The Division of Healthy Start - Essay Example

? Accounting and Finance Table of Contents Introduction 3 2)Divisions of Healthy Start 3 2.a) Health System Division 3 2.b) Educational System Division 3 2.c) Economic System Division 4 2.d) Community System Division 4 3)Products and Services of Healthy Start 4 4) Critical Analysis 4 4.a) Setting the Strategy 4 4.b) Diversification Strategy 5 4.c) Reasons for Pursuing Diversification 5 4.d) Value Chain 5 4.e) Bases of Competitive Strategy 6 4.g) Weapons for Competing 6 4.h) Porters Five Forces Analysis 6 4.i) New Bonus Scheme 7 4.j) Estimation of Net Profit 7 4.k) Calculation of net profit 8 4.l) Calculation of Return on Investment 8 4.m) Result 9 5)Summary 9 References 10 1) Introduction Healthy Start is a UK-wide government public health scheme that provides services such as nutritional safety for new mums, pregnant women and young children of low-income families. At the most important times in their lives, it helps them to eat healthily and also supports them to develop good habit for the future. It also provides tax credits to the low income families. Families with children under four years of age and women who are at least ten weeks pregnant qualify for healthy start, if the family is getting income-based jobseeker allowance, income support, income-related employment and support allowance and child tax credit having an annual income of 16,190 pound or less than that. It reduces infant mortality, increase the number of immunizes children, helps to prevent disease and improve handicapping condition among children. It provides diagnosis and treatment services to the low income group children and also provides access to the women health by giving prenatal, delivery and postpartum care, and to the children health by providing preventive care services (Cruz, 2012, pp.3-4). 2) Divisions of Healthy Start Healthy Start has four autonomous divisions and these are as follows: 2.a) Health System Division Health system division takes care of the health of women and children. It is like a medical home for the health of women that offers quality prenatal and intrapartum care, interconception care, cost-control platform, and integration and system navigation. 2.b) Educational System Division It is a way to success that starts early with baby college, then valued childhood education, followed by promise academy and youth development programs. 2.c) Economic System Division It is an opportunity incubator which combines the macroeconomic policies such as enterprise zones or empowerment with capital development such as microfinance, job training and business incubation, asset development for families and financial literacy, and net programs of high safety. 2.d) Community System Division It provides healthy community that promotes healthy food and physical activities, environmental justice, strong families and national equity (Cruz, 2012, pp.3-4). 3) Products and Services of Healthy Start The products of Healthy Start include milk, fruits and vegetable, vitamins, and medicines and drugs. The service which it offers includes cash management, outreach, screening for depression, health education and continuity of care. Apart from this certain health tips is also provided by them which includes healthy eating in pregnancy, safe bottle feeding, how and when to give solid foods to children, and how to manage the weight and stay active. 4) Critical Analysis 4.a) Setting the Strategy As mentioned, the product is in the mature stage which means that the product is a standard product but the growth scenario is low. The company is having strong buyer and high entry barrier because of the cost and value benefit provided by it and also because of the customer loyalty. It is the reason that they are expected to generate good cash flows for the next few years. In order to use these net cash flows to stimulate new products and to move into new markets, the managers have to follow the diversification strategy. So, the senior managers have to set the strategies in such a way that they could generate maximum ROI in order to get good bonus. 4.b) Diversification Strategy In order to follow the diversification strategy, first managers have to do the market segmentation and then market penetration. In order to do the market penetration managers have to take the increased share of its existing market with its existing product range and then they will do the market segmentation based on age, sex, income, purchasing behaviour, product image, importance of purchase, loyalty of customer, quality and price preference . Then they will enter into the new market with new product (Kotler & et. al., 2009, p.15). 4.c) Reasons for Pursuing Diversification In order to generate more ROI the divisional managers should set strategy in such a way that it should generate more profit. The reasons for pursuing diversification is to increase market power, efficiency gains, to respond towards market decline, for spreading risk, to meet the expectation of powerful stakeholders, to utilize current resources and to make use of cash flows which is in surplus form (Gsu, p.5). 4.d) Value Chain The divisional managers have to generate high profit margin in order to get high return on investment. So, to generate high profit they should consider the activities in the value chain which describes the categories of activities within and around an organization, which together create a product or services. The primary activities consist of inbound logistic which include raw material, then operations which include technology, then outbound logistic which include distribution network, then marketing and sales which means establishing relationship with customers, then after sales service and all these leads to profit margin (Kotler & et. al., 2009, p.35). 