NAME: K LAZIMYOONAS

SECTION: Q2011

ROLL NO: 4

SUBJECT: MGNM571
 HUMANA

History
Humana Inc. is a for-profit American health insurance company based in Louisville,
Kentucky. In 2021, the company ranked 41 on the Fortune 500 list, which made it the highest
ranked (by revenues) company based in Kentucky. It has been the third largest health
insurance provider in the nation. The health insurer Aetna said on July 3, 2015, that it had
agreed to acquire its smaller rival Humana for $37 billion in cash and stock but walked away
from the deal after a court ruling that the merger would be anti-competitive.
Humana's health products and services are designed to encourage personal wellness and
smart healthcare decisions for you and your family: Medical, dental and vision benefits.
Health plan incentives. Supplemental health and long-term care.
Humana Inc., headquartered in Louisville, Kentucky, is one of the nation’s largest publicly
traded health and supplemental benefits companies, with approximately 10.3 million medical
members and 7.2 million specialty members. Humana is a full-service benefits solutions
company, offering a wide array of health and supplemental benefit plans for employer
groups, government programs and individuals. Over its 49-year history, Humana has
consistently seized opportunities to meet changing customer needs. Today, the company is a
leader in consumer engagement, providing guidance that leads to lower costs and a better
health plan experience throughout its diversified customer portfolio.
Vision:
Inspiring health and well-being for each person
Mission:
Helping people live healthy and happy
What is corporate strategy?
A corporate strategy is a long-term plan that outlines clear goals for a company. While the
objective of each goal may differ, the ultimate purpose of a corporate strategy is to improve
the company. A company's corporate strategy may be to focus on sales, growth or leadership.
For example, a business might implement a corporate strategy to expand its sales to different
markets or consumers. It may also use corporate strategy to prioritize resources. Another
purpose of corporate strategy is to create company value and to motivate employees to work
toward that value or set of goals. Companies use corporate strategies to create and identify
long-term goals aimed toward improvement and success. Understanding what a corporate
strategy is can help you increase overall profits and financial stability for your company

