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Internal Environment Analysis in Health Institutions

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Chapter 99

Internal Environment of Al Shifa International Hospital

1. Introduction:
Internal environment is one of the most important factors of a business must undertake
in order to sustain, develop and exist for a long time in a sustainable perspective.
Internal environment analysis is important because it can show us the existing threats as
well as demonstrate the strengths of the business or the characteristics of the business
which can have potential strengths.

Al –Shifa International Hospital includes self-awareness, self-evaluation, and ability to

develop an estimation of the institution's product and service capacity, and analysis
processes. For this reason, strategic management of internal environments of health
institution should be emphasized in order to be able to adapt to external environment
and to have competitive power. In this report I have chosen the Al Shifa International
Hospital and here I will define and explain scope of the internal environmental factors
and also its analysis. About Shifa International Hospitals

Shifa International Hospitals Limited engages in the establishment and

operation of medical centers and hospitals in Pakistan. The company offers
clinical services, which include medicine services related to internal
medicine, cardiology, gastroentrology, pulmonology, neurology, nephrology,
endocrinology, radiation oncology, psychiatry, and dermatology; surgical
services, including general, cardiac, orthopedic, neuro, urology clinic/kidney
transplant, plastic, and pedriatrics, as well as ear, nose, and throat surgery
services; obstetric and gynecology, dentistry, ophthalmology, rehabilitation,
and home health services; and specialized services consisting of
emergency room services, medical checkups, pharmacy services, enhanced
external counter pulsation services, and weight loss programs. It also
provides clinical and hospital support services; diagnostic services that
comprise clinical laboratory, diagnostic imaging, and specialized diagnostic
services; and online services. The company was incorporated in 1987 and is
headquartered in Islamabad, Pakistan.

2. THE CONCEPT OF INTERNAL ENVIRONMENT:

Any business represents a component of the marketing environment in which it is
active. In this context, it is necessary to develop long-term action plans aimed at
effectively managing the opportunities and threats in the marketing environment, taking
into account the application of the market strategy and the organization's own strengths
and weaknesses in order to ensure the continuity of an institution. The structure and
environment in which the operator is located consists of two levels: the internal
environment made up of certain variables within the organization, and the external
environment made up of variables outside the organization.
External environment can be categorized into macro environment and micro
environment. The potential of the external environment analysis is to define the present
and future opportunities and threats. On the other hand, the potential consequence of
internal environment analysis is to identify the strengths and weaknesses that exist in
the organization structure and culture.
Most of the time we cannot completely manage the external circle, but we think
we can proactively and proactively cope with it .Regarding internal environment, Al
Shifa International Hospital can manage its strategic assets based on its competencies. It
997
deals with internal analysis, structures, systems, personnel, skills, senior values and
management within the organization .
Conditions such as the aims of the institution, the policies it conducts, the climate it is
in, the communication system of the institution, and the leadership styles displayed in
the institution constitute the internal environment of the Al Shifa Hospital.

The internal environment contains all the elements that constitute the factors
originating within the operator and which are largely influenced and fully controlled by
these factors. The internal review should answer all questions about the resource,
resolve all resource management issues and represent the first step in the formulation of
the marketing strategy. All these components constitute a "value chain". Value-chain
analysis is based on the link between institution resources and competitive position and
explores how these components contribute to profitability.
Table 1: Factors Used in the Internal Cycle Analysis
Subsystems Description
It is discussed whether the Al Shifa International Hospital existing
Management management system is successful,
what qualities are possessed by managers, and whether the current
Management needs improvement in the analyzed health institution.
Human The analysis focuses on the number and quality of personnel working
Resources in Al Shifa Hospital analyzed, whether there is a problem in
finding new staff, what level of productivity is available and how the
level of staff attendance is.
Finance The analysis focuses on whether the economic resources of the Al Shifa
Hospital are adequate, how financial performance is based on financial
performance criteria, and whether there are budget deviations.
Marketing The subjects such as insurance status and demographic characteristics
of the patients in the hospital and where they come from are
analyzed.
In the analyzed Al Shifa International Hospital what services are offered
Clinical and the level of service quality, what type of technological equipment
systems is used in the service delivery process, and how doctors' knowledge
and skill levels are discussed.

Institutional It is emphasized whether there are problems in different departments

Structure and interdisciplinary relations in the Al Shifa Hospital.
Corporate It is emphasized whether the value systems and the behavioral
Culture characteristics of the personnel are compatible in the Al Shifa Hospital.

