The Company Medibank Private Ltd operates as an integrated healthcare and wellbeing service provider company. The company caters the health care sector though it’s various healthcare related products and services (Cassidy, 2016).
A SWOT analysis and PEST analysis is shown which shows how the company uses its group of network, innovative skills, presence in all market with highest market share, its product portfolio as its strength. While the company faces many issue with the fierce competition it faces from Bupa Health Care Company and others.
It also faces many political threats in different parts of the country with certain law and taxation effects by the rules and the guidelines set by the Regulatory Board of the Insurance Sector. While exploring economies with young demographic trend and developing economies where the field of healthcare can be more explored is the aim for the company and building its major share over there is a major strategy for the company (Wolf & Floyd, 2017).
The financial ratios and the evaluation of the same was performed to get an overview of the company. The forecasting of the data for the company and the industry analysis of the company helped us determine the business strategy implied by the company (Wheelen et al. 2017).
Discussions
Business and Strategy Analysis
Analysis of the Economy
PEST Analysis
The PEST Analysis is an analytical review of the external factors affecting the company’s operations and its day-to-day workings. The PEST is the acronym for the factors like Political, Economic, Social, Technological, Legal and Environmental Factors affecting the company. The macro environmental factors may have a direct influence on the company’s operations and the long term financial goals of the company. Thus it is important to review and analyse the PESTEL analysis of the company. The analysis will help in getting the detailed analysis of the business environment and the economy and industry under which the company operates (Song, Sun & Jin, 2017).
Political Analysis: The Medibank Company operates in the Political scenario of the Australia economy and various other companies where the company caters different kinds and types of insurance services and products to its globally based customers. The country GDP gets a larger boost by the healthcare Industry where the sector contributes a significant portion of GDP. The performance of the Industry and the stable political environment has made the company’s operations well operate without any political interventions.
The political factors that may influence the operations of the company is the political instability in the economy where the company performs and the interference of the concerned insurance or the regulatory bodies n maintain and by changing the principal, rules and guidelines of the insurance sector (Lamas Leite, et al. 2017).
Economic Factors: The Economic growth of the country has been impressive with the growth of the economy it gives an opportunity for the company to cater more customers in the insurance sectors. The rise of the economy and the increase of the Purchasing Power Parity of the consumers will help ease the consumers will spend more of their amount in the sector like Healthcare Insurance products as a savings and for securing there future. All other economic factors like the interest rate, Inflation Rate, and economic growth pattern affects the country economic scenario.
The Medibank Private Ltd Company can use the opportunity of exploring the industry sector of different economies and forecast and perform better operational activates of the company by exploring the developed countries (Rastogi & Trivedi 2016). The key economic factors that the company should evaluate is the government intervention and the financial markets efficiency and the stability of the economy. Business cycle and other macro-economic trends of the economy may be important to assess while the operational activities of the company is carried.
Social Factors: The factors help us understand the various social environment and the different cultural trends, population or demographic analysis. The Medibank Company has a wider group of target consumers which are in need of healthcare services and those in the age range of 45-80 and the young demographic of the country with the age range of 5-25 years of age (Amin et al. 2017).
Technological Factors: Technological changes and getting adapted to latest technology marks the company’s growth. There are certain factors and innovations in the technology field, which can bring changes in the Medibank Company like using advanced tools for the treatment of various health related problems which could bring efficiency in the company (Mkude & Wimmer, 2015).
Environmental Factors: These Factors comprise of all factors, which influences and determines the operations of the business. The Environmental Factors for the company have remained in favour of the company because of its different strategy of servicing and catering to different people and in building of new culture among the people.
Legal Factors: Safety Standards, labour laws and other consumer laws comprises the legal factors, which affects the company’s operations. Certain policies changes affect companies if these changes are not static. Australian Government has been very strict with the labour laws and other legal factors to protect the workforce from being exploited. There are certain other factors like different healthcare services like insurance services needs to be followed by the guiding principles of the Insurance Regulator department and changes in principles and laws should be reflected in the company’s policy.
Industry Analysis
The operations and distribution of health services is categorised into two major groups the first group or the segment deals with the Health Care Insurance Products and services, which the company caters. The Medibank Health is the other segment by which the company caters the heath care sector (Sabirov et al. 2015). The insurance group offers a health insurance products to its customers which covers various healthcare related services. The group serves to major customer base both domestic and overseas. The other group or the Medibank segment caters the customers by providing health management to every group of customers.
