Cigna Corporation Internal and External Factors Evaluation Matrix - Assignment Example

Cigna Corporation Internal and External Factors Evaluation Matrix Cigna Corporation (Cigna) is a global health service company. The company offers variant insurance products under medical and accident cover throughout United States. These services are sold through the company employees and selected groups. Beyond, United States, the company has operations in selected international markets. The company has services organized under five main divisions, health care, disability and life, international (CIGNA International) and Run off Reinsurance. Having wide operations in United States and beyond means the company is under a greater challenge to handle external factors than a local business. Similarly, the wider operations mean the company has a wide management structure and numerous employees. This also means the company has numerous internal factors that affect its operations in one way or the other (Saleem 10). This study looks at the external factors and seeks to determine their impact on the operations of the organization through external factor evaluation matrix. A similar exercise will be undertaken for internal factors through internal factor evaluation matrix. External Factor Evaluation As is the case with every other business, Cigna Corporation (which will be referred as Cigna in this text) has a great interest in factors happening beyond it. These factors largely determine their chances of survival and most importantly inform the organization’s strategy. This is because external factors cannot be avoided or controlled. An organization can only adapt operations to maximize on opportunities and adjust to any threats. In the case of Cigna, the following six factors have the greatest impact on their operations. The factors are considered from the wider grouping of political, economic, social, technological, environmental and legal factors. Political The most prominent political factor affecting Cigna at the moment is government regulations and policies. Since the election of President Obama, there has been continuous debate and eventual passage of the “Obama Care”. This is a health scheme which has sought to guarantee healthcare to all Americans. This is of great interest to health insurers who have been required to reconsider certain policy regulations. The most notable is a directive to have them insure patients who have preexistent health conditions. From a business perspective, this government policy is likely to affect the profitability of Cigna as they will be required to make payments for conditions they would have avoided. Economic factors Cigna is affected by almost every economic factor. These affect the ability of the populace to make premium payments for their different insurance products. However, the most critical are: growth of the economy, level of disposable income and exchange rates. Growth of the economy, this has been a major factor since the onset of global recession. A recession meant people lost their jobs and businesses also closed down. Most insurance premiums are paid by the employer; however, when an employee looses their jobs these payments are halted. Similarly, entrepreneurs who personally make payments for their insurance policies are forced to cut their payments as business slows down. In overall, a booming economy means more people will seek insurance services and a slow down in the economy will have people opting out of their insurance engagements. Level of disposable income, disposable income refers to monies that an individual can use to pay for services and purchase goods. The level of disposable income is largely dependent on ones position as well taxes (Herzog 35). A rise in the level of disposable income allows people adequate resources to pay for insurance services, thus such a situation will be good for Cigna. On the other hand, a drop in the level of disposable income means that people are faced with a tougher choice and will not seek insurance services or will stop their obligation to these companies. Such a situation affects Cigna’s operations by reducing their revenue from premium. The last economic factor is exchange rates, Cigna runs Cigna International this is the branch that handles the company’s operations beyond United States. This branch has to generate accounts using the US dollar. In remitting these earnings, the exchange rate becomes a crucial consideration. A higher exchange rate would mean higher earnings and a lower exchange rate would affect Cigna’s profitability negatively (Waters 208). Thus exchange rates become an important factor when determining Cigna Corporations profitability. Social Factors Changing social trends greatly affect Cigna’s operations. Almost every social factor has an impact on the operations of Cigna in one way or the other. However, this study considers three which are most prominent and which continually determine the company’s market strategies, these are; birth and mortality rates, education and aging population. Birth and mortality rates, Cigna being an insurance company stands to benefit from a growing population as outlined by the country’s birth rate. An expanding population means a bigger market (Henry 51). On the other hand, a high mortality rate means increased expenditure this is mainly for the company’s reinsurance segment which guarantees minimum death benefits (GMDB). Similarly, a low mortality rate extends average premium payment period. Education, research has shown that an educated society has a higher demand for insurance services. Based on such observation, then it is proper to assume that an educated society will mean a large market for different insurance products. Lastly, an aging population means a more delicate population. A fast aging community necessitates better medical care which requires Cigna to continually settle bills for its medical insurance clientele. Consequently, a community with a lesser aging population allows for divesture as there are no frequent needs for insurance settlements as in the previous case. Internal Factor Evaluation Cigna Corporation is one of the most prominent businesses in health insurance. The size and ability to attract best employees has served the company well over the years. However, this does not mean that the company does not exhibit some weaknesses which have hindered its exponential growth. In the following part and as part of Internal Factor Evaluation the study looks at Cigna’s internal strengths and weaknesses. Internal strengths Cigna’s main strength is its strong national network. A wide network has helped build the company’s credibility and also ensured market visibility. Additionally, this has also ensured low cost advantage. As most company’s contend with a limited network, Cigna can comfortably handle a wider population and this helps sustain the operations as the larger the client base the higher the revenue. The other strength is a comprehensive offering. Cigna has a wide range of insurance products and services, this provides for “a one stop shop” kind of service. This has helped attract a huge base of customers who look at the company as offering convenience and flexibility. The other major strength is a growing international business. A growing international business has meant that Cigna does not have to fully rely on the American/domestic market. This has helped steady its earnings as the economic conditions are not always the same across its markets and one market can help support another in different economic times. Cigna has also benefited from a well coordinated workforce. This has helped in realizing their great potential and has also improved the company’s image. The employees’ ability to sell the company has ensured a greater customer retention and growth as compared to other company’s with the insurance sector. Internal Weaknesses A look at the company’s financial reporting shows that the company’s run-off reinsurance business has been unable to post a stable run of earnings. Other segments maybe struggling as well, but this has presented a bigger load to them and this has greatly affected the company’s earnings especially for the past three financial years. The other weakness for the company is a lower market share in Medicare products. This has hindered the company from realizing the great potential the Medicare has yielded. In overall, this has affected earnings even when Cigna’s competitors are leveraging through these products. Works Cited Henry, Anthony. Understanding Strategic Management. Oxford: Oxford University Press, 2008. Print. Herzog, Cornelius. Strategic Tools in Dynamic Environments: A Framework. New York: GRIN Verlag, 2010. Print. Reuters. Cigna Corp (CI). 2012. 28 November 2012 . Saleem, Shaikh. Business Envirornment. New Delhi: Pearson, 2010. Print. Waters, C D. J. Operations Strategy. London: Thomson Learning, 2006. Print. Read More