Corporate Strategies:
What are Intensive Growth Strategies?
Intensive growth strategies deal with the development of new products or markets to
accomplish corporate growth objectives. The multinational companies like Humana consider
these strategies to understand how to further penetration into existing markets is possible and
how the customer base can be expanded through the market and/or product development.
Intensive growth strategies help the firms to grow quickly by actively seeking the
product/market expansion opportunities. The unique combination of the three main generic
strategy streams- cost, differentiation and focus set the basis for Humana’s intensive growth
strategies. These growth strategies are depicted into the Ansoff’s product-market expansion
grid, which includes four dimensions- market penetration, product development, market
development and diversification. The choice of each growth strategy is dependent on the
level of competition, target market characteristics and unique organizational growth
objectives.
Aim of Humana to use intensive growth strategies
The broad aim of Humana when considering these strategies is to maximize the profitability
and broaden market share to maintain relevancy and ensure long-term business growth. The
effective implementation of these strategies requires the firm to exert the intensive efforts,
particularly when management considers them as a source of competitive advantage.
The company has adopted a combination of cost leadership, differentiation and focus
strategies to handle the competitive pressure. The customer base expansion and sales growth
objectives are obtained by focusing on most appropriate intensive growth strategies based on
three generic strategy streams (cost, differentiation and focus). The intensive growth
strategies adopted by Humana to achieve growth targets include- market penetration, product
development, market development and diversification.
Cost leadership:
Cost leadership strategy involves gaining a competitive advantage by lowering the cost. Cost
leadership is the main generic strategy that Humana uses in various consumer markets.
How Humana uses a cost leadership strategy?
• The primary objective of using this strategy is to preserve the market leadership
position through efficient value chain management.
• This strategy allows Humana to expand the market share by targeting the middle
class, which makes the largest proportion of overall consumer market mix in most of
the countries. Middle class consumers generally place high importance to the pricing
factor and cost leadership is the best strategy to cater the needs of this consumer
segment.
 • Humana focuses on affordability and easy accessibility of its produce across the
globe, which leads towards high brand awareness and high sales growth and provides
a strong competitive advantage basis.
• Other than charging low prices by lowering production cost and maximizing supply
chain efficiency, Humana frequently offers discounts and coupons to achieve sales
targets and handle the competitive pressure by its closest rival. The intended outcome
of these discount and promotional campaigns is to increase brand popularity and
encourage consumption.
The discussion of Humana’s cost leadership strategy has outlined many benefits offered by
this generic strategy, such as- gaining quick brand recognition, expanding the customer base,
encouraging consumption and achieving sales targets by emphasizing over product’s
affordability and accessibility.
Differentiation:
Differentiation is another most commonly used generic strategy to build a competitive
advantage. Humana uses differentiation in combination with the cost leadership strategy to
achieve growth objectives.
How Humana uses differentiation strategy?
• The adoption of differentiation as a secondary generic strategy allows Humana to
expand the customer base by emphasizing over the unique product features.
• Humana's strategic objective of using this strategy is to differentiate by embedding
the innovation and address the consumers’ growing health concerns. For example,
Humana has extended its product line after studying the consumers’ changing
interests to differentiate itself from competitors and expand the scope of opportunities
within the industry. The combination of the differentiation and cost leadership has
helped Humana build a strong and loyal customer base.
• Through differentiation generic strategy, Humana positions its product offerings in a
way to stand out and be different from the available alternatives. Being the
experienced brand with strong foothold, the company uses differentiation as a tool to
reduce the pressure by other brands. Heavy investment in marketing, advertisement
and celebrity endorsement is made just to differentiate the Humana from other brands.
• Extensive experience, the oldest brand and strong presence in all over the world are
some differentiation factors that are highlighted in the company's marketing and
communication strategies.
• Other than these, the brand logo is also used to set the differentiation basis. The
unique and distinctive brand logo has established a strong brand image in consumers’
mind. Although the brand has undergone many revisions, the essence has remained
the same, which also serves as a strong differentiating factor.
Moreover, the company offers a wide variety of flavors to match the unique taste needs of
consumers. It uses innovation as a tool to offer differentiated augmented services that may
delight the customers and increase their preference of Humana over other brands.
Focus strategy:
Focus is the third generic competitive strategy that encourages companies to concentrate their
resources on expanding the narrowly targeted segments. When companies adopt the focus
strategy, they serve particular market segments and base their competitive advantage on niche
marketing.
How Humana uses focus strategy?
• Humana adopts the focus strategy both in terms of low cost and offering the best
value. The low-cost focus strategy is adopted by serving the needs of a niche market
segment at the lowest possible price.While, best value focus strategy is adopted by
emphasizing over the taste, size and design of the product that could best match the
customers’ needs and requirements.
• By focusing on product attributes, Humana revises its branding strategies and brings
continuous changes in the product designing and packaging to satisfy the customers’
psychological expectations and maximize value for money.

Product Development (Secondary Strategy)

What is the product development strategy?
Product development is the second intensive growth strategy of Ansoff growth matrix.
Humana uses it as a secondary strategy to achieve growth objectives. This strategy involves
the development of new products or modification in the current product lines to make them
new to current customer base. Growth-seeking firms like Humana adopt this strategy when
they found limited growth opportunities in the current market with the current product line.
During the last few years, the intensified competition has induced Humana to bring new
products to targeted market segments. Targeting existing customers with new products
requires comparatively less time, resources and efforts as the company leverage the already
developed brand awareness and customer loyalty.
How Humana applies product development strategy?
• Since its introduction, Humana has considerably extended its product line, and its
product array has become too broad. It allows the company to hedge the risks as it can
compensate the losses incurred from one product line with the gains received from
others. Currently, the organization has more than Competitor product brands being
served all over the world. Product development is an important tool to attract more
customers.
• The strategic objective linked with using this intensive growth strategy is to increase
the research and development investments for innovation and new product
development. Humana’s ability to use the differentiation generic growth strategy
supports the product development process and enhances an organization's ability to
offer novel or new products to achieve growth in existing consumer markets.
• Cost leadership strategy used by Humana also supports this intensive growth strategy
as it allows the organization to minimize the costs and use existing infrastructure to
launch new products. Although the company can use the same resources to extend the
product lines, successful new product development requires Humana to emphasize
research and development and use new technologies required to pursue this strategy.
 • In terms of new product development, three main approaches are available to
Humana.
• First is to offer new products that share a close association with current product lines.
• Second, to offer new products that resonate the purchase behavior of current
customers.
• The third strategy is to develop new products that refresh or reinvent current products.
Humana manages to successfully introduce new products through on-going
assessment of customers' needs

