growth potential through acquisitions - One of the core competitive strengths of Humana is the ability to quickly integrate acquisitions. During the last year, in September 2008, the company completed the $14-million acquisition of Metcare Health Plans (MHP), a wholly owned subsidiary of Metropolitan Health Networks. One of the primary reasons for this acquisition was to gain an additional 7,300 members throughout the Southeastern United States, an area where Humana has significant strength already. (Lee, 2008).

Large percentage of the American and Canadian populations uninsured - the most significant opportunity for Humana today is to increase its customer base by concentrating on the large number of uninsured people throughout the U.S. And Canada. To get a sense of the magnitude of this opportunity and social problem, the Census Bureau projects the number of people with no health insurance will reach 52 million by 2010, or 16.8% of the U.S. population. (Terhune, 2008).

Strong potential growth from online enrollment - the use of the Internet to enable and make more efficient online enrollment in health plans continues to increase. Competitors to Humana including Aetna and WellPoint are working to streamline their use of the Web to attract, sell and serve customers throughout the United States and Canada today (White, 2007). Given the complexities of programs in other countries, no company has successfully moved into this area of competition yet.

Threats

Recession has the potential to slow down growth - According to the U.S. Department of Commerce the U.S. economy has been in a recession since late 2007. The unemployment rates are also driving down how much companies are willing to pay for healthcare. If the unemployment rate becomes too severe there could be a major drop in healthcare spending over time.

Increasing costs of providing medical coverage - Inflation is a global economic problem today and it is also hitting healthcare providers with increased medial costs. This aspect of the economic condition is also forcing healthcare providers to re-evaluate secondary series that may not be as profitable as others and discontinue them.

Tata Steel

As the largest integrated private sector steel producer in India, Tata Steel Group manages and coordinates operations in Asia, Europe, and Australia. Primary products produced include steel and steel-related products, welded steel tubes, bearings, cold rolled strips, and ancillary products. The company is headquartered in Mumbai, India, and has a global workforce of approximately 83,000 people. In a typical year the company generates 32 million tons of steel and is responsible for creating one of the most vertically integrated supply chains in the industry. Tata is responsible for putting the first integrated steel plant in Asia and also supporting operations in 50 countries, having actual operations in 24 of those countries. The company is comprised of Corus, NatSteel Asia, Tata Steel Limited, and Tata Steel (Thailand) Public Company. The intent of this analysis is to compare their strengths, weaknesses, opportunities and threats.

Strengths

Strong market position - as the world's sixth largest steel producer, capable of producing 32 million tons in any given year, Tata is recognized as one of the most dominant forces in the global steel industry today. The development of a new integrated steel production plant in Asia has also led to tat's dominance of the region. The company has a presence in 50 countries and has operations centers in 24 of them.

Merger and acquisition expertise shown with the acquisition of Corus - Tata acquired all the assets of Corus Group in April, 2007 as the company has access to key markets of interest. These markets included automotive, construction, electrical and mechanical engineering, metal goods, and the oil and gas industries (Mahalingam, 2008).

Strong vertical integration capability - Tata is considered to be one of the lowest cost producers of steel in the world due to tight vertical integration to raw material resources and a continual commitment to further increase its supply chains. The company has ownership positions in coal mines, iron ore deposits and futures, in addition to investments in supply chain optimization software and processes (Amit, Mukherjee, Tridibesh, 1995).

Weaknesses

Heavily debit financed and vulnerable to economic downturns - the Corus Group acquisition was entirely financed from debt which has left the company with substantial costs of capital. In the current economic environment this presents a significant risk.

Bond ratings have been downgrade from stable to negative - as a result of the acquisition of Corus being entirely generated from debt, the company has had its bond ratings on world financial markets reduced.

Opportunities

Expansion plans in foreign nations looks promising - Global development of new markets continues to progress rapidly with Tata partnering with the Vietnam Steel Corporation in 2007 to co-build a steel manufacturing center in that country capable of producing 4.5 million tons per year. In addition Tata Steel Global Holding in Singapore also created and eventually solidified a joint venture with Vietnam Steel Corporation and Vietnam Cement Industries Corporation. Additional strategies such as these continue to pay off for Tata as they expand their markets.

Indian expansion -Tata Steel and Steel Authority of India (SAIL) in 2008 were able to agree on a 50:50 joint venture for initiating and supporting vertical integration of coal mining and refining throughout several Indian provinces. In addition, an agreement was completed with Jasper Industries, which operates a plant in Orissa commencing in the summer of 2008.

Threats

Industry consolidation impacting the ability to grow through new business - There is acute industry consolidation occurring in the global steel industry. In 2002 for example the companies of Aceralia, Arbed, and Usinor merged to create Arcelor. Another example of industry consolidation is the progression of LNM Holdings and Ispat International to create Mittal Steel. Mittal Steel was in fact been at the center of the consolidation of this industry, with Arcelor merging with the company in 2006 to create ArcelorMittal, the world's largest steel company.

Economic downturn - the global recession has continued to increase the cost of capital and made it nearly impossible for Tata to refinance its sizable debt… [END OF PREVIEW]

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