The Company Medibank is the second biggest operator of the health care sector where the company ranks second biggest company after the Bupa Health Care Company which dominates the market and is the largest player in the sector of healthcare. The Company Medibank has around 29.1% of the market share. The company was founded in the year 1975 as Health Insurance Company. There are certain aspects of the company like the business analysis, industry review and financial analysis of the company was performed to get an overview of the company and terms of their operational and financial performance of the company since the year 2016. The financial data from the year 2016 was collected for the company in order to review the same.
Porters Five Force Analysis
The porters five force analysis is an important industry and business environment management tools that provides a strategic advantage to the company. The Medibank Company acting as the second largest market player in the field of healthcare sector has constantly upgraded the ways for operating the business strategies and the cycle under which the company operates (Dobbs, 2014).
Michael Porter Analysis of five Forces, which show how different factors affects company operations, level of competition and environment.
The company because of its presence in the market for a longer period of time along with the loyalty of consumer towards the Brand Medibank which is more than just a healthcare service provider.
The company must defines the business contract and many other rules and regulations, which are in favour of both the parties. This ensures that the work reflects the standards and policies of the companies.
The five-force model for the Medibank Private Ltd has shown the evaluation and the environment in which the company operates. It also shows the profitability and how attractive the Industry is. The management of the company should perform strategies based on the analysis done to overcome profitability and its major competitor Bhupa.
Company’s Competitive and Corporate Strategy
The Medibank Private Ltd Company’s management uses various strategy and methods for analysing and intercepting inherits and weakness of the company. The company is trying to understand the internal and external factors and other organizations capabilities and business environment in which the coffee/bar shop operates.
The company has a target group of customers, it differentiates itself from other healthcare company by its unique strategy, by providing healthcare services in every aspect from insurance to treatment of health related services to its customer. The company has a large targeted demographic trend of people who are in need of the healthcare related services and other services like the facility of insurance in various fields helps the company form a better group and base of customers.
Accounting Analysis
Key Accounts of the Company
The three major accounts of the company which can be linked to the industry and competitive corporate strategy analysed above were the Revenue account, Net Profit and the total long term debt of the company. The key accounts plays an important role in the company. The revenue of the company was seen to be increasing because of the strategy deployed by the company by targeting broader demographic trend and by exploring new developing economies. The total debt of the company which is an important actor is also seen to be decreasing which reduces the financial risk of the company (Cucchiella & Rosa, 2015).
Disclosure of Accounting Policies
The Medibank Company prepares its financial reports in accordance to the Australian Accounting Standard Bodies and the company has made several relevant disclosures required for the same (Kallala et al. 2015). The company has mentioned the accounting policies used in the measurement and recognition of the revenue and for the measurement and determining the useful life of the assets.
The bias for the preparation of the financial statements of the company was discussed the relevant accounting standard bodies under which the different components of the company’s financial components were reported is discussed thoroughly. The critical accounting estimates and judgements involved by the company in relation to insurance underwriting, differed acquisitions costs, intangible assets of the company and other provisions are discussed.
Earnings Management
The three key potential red flags identified in the balance sheet of the company were the rising total assets of the company and the falling revenue for the company this shows that the company is not able to utilize the assets of the company properly and the extra additional revenue which the company should generate is not there. The other key weakness found was in the return the company generates that is the net profit margin of the company which has been stagnant and is showing a key decrease from the trend period as identified (Stone et al. 2016).
The other key account was the total debt of the company though the company is trying to reduce the financial exposure of the company by reducing the financial exposure of the debt. The company operates in a segment where the business risk is already high due to increased business risk of insurance and too much debt on the company balance sheet may expose the company to financial risks also which may be harmful for the long term growth of the company.
Financial Analysis
The ratio analysis for the company was done by evaluating key ratio’s for the company. The ratio for the company evaluated were as follows:
Return on Equity
Earnings Before Tax/Total Equity*100
The ratio return on Equity shows the number of times the wealth company generates on the capital employed by the equity holder of the firm. It shows the efficiency of the management of the company to generate excess positive return on the captal employed.