Physical In Al Shifa Hospital, it is emphasized how the physical possibilities

Opportunities are and whether the existing building can be enlarged.
Information It is emphasized whether the staff has knowledge about the clinical,
systems managerial and financial information systems in Hospital

Leadership It is emphasized whether the leadership styles of upper, middle and

lower level managers are appropriate in the Al Shifa,

998
Al Shifa International Hospital facility can be divided into ten functional systems in the
context of internal environment analysis, and that each subsystem alone and later
analyzed with other subsystems.
Internal environment of Al Shifa is constituted by factors such as technology, finance,
human resources, products and services put on the market, nature, structure and culture
of the business. With internal environment analysis, it is possible for an enterprise to
come to an advanced level, to make improvements by finding weaknesses, to develop
stronger aspects, to identify strengths, and to achieve a better point of management.
.Internal environment analysis is carried out by analyzing the resources the institution
has and all kinds of skills and by compare them to the resources and abilities of current
competitors. In this process, strengths and weaknesses are determined.
According to Stahl (2004), there are three important factors that strategy specialists
may face in the internal environment analysis process.
 It is very important to be open-minded for strategic planners as it is in every
profession group. Approaching events and situations with the question "How could it
be better?" is what strategic planners must capitalize in the analysis process.
Strategic planners who approach the plan objectively strengthen the ties with the
employees of the institution, and at the same time, it leads to the emergence of the
strengths and weaknesses in their institution more easily. Al shifa Hospital is a
leading hospital chain comprises of strategic professionals who from time to time
plan the strategies for enhancing their employee productivity and carefully examine
their strength and weakness.

 In the process of internal environment analysis, it is important to note that

strategic planners should collect information that they will use while creating a
strategy. This process is only through effective data collection and analysis of these
data. In this data collection process, Swayne (2006) stated that the institution can
benefit from factors such as financial and technical conditions, employees' relations,
the institution's relationship with the external world and its interactions, internal and
external sources.

 One of the most important features that a good planner should have is
intuition. Effective use of the strategic planner's intuition can be beneficial to the
institution in every process, and it is also important in the process of internal
environment analysis (Stahl, 2004).

The internal environment includes factors that affect an institution's resources. Hitt
et al. (2007) have expressed the resources as sources of competences, some of which
have led to the development of the company's core competencies or the development of
competitive advantage. The internal and external environment must meet each other in
the form of a competitive advantage of the business and a strategy that can generate
profits above the average. The external environment can create opportunities and threats
for an enterprise, but it can turn these opportunities and threats into competitive
advantage by using internal environmental conditions, the capabilities of the business,
unique resources and core competencies.
In order to better understand and conceptualize internal environment and internal
environment analysis, we also need to be familiar with concepts related to internal
environment analysis. Therefore, the concept of competitive advantage, value chain and
core competencies related to internal environmental analysis will be explained from the
point of view of health institutions.
999
 2.1. Competitive Advantage
It is to create and implement a strategy that will provide an institution with the
most important competitive advantage. An enterprise has a competitive advantage when
it can create a more economical value compared to a competitor. Economic value is
simply the difference between the perceived benefits earned by a customer who buys an
entity's products or services and the full economic cost of those products and services.
For this reason, the size of a business' competitive advantage is the difference between
the economic value that a firm can generate and the economic value that its competitors
can create (Barney 2007). Therefore, the emphasis of economic value should be kept in
the foreground with a customer-oriented approach in the process of internal
environment analysis in health institutions and the concept of competitive advantage
should not be forgotten.
Businesses always aim to provide a sustainable competitive advantage that enables
their businesses to succeed in the long run. Porter (2006) argues that a company can
provide competitive advantage in two different ways through differentiation or cost
advantage. Differentiation is the ability to offer a superior and specific value to
customers in the form of specific qualities and quality of the product or after-sales form.
As a result of the differentiation, the company can demand higher prices for its products
or services. If a company remains comparable to the competitors in terms of its costs, it
can make higher profits because of differentiation.
A business can gain competitive advantage with cost advantage. If the business can
provide an advantage to their competitors at a lower cost to produce products or
services, it means that they have done something different than their competitors. When
a company has lower costs, it has the ability to design, produce and market products
more efficiently even if the products are interchangeable (Zimmerer and Scarborough,
2002).
2.1.1. Identifying Existing and Potential Competitive Advantage
Identifying and assessing existing strengths and weaknesses for an organization to
be potentially competitive is the goal of internal environment analysis (Crook et al.,
2003). Competitive advantage is expressed in terms of strengths related to important
aspects of the external environment within the organization. Strategic thinking maps
point to the process of determining the sources of competitive advantage for a company.
The first step is to carefully evaluate the activities that the institution does well and the
activities that the institution does not perform for each component of the value chain.
Once the strengths and weaknesses of the organization are identified, they are evaluated
to determine whether each is a competitive advantage or a disadvantage. Competitive
strengths can affect the ability of a company to establish and maintain a competitive
advantage (Swayne et al., 2006). In an internal environment analysis, it is important for
health managers and personnel to show full participation in the analysis process in order
to both obtain the competitive advantage and set the goals and expectations regarding
the current situation and the future of the institution (Kandemir et al., 2013).

