Assessing health sector strategies

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Assess the process of crafting a strategy in the health sector as a systematic sequence of activities that begins with an analysis of the external environment

Overview of Health sector:

Healthcare industry is defined as a type of stocks related to healthcare/medical goods and services. The healthcare industry includes Nursing homes, pharmaceutical companies, health insurance companies, bio technology companies, Hospitals, Commercial drug development companies. Due to relatively inelastic demand of health care industry, this industry is less responsive in the negative change of economy. According to economic situations, People need healthcare.



Strategy is scope and direction of an organization over the long term that achieves advantage of the organization through its configuration of available recourses within environmental changes and to fulfil expectations of stakeholders.

The Characteristics of Strategy:

Strategy is concerned with long term direction of an organization.

Strategic decisions are trying to achieve advantage for the organization over competition

Strategic decisions are concerned with the scope of an organization's activities.

Strategy can be seen as the matching of resources and activities of an organization to the environment in which it operates.

The characteristics in above definition of strategy have number of consequences

Decisions of strategy are mostly complex in nature.

Decisions of strategy may be made in uncertainty situations.

For managing the organizations, strategic decisions are demand an approach of integration.

Managing and changing relationships and net works outside the organization.

Levels of strategy:

There are different levels of strategy in the organizations.

Corporate level strategy

Business unit strategy

Operation level strategy

Corporate level strategy:

Corporate level strategy is associated with scope and overall purpose of the organization and how the value will be added to organization strategic business units.

Business unit strategy:

Business unit level strategy is associated with specific market. In this strategy we focus on particular market and see how to compete successfully in those markets. Many companies have different strategic business units. One SBU is different from other SBU.

Operation level strategy:

This strategy is associated with the component parts of the organization effectively deliver the business level strategies and corporate level strategies in provisions of resources, processes, and people.

Strategic Management:

Strategic management includes understanding the strategic position of an organization, strategic choices for the future and turning strategy into action.

Strategic position:

The environment

Expectations and purposes

Resources and competencies

The strategic position is concerned with the impact on strategy of external environment, internal resources and competencies, and the expectations and influence of stakeholders.

Strategic choices:

Corporate level strategies

Business level strategies

Development methods and directions

Strategic choices involve the understanding the underlying bases for future strategy at both corporate business unit levels and the options for developing strategy in terms of both the directions and the methods of development.

Strategy into action:



Managing change

Strategy into action is concerned with ensuring that strategies are working in practice.

For Crafting a strategy in Health sector, there is need to understand the environment internally and externally. External environment has impact on strategy. It can change the strategy directions. Environment has environment variables. Many of these variables will give rise to opportunities and others will exert threats on the organization. This is relating to SWOT analysis. We will go step by step in process of crafting strategy in health sector in following way.

PEST Analysis > porter's five forces > SWOT Analysis > Conclusion

PEST Analysis:

PEST Analysis shows that how can organization affect from the environmental factors and what are most important factors from these factors for the organization at the present time and for the next future years. Every organization sees these factors before making strategy.

PEST framework define in following way

P= Policy and Politics

E= Economics factors

S= Social factors

T= Technological factors

Political Economic factors

Stability of Government Business Cycle

Policy of taxation Trends in GNP

Regulations of foreign Trade Interest rates

Policies for social welfare Money supply



Social factors Technological factors

Demographics of population Research Spending

Distribution of income Technological efforts for industry

Changes in lifestyle New discoveries

Work attitudes and leisure Transfer speed of technology

Education levels Obsolescence rates

PEST Analysis regarding Health Sector

Policy and politics:

Paediatrics, Emergency Surgical, A&E, Maternity services might be challenge within health sector.

Government Policy on primary focus on greater level of caring within health sector.

Government structural changes about local health economies.

Patient Choices policies.

Private Sector entrance in Health Sector.

Differences in policies of health sector according to their One country has different policies about health as compared to other country.

Potential establishment of Public Services.


Organization needs to adopt a strategy that must be based on clear identification and must understandable. Organization should consider quality standards regarding health sector on one hand and community care on other hand. Services provided by Health sector like obstetrics, emergency surgery, A&E, are vulnerable. Customer choices should be consider in making strategy. The above factors can change your strategy so there is need to be consider these factors if the organization want to survive in the health sector. The organization needs to reinvent itself develop and apply strategy that allows to organization to beat above its weight.

Economical Factors:

High capital costs

High labour costs

New technology Cost reduced

Drug and therapeutics costs increasing

Litigation costs increasing


Organization needs to put in place system, structure, and processes to improve cost and productivity. Investment in health sector need to provide maximum return on investments. The cost of poor quality will lead to organization towards loss. There is need to invest in new technology regarding health sector to get competitive advantage over others competitors.

Cost has importance in every business. Strategy can be change due to cost factors. In most countries people do not avail of the hospital facilities because high cost related to it.

Social Factors:

Look after of poor people and their needs. eg %age of beds should be keep for poor people.

Open counselling and reliefs centres

Sanitation and tech hygiene among the poor masses

Spreading of Awareness about diseases

Social mobility

Public expectations

Scattered population

Level of education


Changing in these factors can create change in your organization strategy. For health care strategy there is need to consider all those factors that relate to society.