The company has shown a considerabl fall in the return on equity from 26.49% to 24.37% from the year 2016-18 in its horizon period the reason for th decline could be well understood by the static net profit margin and rising equity of the company. The industry performance on the same on the other hand is increasing.
Operating Management Ratio
Current Ratio: Current Assets/Current Liabilities.
The Ratio reflects the potential of current assets to cover up current liabilities. It is also an indicator of company of servicing its near term obligations (Vogel, 2016).
The Current Ratio for X Company is 0.52 for the year 2018 which has remain volatile or close to 0.50 for all the 3 Years from 2016-2018. It it shows that the company has not kept sufficient Current Assets to meet up it’s near term liabilities. A current ratio which is equal to 1 o greater than that implies that the management of the company is able to meet the operating activities of the company smoothly.
Accounts Receivable Turnover Ratio: Sales/Trade Accounts Receivable
The Accounts Receivable Turnover Ratio shows the efficiency of the company in collecting its account receivables. A higher number for this ratio stands the benchmark showing correlation with cash and debtors.
The Ratio for the company has been near 44.70 times in the year 2016 and it has been increasing and in the year 2018 it was around 60.80 times, which is a positive picture for the company. The ratio indicates that the company is able to get more money in the form of cash sales rather than credit sales.
Total Assets Turnover Ratio:
Sales/Total Assets
The above ratio shows the extent to which optimum utilization of resources are being done of the Assets the company actually owns. A greater number of this ratio is usually preferred to show that the assets is for increasing more and more sales.
The ratio for this has been around constant its shows that the company is using its Assets in an effective manner but it should be trending upwards as the year passes by. The sales to total assets of the company for the industry and company should go in hand to ensure that the growth of company is maintained.
Sales to Fixed Assets Ratio
Sales/Fixed Assets
The ratio shows the generation of sales by using the fixed assets of the company. A higher ratio shows that the company is utilizing its Fixed Assets properly.
The ratio is seen decreasing or showing a increasing pattern which shows that the efficiency in utilization of fixed assets is increasing from 16.74 times to 17.33 times.
The profitability ratio of the company shows the efficiency of a company in using its capital as well as its assets. The higher the Profitability Ratio the better it is to show growth. The Investment management can be well assessed by the profitability ratio of the company (Stone et al. 2016).
Net Profit Margin
Net Profit/Sales
It shows the net profit margin the company earns after paying its operational and indirect expenses.
The net profit for the company X has remained static around 6%. The net profit margin for the company was around 6.15% in the year 2016 and the same was around 6.37% in the year 2018.
Return on Total Assets
Earnings Before Taxes/ Total Assets*100
It shows how the company are managing there assets to generate revenue for the companies.
The return on total assets is seen to be constant around 12% which shows that the company was not able to substantially increase the ratio and show efficiency in the utilization of the company’s total assets. The ratio should be growin in order to show effficiency.
Earnings per Share
Net Income/Total Number of Outstanding shares.
The Value remaining after paying all the expenses of the company and after paying the dividend to the preference stock of the company the remaining portion for the Equity shareholders per share is called the EPS.
The EPS of the company is seen to increasing in the 2016-17 year trend time from 1.52 to 1.63 per share but the same has fallen to around 1.62 per share in the year 2018. The growth trend was seen to be hampered in the Earnings per share of the company.
Financial Leverage Ratio
The ratio shows the potential of the company to withstand in all business conditions and how the company meet up its short term obligations (Li 2015). The ratio is quite important as it shows how solvent a company is and what the different financing components of the company are:
Debt to Total Assets: Total Liability/Total Assets
The ratio shows the debt in correspondence to the assets of a company. Companies prefer Assets side of the balance sheet to be bigger in term of its Debt (Chu et al. 2017).
The Debt to total assets for the company has declined to 0.48 time in the year 2018 from the 0.52 times over the three year period and the company should focus to decrease this number to reduce the exposure of the debt in the company.
Equity Multiplier
Total Equity/Total Assets*100
The ratio shows the ownership percentage of the assets by the equity shareholders.
The ratio for the company stood to around 0.52 times in the year 2018 a considerable increase was seen from the year 2016 as the number was near around 0.48 times. This shows that the contribution of the total assets of the company by the equity shareholders is increasing and the exposure towards the financial risk is reducing. The industry analysis for the same with other competitors suggests that while others are having a significant exposure to debt the Medibank Company is reducing the same.