1000
Strategic Thinking Map to Discover Competitive Advantages and Disadvantages I.
Step - Identifying Strengths and Weaknesses
Pre-Service During Service Post Service Presentation of service
Strengths & Weaknesses
CULTURE Culture
Strengths & Weaknesses
STRUCTURE Structure
Strengths & Weaknesses
STRATEGIC Strategic Resources
RESOURCES Strengths & Weaknesses

Determining the internal strengths and internal weaknesses of an organization is

one of the challenging tasks of assessing the health environment of the health strategist
.However, the organizational characteristics that represent the key strengths of
strategists may not be important for patients and other stakeholders, or they may be
powerful aspects of the competition. In today's changing environment, strengths may
weaken as successful strategies challenge the opponents. A critical component of
strategic vision is the ongoing evaluation of the strengths and weaknesses of the
institution in relation to the changing environment (Swayne et al., 2006).In the analysis
process it is necessary to be open to new views and suggestions. In an impartial manner,
it is a challenge for managers and staff who trust their institutions to determine "what
we can do better and not do better" In order for internal environment analysis to be
effective, institutional members need to look at the strengths and weaknesses of the
institution in an impartial manner. This point is important to reduce the negative impact
of the institution's weaknesses introduced and to benefit from its strengths (Kandemir et
al., 2013).
Sources: The basic assumption is that the "resource packages" used by healthcare
organizations to create and distribute services are unevenly developed and distributed,
and at least to a degree, each organization can demonstrate its ability to compete
effectively .Even organizations with marginal resources can distort; Those with lower
resources may be lost; and those with superior resources generally produce profits
(Swayne et al., 2006).
Competencies: Competence is based on knowledge and skill. In many cases, it is }
socially complex and a large number of people are {0 needed to be engaged in
coordinated activities (Amit and Paul, 1993; Florin et al., 2013).
Abilities: An ability of a health facility is to distribute resources and authorities
often in combination to produce the desired services. The intentional coordination of
resources and competencies is another potential source of potential for sustained
competitive advantage (Stuart, 1995).

1001
Step - Assessing Competitiveness for Strengths and Weaknesses

Determining the strengths and weaknesses of the various components of the value chain
inevitably leads to a long list of things like "we do a pretty good job" and "things we
cannot do well". For example, managers often say, "Our greatest asset is our reputation .
"However, reputation is not a significant source of competitive advantage for any of the
organizations if all competitors in the industry have a perfect reputation. Similarly, a
defined weakness may not be a competitive disadvantage if it is not competitive, or if all
the institutions in the competition have the same weakness (Swayne et al., 2006).
Institutional Forces: Strengths must be value-added, rare, difficult to imitate, and
sustainable to create competitive advantage (Miller, 2003, Margaret and Mark,
2003).Only the strengths do not represent their competitive advantage. To be important
in terms of competitiveness, specialized resources and competencies must be ranked in
such a way that they become real alternative strategic assets, which leads to more
economic returns from any alternative use (Amit and Schoemaker, 2003).
Weaknesses of the Institution: The strategic importance of each weakness can be
determined by asking similar questions that are used to assess strengths. The criteria that
they represent must be high value for patients and other stakeholders, not be in
competitors, sustainable against endangered opponents that can not be easily destroyed
or remedied (Swayne et al., 2006).
II. Step - Focus on Strengths and Weaknesses in Competition
Advantages of Competition
and
Disadvantages of Competition
The final step in taking advantage of competitive advantage is to determine how
each competitive strength and weakness will affect the competitiveness of an
organization in the market.What is strong in terms of competition is the strengths that
are valued in the market, rarely found, difficult to imitate and able to continue. The
weaknesses in terms of competition are not the common weaknesses attributed to
competitors and valued in the market, but the areas that are difficult for an organization
to improve but easy to provide advantages for others. This careful analysis of the
interior environment helps a better understanding of where strategic leaders need to
concentrate their efforts on and where to look to avoid injustice according to

