United Health Group
United Health Group Company Overview
United Health Group is a leading managed care health company offering healthcare products and insurance services. The Minnesota based firm was founded 41 years ago by Richard T Burke and has grown to be one of the most formidable players in America’s healthcare system. The company’s vision is to help people live healthier lives and to help make the health system work better for everyone while. The core values guiding the organization’s activities include integrity, compassion, innovativeness, excellence in performance and building and sustaining thriving stakeholder relationships (United Health Group, 2017). With revenues of 201.1 billion, a market capitalization of 245.9 billion and 270,000 employees, United Health Group is no doubt a successful company (United Health Group, 2017). As such, the firm’s position five in the Fortune 500 list is not a big surprise. United Health Group is divided into two major business divisions namely Optum and UnitedHealthcare. Optum offers services such as health data analytics, healthcare delivery and provision of healthcare technology. UnitedHealthcare provides customer-oriented health benefit plans, managed care solutions to Medicaid programs, serves over 4 million people with medical benefits and addresses the health and wellbeing of the geriatric population (United Health Group, 2017). David Wichmann is currently at the helm of the organization’s leadership, and he oversees the implementation of the strategic plan.
United Health Group External Environmental Factors
An organization’s competitiveness depends on both the internal and the external environment and how the firm will react to the situation. For this reason, it is essential to explore some of the factors in the external environment that might affect United Health’s Group external factors that might affect the company’s continued success. One such factor is the merger between CVC and Aetna which will see the two giants merge and leverage on their core competencies to offer more formidable competition to United Health Group (Jepsen, 2017). Today, United Health Group has the most significant market share of 51.1% giving it a competitive edge in the market. However, the merger of CVC and Aetna will inevitably change the dynamics of the healthcare system in the United States and with it the competitiveness of firms in this sector. Notably, a merger or acquisition is likely to combine the talent and core competencies of the parties involved (Salavou, 2015). Another external factor affecting United Health’s Group competitiveness is the regulatory environment. For example, changes in the Affordable Care Act are likely to affect the profitability of United Health Group. Given that the ACA is the dominant regulatory framework that guides the provision of healthcare in the United States, changes such as those proposed by Donald Trump could be disastrous for United Health’s future.
How Primary Stakeholders Can Influence United Health Group Financial Performance
Internal and external stakeholders play a significant role in the profitability and financial health of a company. In this light, this section explores how employees, management, government, customers and the media can affect United Health’s Group Financial performance.
Employees. Employees influence the profitability of a company since if they are very productive, the company will achieve economies of scale and thus improve cost efficiency. Also, the employees’ retention rate will affect the financial performance of an organization since a high employee turnover costs companies million in recruitment and talent development fees (Salavou, 2015). For example, a company that loses nearly 50% of its current employees every year will experience a more reduced financial performance compared to one that has zero percent employee turnover.
Management. A company’s top leadership determines the strategic initiatives that the company engages. These initiatives could be new product development efforts, opening of new plants and acquisitions or mergers. It is upon the management to ensure that the strategic initiatives will lead to a remarkable return on investment to maximize shareholder wealth (Titman, Keown & Martin, 2017). Therefore, one way the management affects the financial performance of United Health Group is their ability to deliver a return on investment that is way beyond the initial investment. Besides, the executive compensation will affect the company’s key ratios such as liquidity and solvency ratios.
Government. Government is a critical external stakeholder that plays a crucial role in a company’s financial performance (Hill, Jones & Schilling, 2014). One of the ways this happens is through the taxation laws which stipulate which percentage of operating profits will be reported as tax. If the tax rate is 30%, the company will have a more reduced financial performance than if the tax rate was 20%. Furthermore, if the government offers subsidies or tax breaks to United Health Group, these incentives will improve the firm’s financial performance unlike if they are absent (Salavou, 2015). And then, given that the government is the leading energy provider in the country, the electricity rates will affect United Health Group cost of doing business and with it the profit and loss account.
Customers. United Health’s customers are the firm’s sole source of income, and hence, the number of customers will affect the company’s financial performance. Many customers increase the volume of services, and due to the economies of scale, the organization can offer services at reduced prices and still enjoy impressive profit margins (Titman et al., 2017). Also, the customer’s knowledge of alternative service providers and the switching costs involved will affect United Health’s financial performance. Informed customers are likely to compare the value continually they are getting from United Health with other service providers and therefore if they notice a declining quality of service from United Health, they will abandon the company’s services leading to declining sales and reduced profitability (Salavou, 2015).
Finally, the media also influence the financial performance of United Health. Media creates a perception about an organization, and that perception might make or break that firm (Hill et al., 2014). For instance, if the media highlights the corporate social responsibility initiatives that United Health is undertaking, this would create a positive perception and instill trust (Salavou, 2015). This trust is essential in maintaining customers, attracting new ones and while making deals with other players in the industry: all of which contribute to the triple bottom line.
United Health Group Controversial CSR concern
Environmental pollution remains one of United Health’s most pressing CSR concern. Despite the CSR initiatives aimed at promoting environmental sustainability, it is noteworthy that United Health’s CO2 emission in 2017 was 20,2012 tonnes more than in 2016 making one wonder whether the company’s efforts to reduce environmental impact are bearing any fruits (United Health Group, 2017). Also, the firm still hugely relies on energy burned from fossil fuels and therefore has not yet utilized energy efficient sources which would steer it towards becoming a champion of environmental conservation (Wong &Zhou, 2015).
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