Debt to Equity Ratio
Total Debt/ Total Equity
The ratio shows the capital contribution done in the company by different sources of capital contributors. A lower number of ratio is usually good for creditors and other secured lender’s as the risk involved in a more leveraged company is higher.
The ratio for the company in the three year time frame has decreased considerably which shows that the company has tried to reduce the exposure towards leverage. The ratio for the company has decreased from 1.07 times in the year 2016 to 0.94 times in the year 2018.
Interest Coverage Ratio: The company has shown a considerable improvement in this field by increasing its Earnings before taxes and by reducing its interest expenses but it still does not matches the industry practices where other companies are reducing the debt exposure but the company has also shown a considerable increase from 6.76 times in the year 2016 to 7.29 times in the year 2018. This shows that the company is reducing the debt exposure and in turn is also reducing the exposure towards financial risk that is debt.
Cross Sectional and Time Series Analysis
Highlights of the Ratio Analysis of the Company is as follows:
|
Ratio Analysis |
2016 |
2017 |
2018 |
|
Operational Management Ratio |
|||
|
Accounts Receivable Turnover Ratio |
44.71 |
53.20 |
60.90 |
|
Current Ratio |
0.46 |
0.57 |
0.52 |
|
Sales to Total Assets Turnover Ratio |
2.08 |
2.00 |
1.98 |
|
Sales to Fixed Assets Ratio |
16.74 |
16.95 |
17.33 |
|
Investment Management Ratio |
|||
|
Net Profit Margin Ratio |
6.15% |
6.49% |
6.37% |
|
Percentage Return on Total Assets |
12.80% |
12.97% |
12.58% |
|
Percentage Return on Equity |
26.49% |
26.12% |
24.37% |
|
Earnings Per Share |
1.52 |
1.63 |
1.62 |
|
Financial Leverage Ratio |
|||
|
Debt to Total Assets |
0.52 |
0.50 |
0.48 |
|
Debt to Equity Ratio |
1.07 |
1.01 |
0.94 |
|
Interest Coverage Ratio |
6.76 |
8.66 |
7.29 |
|
Owners’ Equity to Total Assets/Equity Ratio |
0.48 |
0.50 |
0.52 |
Prospective Analysis
Forecast of the Company
The forecast for the company for sales growth rate is considered to be moderate while the industry and the business environment under which the company will explore also work on will also be a key factor to analyse the sale growth of the company. The rising premiums of insurance and from health care services such as treatment and operation services. The Net operating profit after tax margin for the company in the three year period has remained almost same and the analysis for the same in the terms of forecasting for the company has remained the same.
The Debt ratio of the company will be forecasted to be decreasing more and the exposure of debt for the company will be seen to reducing as the company moves more towards an optimum source of financing that is the equity sources of funding. The after tax of cost of debt for the future forecasting of the company may not prove to be effective as the company move on to the next year as the profit margin of the company has remained the same and no additional benefit was generated in the form of tax saving via interest payments for the company. The dividend rate for the company will also assumed to be constant and the same will be forecasted to be stagnant as the component is directly dependent on the increasing net profit of the company and the same will be only possible for the company when the company generates more revenue.
|
Particulars |
MDBKY |
Industry Average |
|
Price/Earnings |
19.2 |
14.8 |
|
Price/Book |
5.1 |
1.3 |
|
Price/Sales |
1.2 |
1.8 |
|
Price/Cash Flow |
22.9 |
14.1 |
|
Dividend Yield % |
2.1 |
0 |
Overall Performance of the Analysis
The overall performance of the company in the trend period analysed was not good as the margins of the company has not shown much improvements and the forecast assumption is also taken as stagnant behaviours for the company because of the rising competition on the company and the decreasing net profit margin of the company. The total assets of the company was also seen to be not utilized efficiently. Thus overall impression for the company in the terms of growth and performance will be somewhat around average.Forecast of the Key Multiple Approaches of Medibank Company and the comparison of the same with the industry.
Recommendations
While exploring economies with young demographic trend and developing economies where the field of healthcare can be more explored is the aim for the company and building its major share over there is a major strategy for the company as learned from the above report. The financial ratios and the evaluation of the same was performed to get an overview of the company. The forecasting of the data for the company and the industry analysis of the company helped us determine the business strategy implied by the company. The company has mentioned the accounting policies used in the measurement and recognition of the revenue and the assets of the company. The debt analysis and other key components of the company were studied to get a brief about the company.