1002
 competitors. It is impossible to be everything to everyone; an organizational effort
should focus on what is best (Swayne et al., 2006).
2. 2. Value Chain
The functions of all enterprises in terms of establishment and service can vary.
These separate functions are used when designing, producing, advertising, and
delivering the functions of the customer and the product in various forms. It is based on
these different functions that help organizations move through the chain of values,
starting from the raw material stage of a product to the stage of submitting to the
customer. Each part of the value chain increases the value of the product or service
(Porter 1985).
Value chain analysis is the perfect tool for companies to understand value creation
and functions of it. It is critical that businesses have information about key parts of an
organization, key components that enable the business to be successful and profitable.
Value chain analysis can help businesses understand and identify key functions and cost
positions (Hitt et al., 2007).
Functions such as marketing, service delivery, information systems, material
management and human resources play a crucial role in reducing the cost structure and
perceived benefit (value) of products. A value chain is a chain of activities that
translates the output of an entity's presence. This process involves many key activities
and support activities that add value to the service provided (Hill and Jones, 2008: 83).
Value chain analysis is a strategic tool that enables value activities to be achieved
at lower costs and enables businesses to be a brand in the sector by explaining each
value activity and the relationship between these activities in order to obtain a
competitive advantage in health institutions (Ülgen and Mirze, 2006).
Figure 1. Value Chain
Pe-Service Service Point Post Service
Market/Market Clinical Monitoring
Service Research operations -Clinic
Distribution Target Market -Quality -Marketing Adding
Provided services -Process Invoicing Value
Branding innovation Following
Pricing Marketing -Clinic
Promotion -Patient -Marketing
Distribution/Logistics satisfaction
Organizational Culture
Shared Assumptions Shared Values Behavioral
Support Norms
Activities Organizational Structure Adding
Functional Dividing into Parts Matrix Value
Strategical Sources
Financial Human Information Technology

Value chain analysis is the evaluation of the activities and business processes
performed by the operator and ensuring the harmony and coordination between them
(Şahin, 2008).