Market Development (Supporting Strategy)

What is a market development strategy?
Market development is the third intensive growth strategy of Ansoff growth matrix. The main
objective of this strategy is to explore and enter new markets.
How Humana applies market development strategy?
• Humana uses market development as a growth strategy that supports market
penetration and product development. The organization has extensively applied this
strategy, and as a result, it is currently present in more than Competitor countries. The
successful entry in new consumer markets has played a key role in making Humana a
global brand. Main reasons behind the worldwide presence are- affordable prices,
strong brand name and flavor. Besides these factors, the successful marketing and
celebrity endorsed promotional campaigns have also helped Humana in capturing new
customers and becoming the market leader in many countries.
• Through on-going investment in research and development, the company
continuously expands the distribution network to reach every corner of the world,
particularly in developing countries where the presence is currently weak. However, a
company is already entered in most of the markets all over the world; market
development now only acts as a supporting strategy and has secondary importance.
• The Humana’s strategic objective of applying this strategy is to expand the value
chain so that it could support the distribution network growth. Humana's ability to
minimize the costs and attain the cost leadership position allows the organization to
apply this intensive growth strategy successfully. The cost minimization supports the
additional investment made by the Humana to enter in new consumer markets.

What is humana famous for?

The company offers fully-insured medical and specialty health insurance benefits, including
vision, dental, other supplemental health benefits and administrative services only (ASO
products) to individuals and employer groups. It also offers health care services for retired
military personnel and their dependents and active duty military personnel and their
dependents

Who started HUMANA?

The company was founded by David A. Jones, Sr. and Wendell Cherry as a nursing home
company in 1961. Then known as Extendicare, the company became the largest nursing
home company in the United States. Extendicare later divested the nursing home chain and
moved into purchasing hospitals in 1972, becoming the world’s largest hospital company in
the 1980s. The corporate name was changed to Humana Inc. in 1974. Humana experienced
growth period in the years that followed, both organically and through the takeover of
American Medicorp Inc. in 1978, which doubled the company’s size. During the mid-1970s,
the company used a fast-track construction process to complete and open one hospital a
month. During this period Humana developed the double corridor model for hospital
construction. This design minimized the distance between patients and nurses by placing
nursing support services in the interior of the building with patient rooms surrounding the
perimeter.

Vertical and Horizontal Integration for Expansion

How Horizontal Integration Works:
It is highly usual for businesses to expand by taking clients from other businesses. This kind
of horizontal integration is used here. In contrast, a business can pursue vertical integration
when doing so will raise profitability through improved operational control. Businesses can
also engage in horizontal integration by acquiring or combining with rival businesses. This is
effective when a business needs to grow its customer base in order to achieve greater
economies of scale and profit. Additionally, buying or merging is done to increase a
company's product or service diversity and lessen marketplace competition. Examples of
horizontal integration are when a major studio business buys a tiny, independent film
production company or when one large hotel chain buys another. Unfortunately, horizontal
integration is not always effective. When the two businesses have complementary consumer
bases and corporate cultures, this technique of growth performs well. If there are issues
integrating the two corporate cultures, a merger may fail even though two businesses sell the
same kind of goods.
How Vertical Integration Works:
Other companies decide to grow by acquiring a firm that plays a crucial role in their supply
chain operation. This include obtaining raw materials, creating products, moving them, and
selling them. The degree to which a company controls its upstream suppliers (backward
integration) and its downstream customers is another definition of vertical integration
(forward integration). Businesses use this in order to secure the materials, points of
distribution, or other elements of the deal required to make or market goods or services at a
cheaper or more stable cost. (For instance, an auction site buying a payment company to get a
piece of the online payment fee revenue stream.) Vertical integration involves synergies,
although they don't always work. Sometimes the quantity requirements between the two
companies are different portion of the supply chain needs to move the product or service
through. Vertical integration also refers to a dedication to a specific business, technology, or
procedure. This may lead to a lack of adaptability as market trends shift.