Overall, the recommendation for the company after the financial evaluation and study is that the company should be given a sell decision as the valuations of the company appears to be too high from the market index level and the financials of the company does not support the high valuation demanded by the company.
Reference
Amin, K., Bergeron, M., Blair, S., Boon, O., & Zhang, J. (2017). UBC Building Operations: client project brief.
Cassidy, A. (2016). A practical guide to information systems strategic planning. Auerbach Publications.
Chu, P. L., Vanderghem, C., MacLean, H. L., & Saville, B. A. (2017). Financial analysis and risk assessment of hydroprocessed renewable jet fuel production from camelina, carinata and used cooking oil. Applied energy, 198, 401-409.
Cucchiella, F., & Rosa, P. (2015). End-of-Life of used photovoltaic modules: A financial analysis. Renewable and Sustainable Energy Reviews, 47, 552-561.
Kallala, R. F., Vanhegan, I. S., Ibrahim, M. S., Sarmah, S., & Haddad, F. S. (2015). Financial analysis of revision knee surgery based on NHS tariffs and hospital costs: does it pay to provide a revision service?. The bone & joint journal, 97(2), 197-201.
Kallala, R. F., Vanhegan, I. S., Ibrahim, M. S., Sarmah, S., & Haddad, F. S. (2015). Financial analysis of revision knee surgery based on NHS tariffs and hospital costs: does it pay to provide a revision service?. The bone & joint journal, 97(2), 197-201.
Lamas Leite, J. G., de Brito Mello, L. C. B., Longo, O. C., & Cruz, E. P. (2017). Using Analytic Hierarchy Process to Optimize PESTEL Scenario Analysis Tool in Huge Construction Projects. In Applied Mechanics and Materials(Vol. 865, pp. 707-712). Trans Tech Publications.
Mathooko, F. M., & Ogutu, M. (2015). Porter’s five competitive forces framework and other factors that influence the choice of response strategies adopted by public universities in Kenya. International Journal of Educational Management, 29(3), 334-354.
Mkude, C. G., & Wimmer, M. A. (2015, May). Studying Interdependencies of E-government Challenges in Tanzania along a Pestel Analysis. In ECIS.
Porter, M. E., & Heppelmann, J. E. (2014). How smart, connected products are transforming competition. Harvard business review, 92(11), 64-88.
Rastogi, N. I. T. A. N. K., & Trivedi, M. K. (2016). PESTLE technique–a tool to identify external risks in construction projects. International Research Journal of Engineering and Technology (IRJET), 3(1), 384-388.
Sabirov, I., Kharisova, R., Pavlova, A., Gumerov, A., Litvin, I., Nabiullina, K., & Schepkina, N. (2015). Improving strategic management of the business entities.
Song, J., Sun, Y., & Jin, L. (2017). PESTEL analysis of the development of the waste-to-energy incineration industry in China. Renewable and Sustainable Energy Reviews, 80, 276-289.
Stone, A. B., Grant, M. C., Roda, C. P., Hobson, D., Pawlik, T., Wu, C. L., & Wick, E. C. (2016). Implementation costs of an enhanced recovery after surgery program in the United States: a financial model and sensitivity analysis based on experiences at a quaternary academic medical center. Journal of the American College of Surgeons, 222(3), 219-225.
Stone, A. B., Grant, M. C., Roda, C. P., Hobson, D., Pawlik, T., Wu, C. L., & Wick, E. C. (2016). Implementation costs of an enhanced recovery after surgery program in the United States: a financial model and sensitivity analysis based on experiences at a quaternary academic medical center. Journal of the American College of Surgeons, 222(3), 219-225.
Vogel, H.L., 2016. Travel industry economics: A guide for financial analysis. Springer.
Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management and business policy. pearson.
Wolf, C., & Floyd, S. W. (2017). Strategic planning research: Toward a theory-driven agenda. Journal of Management, 43(6), 1754-1788.
Yunna, W., & Yisheng, Y. (2014). The competition situation analysis of shale gas industry in China: Applying Porter’s five forces and scenario model. Renewable and Sustainable Energy Reviews, 40, 798-805.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download