1003
 The value chain shown in Figure 1 is adapted from the value chain used in industry
to better reflect the value-creating components of healthcare organizations (Swayne et
al., 2006).
In the course of service delivery activities, healthcare institutions can gain
significant advantages by setting values against their competitors in the pre-service
period, during the service period, and after the service period (Swayne et al., 2006).
Nonetheless, other activities are one of the important tools that healthcare institutions
need to use to create value in service delivery .If a health institution has adopted a
service-oriented approach as part of its culture, patients will immediately understand
this. Therefore, the service-oriented organizational culture will also automatically
increase customer satisfaction. Strategical resources will have a positive effect on the
value perception in the health institutions.At this point, the use of chain value analysis
will improve efficiency by increasing accessibility and quality in health sector and
improving the quality and decreasing the costs (Özgülbaş, 2013).However, obtaining
the competitive advantage requires a careful analysis of the internal organizational
environment. In this section, the value chain is used as a guide to this internal
assessment. The value chain is a handy tool to focus on those areas in a healthcare
facility where value can be added. The value chain is divided into two main
components. The first one is concerned with the provision of health services and
includes pre-service activities, service point activities and post-service activities. The
second major component consists of support activities, including organizational culture,
organizational structure and strategic resources (Swayne et al., 2006).
2.3. Basic Skills and Capabilities of Healthcare Institutions
In order for a health care facility to deliver its services properly and systematically,
it is also crucial that its capabilities and basic capabilities are as important as their
resources. These basic skills need to be identified and developed .It is defined as a set of
resources that fulfill the tasks, services and activities that exist in an enterprise. The
same healthcare facility in a region can have the same basic skills and resources. In such
a case, the basic capabilities and efficient and effective use of resources will separate
one business from the other. In such a case, competitive advantage is only possible with
different capabilities such as culture, strategical leadership or business processes
perceived as strategical coming together (Swayne et al., 2006).
A healthcare facility may have similar sources. In this context, tangible and
intangible resources are found almost equally in most healthcare businesses. If each
hospital has the same technological equipments and devices, the quality of the service
personnel and the quality of the service that these professionals will use will constitute
the quality of the service using the equipments (Ülgen and Mirze, 2010).
Capabilities, like resources, are important to the extent where they decrease the
costs or they increase the demands for the products offered by the service of the
organization. The competitive advantage of a healthcare organization is influenced by
the ability to choose, manage and motivate the workforce that provides less cost; and to
enable employees to be productive. Sustainable competitive advantage can be achieved
only if the institution has valuable capabilities that can be protected from copying (Hill
and Jones, 2008). Businesses can achieve competencies in other businesses and create
competitive advantage by using variables such as training, experience, and qualified
staff to provide the capabilities that exist in other businesses. Therefore, businesses
1004
need to transform their talents into basic skills in order to achieve a long-term
competitive advantage. Basic abilities are the specific and powerful aspects of a
business' ability to do some things better than their competitors or to have different
features in line of these reasons.
Unlike equipment wearing down in time, basic skills can be improved as they are
applied and shared (Prahalad and Hamel, 1990). Basic skills reflect the personality of
the business and distinguish it from other businesses. However, how to distribute the
different resources and abilities through organizational learning becomes clear over time
(Hitt, 2007).
3. THE IMPORTANCE OF THE INTERNAL ENVIRONMENT ANALYSIS
IN HEALTHCARE INSTITUTIONS
Internal environment analysis, an important step in situational analysis, is also the
first step in strategic planning. With the help of internal environment analysis, the
businesses can see what they are, can make an internal assessment, and can analyze the
results and compare their situation with other competing companies and enterprises at
the same time. Therefore; businesses can determine their weaknesses, insufficiencies
and strengths as a result of this analysis. In addition, internal environment analysis
analyzes the function, system and physical and social structure of the business and how
much of the previously targeted strategies have been achieved. It can also make
comparisons with the outputs of other sectors. It is very important to understand where
the business has reached, to compare which services have been implemented and to
determine which ones have not been effective. Each business has a priority goal to
survive, to determine the quality of service in such a way as not to lose customer
potential, and to carry out long-term activities. As is the case in every business,
healthcare businesses take these processes and conditions into account. In this context,
as stated above, it is extremely important for the business to ensure compliance with
internal and external environmental conditions. If an institution is inadequate to grow,
change, meet the needs of the community, and prepare to meet future needs, it faces the
danger of being convicted of retrenchment (Higgins and Vincze, 1993). In the planning
of health institutions, differentiation and merging possibilities should be presented for
grouping of activities by using different plan and function tables. Different needs and
problems, specific priorities or preferences should be done with the specified order in
mind. It should not be overlooked that the primary target in healthcare businesses is the
patient and that all other activities therefore have to support this main target/0} .An
internal environment and the conditions that make up this environment are necessary in
the planning of services for the patient (Öcel, 1998).
Internal environment analysis in health institutions is carried out by evaluating
functional areas such as clinical operations, information systems, marketing, clinical
support, human resources, financial management and so on. Starting from this point, the
evaluation process should be carried out by making a list of weaknesses and strengths
that must be carefully analyzed for each function or each organizational sub-system
(Swayne et al., 2006).

1005
 4. CONCLUSION
Because of the age we live in, most of the things can change and transform in a
very short time. The businesses can be considerably affected in a positive or negative
way with the spread and development of technology, the accessibility of information,
the relations between countries and its reflection on attitudes and behaviors. Therefore,
it is often difficult for businesses to comply with existing environmental and sector
conditions. Since the businesses that are in the process of development may not be able
to set their full strengths and weaknesses, they may not fully anticipate potential threats
or opportunities. In this context, it is necessary to give priority to the analysis of the
internal environment so that these types of businesses, but generally every type of
business, will not fall into difficult conditions.
Most emphasized cases and arguments generally mean the same for healthcare
businesses. Therefore, the healthcare institution should be well-defined and well-
evaluated by the managers and the internal environment analysis should be done
objectively using the precepts.
It is unlikely that every business will be strong in all areas it serves. However, the
goals and strategies of businesses should be to improve their strengths and reduce their
weaknesses. Since functional areas such as management, marketing, finance/
accounting, R&D, production/operations constitute the core areas of most businesses,
managing these areas for strategic purposes requires optimum utilization of available
resources, skills and core competencies. For this reason, the ability of an institution to
gain competitive advantage and to make a difference in its sustainability level depends
on the strength and qualities of its resources and capabilities.

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