Case: 3 Unicorn Hospital: Environmental Analysis

Case: 3 Unicorn Hospital: Environmental Analysis.
The Unicorn Hospital is currently operated by Dr. K. H. Wong, the son of one
of the Hospital’s co-founders. A surgeon by training, Dr. Wong recently
admitted that there is a lot of uncertainty about the future of his Hospital.
Many changes are currently taking place in the health care industry.
Improvements in medical technology, surgical procedures, and hospital
facilities are obvious examples. One change occurring in this industry,
however, may be apparent to neither the casual observer nor the hospital
patient. Within the last few years, many groups that own private hospitals
have changed from focusing mainly on generating hospital revenue to selling
other products that can supplement this revenue. It is because the services of
the public hospitals have been improving since the establishment of the
Hospital Authority in December 1990. Patients have another cheaper
alternative of quality hospital services. The Hospital Authority is an
independent statutory body responsible for the management and control of all
public hospitals in Hong Kong. Its mission is to integrate government and
government-assistant hospitals with a view to optimizing the use of resources,
facilitating hospital management reforms and enhancing community
participation. A comprehensive range of medical treatment and rehabilitation
services is provided to patients through hospital and specialist clinics
operated by the Authority. The quality hospital services provided by the
Hospital Authority threaten the survival of Unicorn Hospital and other private
The Unicorn Hospital, a major participant in this “supplemental products”
movement, has approximately 260 hospital beds and employs over 350
medical staff. It is clear that the Unicorn Hospital has enjoyed several years of
outstanding progress since it’s opening in 1990. As an example, in 1992 its
revenue rose nearly 50 percent to reach $1.2 billion.
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Lately, however, there has been some disappointing news from the Unicorn
Hospital. Its board of directors were shocked by the announcement that its
growth had stalled and that its earnings would no longer be increasing at such
a dramatic rate.
According to an industry analyst, the Unicorn Hospital has been very slow to
measure and anticipate some major trends in its business environment. It
knew the decline in hospital business was coming. Such signals as
decreasing occupancy rates in private hospitals and tightened medical
regulations did not go unnoticed. But this reduction in business came more
quickly and more dramatically than Unicorn Hospital expected. According to
internal reports, profits from hospital operations had fallen 20 percent in two
In reaction to this downward trend in hospital earnings, the Unicorn Hospital
has begun to set its sights less on efforts to boost hospital-related revenue
and more on developing and marketing supplemental health insurance
products. One such product is known as Health check programme. The
Health check programme at the Unicorn Hospital provides a whole range of
choices to accommodate individual needs. The purpose is to detect diseased
at its early stage, offer advice on preventive measures to reduce risk factors
and hospitalize when it deems necessary.
The Health check programme is marketed to companies as a total health-care
package for employees. Under the plan, customers pay a set fee that covers
all health costs but, to enjoy the benefits of coverage, must see only doctors
designated by the plan. Naturally, this is one means of funneling patients into
the Unicorn Hospital’s empty hospital beds.
According to Dr. Wong, the hospital must prove itself all over again. However,
he believes that owning its own hospital will give the group a tremendous
advantage in marketing and pricing the Health check programme. As he sees
it, this ownership will allow the hospital to charge patients lower prices.
Eventually, he plans to market the Health check programme to nearby
communities because in Hong Kong, affluent diseases are prevalent. As
incidences are increasing, regular annual health check-up becomes very
Many observers describe this move into Health check as “too little too late.”
After all, one of the Unicorn Hospital’s major competitors, St. Louise Hospital,
made this move some time ago and now has a solid base in the health care
area. Only time will tell whether the Unicorn Hospital’s tardy attempt to follow
suit will be successful.
Question for consideration:
Would you suggest Dr. Wong some guidelines to perform the environmental
analysis on the Unicorn Hospital?
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Instructor’s manual:
Topic covered: The problems of setting up a business organization:
internal factors and external factors.
Suggested solution:
1. There is no one best or standard way to perform an environmental
analysis and determine present and future threats to the organizations
attainment of its goals. By following the guidelines, however,
trainees/managers can enhance the quality of their environmental
analysis regardless of the specific procedure they use.
2. Environmental analysis is defined as the process of monitoring the
organizational environment to identify both present and future threats
and opportunities that may influence the firm’s ability to reach its goals.
The purpose of environmental analysis is to explore future conditions of
the organizational environment and to incorporate what it learns into
organizational decision-making.
3. Guidelines for performing an environmental analysis:
1. Determining the relevance of environmental levels to
organizations is to consider the organization’s size and its
degree of involvement in business. As an organization increase
in size and becomes more involved in business, variables in the
general environment become more relevant to successful
management of the organization.
2. Determining the relevance of strategic issue, which is an
environmental factor, either inside or outside the organization
that is likely to have an impact on the ability of the enterprise to
meet its objectives.
4. Environmental scanning is defined as the process of gathering
information about events and their relationships within an
organization’s internal and external environments for the purpose of
helping management to determine the future direction of the
5. Factors affecting the external environment:
1. Economic environment
2. Technological environment
3. Legal-Political environment
4. Social environment
These factors can be observed through:
1. Personal experience
2. Journals
3. Reports
4. Books
5. Professional meeting
6. Industrial conferences
7. Colleagues
8. Board members
9. Friends
10. Employees
11. Other sources
6. Factors affecting the internal environment:
1. Physical assets
2. Human resources
3. Interpersonal relations
4. Inertia of past decisions and views
5. Personal values
These factors can be observed through:
1. Personal experience
2. Reports
3. Conferences
4. Committees
5. Memoranda
6. Subordinate
7. Employees
8. Outsiders
9. Other sources