4.e) Bases of Competitive Strategy The divisional managers have to set the bases of competitive strategy in order to generate more cash flows. The bases of competitive strategy are as follows: first to set low price on its product from its competitors while offering same benefit. Second, adding value to its product while keeping the same price. Third, is hybrid strategy i.e. keeping the product cost low as well as providing more benefits with it. Fourth is differentiation strategy which seeks to provide products that offer benefits that differ from those offered by competitors. It depends upon identifying and understanding strategic customer needs, and identifying key competitors’ strategies. 4.g) Weapons for Competing As the divisional managers are well experienced and have enough knowledge about the product and the competition prevailing in the market therefore they need to choose strong weapons for competing so that the new products may not find any difficulty in getting the hands of customer. The weapons for competing are better product performance, higher quality and strong brand image, higher level of advertising, better customer service and stronger capabilities to provide buyers with custom-made products. 4.h) Porters Five Forces Analysis Divisional managers can also apply porters’ five forces analysis in order to know the threat of customers, threat of suppliers, threat of substitutes, threat of new entrants and rivalry among competing sellers. Threat of customers means undifferentiated products, low margin, and switching cost of customer is low. Threat of supplier means monopoly of supplier, substitute inputs are less, switching cost of customer is high. Threat of substitute applies buyer’s propensity to substitute. Rivalry among competing seller applies to industry stagnancy, low level of differentiation and high exit barrier. By applying this they can understand the market well before launching the new product (Wharton, 2012, p.1). 4.i) New Bonus Scheme The bonus scheme for the divisional managers will be that they will be evaluated on the basis of profit margin and return on investment and paid bonuses when this reaches or exceeds 10%. Higher the profit margin, higher will be the return on investment. Therefore, firstly they should focus on increasing the net profit. At 10% return on investment, the division manager will receive an additional 3.5% of his/her salary of ?50,000 per annum. For each 1% increase in return on investment above 10%, and pro-rata, the manager will receive an additional 3.5% of basic salary with an upper bonus limit of 55% of salary for that year. 4.j) Estimation of Net Profit First the divisional managers should know what the total asset of the company is. According to this they should estimate that how much net profit should be generated. It is one of the most closely followed numbers because on the basis of this return on investment will be calculated. Moreover it is the source of compensation to the divisional managers because the divisional managers will get bonus on the basis of higher return on investment. Higher the net profit, higher will be the return on investment. 4.k) Calculation of net profit Assumption: revenue = ?20,000,000; cost of goods sold = ?200,000; operating expenses = ?10,000,000; interest expenses = ?5,000,000; taxes = ?2,800,000. First they will estimate the gross profit and then net profit. Revenue = ?10,000,000 Less: cost of goods sold = (?200,000) GROSS PROFIT = ?9,800,000 Less: operating expenses = (?4,500,000) Less: interest expenses = (?2,000,000) Less: taxes = (?1,000,000) NET PROFIT = ?2,300,000 After calculation of net profit return on investment will be calculated. 4.l) Calculation of Return on Investment Return on investment is what amount is coming as a return of what is actually invested in company. It is calculated by dividing net profit by total asset or say a total investment in a company. Total Asset = ?20,000,000 Net profit = ?2,300,000 Therefore Return on Investment = Net profit / total asset = ?2,300,000 / ?20,000,000 = ?0.115 * 100 = 11.5% 4.m) Result As the return on investment is more than 10 % therefore the divisional managers will receive bonus. As, it is more than 1% increase in return on investment above 10%, so they will receive an additional 3.5% of basic salary with an upper bonus limit of 55% of salary for that year. So, it will be a motivating factor for them because it will encourage them to contribute more for the company. 5) Summary As Healthy Start is a public health scheme that provides health facility to mother and children and access to child health and quality maternal services to low income group people therefore it is expected that it will achieve growth in the long run. It also provides healthy start food voucher through which the women and children can get vitamins coupons which they just need to swap and they will get free Healthy Start vitamins. Healthy Start vitamin is especially designed for the growing children and pregnant women. As it is in the maturity stage, it is clear that after some span of time i.e. 3-4 years it will decline, but from the current position it is estimated that it will continue to remain in the maturity stage because it is providing benefits to the low income group people. Customers are also satisfied with the program. So, the regional managers will not find it difficult to generate more return on investment as the company is doing good business. If they will generate more return on investment i.e. more than 10% then they will get bonus which in turn motivate them to put more efforts and add value towards the company. References Cruz, D., 2012. The Division of Healthy Start and Perinatal Services. [pdf]. Available at: http://www.nfimr.org/site/assets/docs/Healthy%20Start_DelaCruz.pdf. [Accessed 12 March 2013]. Kotler, P. & et. al., 2009. Marketing Management:Target Markets and Segmentation. 13th ed. United States of America: Dorling Kindersley. Gsu ., Diversification Strategy. [ppt]. Available at: www2.gsu.edu/~wwwsmg/BA8993week10.ppt. [Accessed 12 March 2013]. Kotler, P. & et. al., 2009. Marketing Management:The Value Chain. 13th ed. United States of America: Dorling Kindersley. Wharton., 2012. Analyzing Porter’s Five Forces. [online]. Available at: https://kwhs.wharton.upenn.edu/2012/03/show-me-the-money-analyzing-porters-five-forces. [Accessed 12 March 2013]. . Read More