Global alliance
The new alliance will blend CIGNA's consultative approach and single point of contact for
clients with Humana’s industry-leading group Medicare Advantage products and services and
strong name recognition. Clients will benefit from a simplified management structure,
additional geographic offerings, and a cost-effective solution that addresses the full range of
benefit needs for their employees and retirees. Employees will benefit from CIGNA's health
and wellness programs and award-winning quality and service, and retirees will benefit from
the scale and breadth of Humana’s Medicare offerings. The alliance will address the needs of
employees as they approach retirement by offering a coordinated solution through the
employer.
“CIGNA and Humana are driving innovation through this unique alliance,” added Thomas
Liston, Humana senior vice president of senior products. ”We are excited that CIGNA will be
exclusively supplementing its retiree offerings with Humana’s Medicare Advantage plans,
enabling CIGNA to offer a cost-effective, one-stop solution.”
Humana Competitors and peers
Humana is one of the largest health insurers in the United States by direct premiums written.
Only UnitedHealth Group Inc. and Anthem Inc. wrote a larger volume of premiums in 2019.
Anthem’s revenue is also increasing year-on-year, which suggests that the U.S. health
insurance sector is profitable and will most likely remain so in the near future.
Humana competitors include Anthem, Inc., UnitedHealth Group, Express Scripts, Aetna and
Molina Healthcare. Humana ranks 1st in CEO Score on Comparably vs its competitors. See
below how Humana compares to its competitors with CEO Rankings, Product & Services,
NPS, Pricing, Customer Services, Overall Culture Score, eNPS, Gender and Diversity Scores.

Humana has ranked No. 3 in its industry — Health Care: Insurance and Managed Care — in
Fortune magazine’s 2019 listing of the World’s Best and Most Admired Companies opens
new window. The list is a ranking of the world’s most respected and reputable companies, as
ranked by peers in their industry.
Humana ranked particularly well in the areas of innovation, people management and quality
of products/services. Fortune collaborated with partner Korn Ferry on this survey of
corporate reputation. They began with a universe of about 1,500 candidates: the 1,000 largest
U.S. companies ranked by revenue, along with non-U.S. companies in Fortune’s Global 500
database that have revenues of $10 billion or more. They then winnowed the assortment to
the highest-revenue companies in each industry, a total of 680 in 30 countries. The top-rated
companies were picked from that pool of 680; the executives who voted work at the
companies in that group. To determine the best-regarded companies in 52 industries, Korn
Ferry asked executives, directors, and analysts to rate enterprises in their own industry on
nine criteria, from investment value and quality of management and products to social
responsibility and ability to attract talent. A company’s score must rank in the top half of its
industry survey to be listed.

Humana’s overall business-level strategy

• Humana has segmented its business into two segments: Commercial and
Government. The commercial segment consists of employer groups and individuals.
The government segment consists of sponsored programs of the government.
• Humana Inc.’s target market includes seniors, military members and self-employed
individuals. The retail segment of Humana consists of products and services sold on a
retail basis to individuals such as Medicare etc. The group and speciality segment of
Humana consists of employer groups that are fully insured commercial medical
products.
• Humana Inc has positioned itself differently to different target groups. Military
members, have positioned themselves as high-quality, cost-effective and accessible
health care services for all.
• Humana has a presence on Social Media like Instagram, LinkedIn, Youtube, Twitter
and Facebook. On Facebook, they have more than 400K followers.
• Humana has a free MyHumana app, Humana’s mobile website, which comes up with
lots of features such as personalized information about their health plan, their
member id card information, medical and pharmacy claim status and details etc.
• `Humana has had a strong focus on digital marketing for many years. Humana is very
active on social media. The post content is related to recipes and healthy living tips
and their products, awareness messages, etc. The source of posting content is
Facebook, Instagram, YouTube and Twitter.
In the marketing strategy of Humana, we saw that Humana is gaining love and support from
all the places in the world. The uniqueness of being the third largest health insurance
provider in the nation and the company is ranked 41 on the Fortune 500 list, has lessened the
competition for them. Humana offers a variety of services like pharmacy solutions, clinical
care services, provider services, informatic services etc. Humana provides their products and
services through contracted healthcare providers, direct sales representatives and
telemarketing representatives and licensed brokers and agents. It markets its products and
services through various mediums such as radio, television, telemarketing, direct mail and
the internet. Humana has created a customer base for itself by stepping into the digital era
and has created its social media presence on several platforms. Digital marketing is crucial
since it links a company with its clients when they are online and is effective across all
sectors. It links businesses with ideal consumers through SEO and PPC on Google, social
media marketing, and email marketing.

Business model of Humana

Humana offers a broad range of products and services to customers across multiple
segments. The Company’s customers can principally be organised into the following
categories:
 • Individuals, comprising individual consumers covered under health benefit plans,
notably the Medicaid program, including individuals across multiple demographics;
• Employers, comprising employers and employer groups across multiple business
sectors and industries, including commercial entities, government and public bodies,
and other organisations, such as non-profits; and
• Healthcare Services Customers, comprising certain Humana businesses, as well as
external health plan members, external health plans, and other employers or
individuals.
Humana notably has a contract with the US Department of Defense, under which it provides
administrative services to arrange health care services for the dependents of active-duty
military personnel and for retired military personnel and their dependents. Humana’s core
market is its native US, where its serves customers nationwide. The Company does not
appear to have any significant international operation.

How Humana generates revenue?

Humana generates revenue through the provision of medical insurance coverage and other
related services. The Company principally derives its revenue in the form of regular
insurance premiums paid by its customers, as well as service fees paid on a case-by-case
basis. In 2015 Humana generated total revenue for the year in the amount of $54.29 billion,
up on the $45.96 billion recorded by the Company in 2014. Most of the the Company’s
revenue, around $52.41 billion, came in the form of insurance premiums, with service
revenue totalling $1.41 billion for the year.

Revenue of Humana in the United States from 2008 to 2021(in billion U.S. dollars)
The revenue of Humana increased year-on-year from 2008 to 2021, except in 2017 wen a
slight drop was observed. As of 2021, the total revenue generated by Humana that year
reached a value of over 80 billion U.S. dollars - an increase of around six billion U.S. dollars
from the previous year, and the highest value reached during the time period under
observation.
What are the cost drivers?
Cost drivers are the direct cause of a business expense. A cost driver is any activity that
triggers a cost of something else. An example of this could be how the amount of water your
office uses in a month determines the price of your water bill. The units of water are the cost
drivers, and the water bill is the cost. This concept demonstrates that all activities require the
consumption of resources, and as people complete work activities, there is an associated
resource cost for each activity.
Cost drivers are the direct cause of a business expense. A cost driver is any activity that
triggers a cost of something else. An example of this could be how the amount of water your
office uses in a month determines the price of your water bill. The units of water are the cost
drivers, and the water bill is the cost. This concept demonstrates that all activities require the
consumption of resources, and as people complete work activities, there is an associated
resource cost for each activity.

What about profitability?

Humana annual/quarterly revenue history and growth rate from 2010 to 2022. Revenue can
be defined as the amount of money a company receives from its customers in exchange for
the sales of goods or services. Revenue is the top line item on an income statement from
which all costs and expenses are subtracted to arrive at net income.
• Humana revenue for the quarter ending June 30, 2022 was $23.662B, a 14.61%
increase year-over-year.
• Humana revenue for the twelve months ending June 30, 2022 was $89.383B, a
11.1% increase year-over-year.
• Humana annual revenue for 2021 was $83.064B, a 7.66% increase from 2020.
• Humana annual revenue for 2020 was $77.155B, a 18.9% increase from 2019.
• Humana annual revenue for 2019 was $64.888B, a 14.01% increase from 2018.