Technological Factors:

Hospital care complexity

Level of specializations

Hospital information based on computer

Medical records

Decision support system

Information networks for health

Speed of technology transfer

Introduction of new technology E. g Genetic technology

Hard technology E. g New equipment

Soft technology E. g clinical practices and specialization


All the factors have importance but technological factors have greater importance as compared to others. Due to technology, organization can get competitive advantage over competitors. Due to technology new ways of distribution of health information to customers are begins to affect the quality, cost and accessibility of health care. Today technology can support database, communications networks and quick distribution. Hard technology and Soft technology have great impact on health care organization. Health care organization cannot survive without these technologies.

Structural drivers of change:

Structural drivers of change are the forces that affect the structure of an industry, market or sector. These are also called driving forces.

There are different driving forces that can change the structure of health sector. There must be need to consider those forces.

There is an increasing convergence of markets worldwide for a variety of reasons. In some markets, customer needs and preferences are becoming more similar.

There may be cost advantages of global operations.

The activities and policies of governments have also tended to drive the globalisation of health care industry.

Global competition

Five Forces Porter's Model:

The five forces framework helps identify the sources of competition in an industry or sector. Five forces model of Michael Porter is a concept of understanding company's competitive position. Michael Porter is a professor at Harvard Business School and is a leading authority on a competitive strategy and international competitiveness. Michael Porter said that Businesses are influenced by the following Five Forces

Threat of new entrants

Supplier power

Buyer power

Threat of Substitutes

Competitive Rivalry

Threat of new Entrants Supplier power

Time and cost of entry Number of suppliers

Knowledge Size of Supplier

Economies of scale Switching Cost

Cost advantage Unique service

Technology Substitute ability

Buyer power Threat of substitutes

No. of customer Substitute performance

Buying volumes Cost of switching

Differentiation Buyer willingness

Price elasticity


Brand identity

Switching cost

Competitive rivalry

No. of competitors Differentiation

Exit barriers Switching costs

Niche, quality Diversity of competitors

Porter's Five Forces-Healthcare Industry

Overview of Industry:

Healthcare industry is defined as a type of stocks related to healthcare/medical goods and services. The healthcare industry includes Nursing homes, pharmaceutical companies, health insurance companies, bio technology companies, Hospitals, Commercial drug development companies. Due to relatively inelastic demand of health care industry, this industry is less responsive in the negative change of economy. According to economic situations, People need healthcare.

Threat of New Entrants:

The entry barriers into the healthcare industry are mostly high. If we take example of biotechnological industry, the big entry barrier into the industry is initial cash investment. This cash investment relates to Research and Development(R&D). Firm must be willing to take large amount of money that sometimes gives result no return to the firm. For health insurance companies, there is large profits but there are few entrants into market because barriers to entry in health insurance company are regulatory requirements and large initial cash investment. Barrier to entry of hospitals same as health insurance company. Hospital are regulated by Government. These barriers will not allow new hospital to be established and will not allow a hospital to acquire a new technology.

Supplier power:

In Healthcare industry idea for power of supplier is very interesting because healthcare industry consists of different categories of companies in which buyers and seller are interacting within the industry itself. Drug development and Biotech Companies supply medicines to Pharmacies and Hospitals. Hospitals and Pharmacies supply medicines to patients and insurance company as well. The above two companies face suppliers outside of healthcare industry because these suppliers provide the materials, specialized tools, equipment to these companies because company need them to develop their product. These companies have small power over Drug development and Biotech industry.

Drug development and Biotech companies have power of pharmacies because they choose simply and not to supply the drugs because pharmacies sell medicines directly to patients. this not large threat because any prescribed drug that the co. sell must be sold through pharmacy. If the company do not want to sell through pharmacy then it would sell through process. Pharmacies face supplier power. This depends on availability of generic medicine. If the same drug has many generic version then there will be the competition in the market between the companies that are making generic medicines. In this situation pharmacies face less power of supplier and there are many suppliers that are offering same drug at competitive price.

On the other hand if there is one company that is making medicine and supplying to pharmacies then this company charge high price. In this situation company has a monopoly. Hospitals face little bit supplier power because companies produce Healthcare equipment can chose not to sell their equipment. This is not a big threat because there are many companies available in market that are producing healthcare equipment. Supplier power has also effect on insurance industry. If the physicians do not choose to join the network of insurance company, then people avoid purchasing the insurance of that company. It means insurance industry faces supplier power.

Buyer Power:

Healthcare industry does not affected by a power of buyer if we see this industry as a whole. Healthcare Industry consists of companies that are providing healthcare services to the people. In healthcare industry there is no effect on the choice of buyers because people consume health care services even that whether the economy good or bad or medicines prices are high or low. It does not matter that if the people poor or rich. In both cases people consume them.

Substitutes Availability:

Substitute's availability within the healthcare industry varies. Generally No substitutes within the healthcare industry if we see as a whole. You cannot get special healthcare services other than the healthcare industry. Some and more specialized places you can go but those are few and small enough so that we can ignore them for our purpose.

Pharmaceutical company's face substitute for their produced medicine specially when patents of these companies expire. The company has monopoly to sell their drug due to effective patents and these companies have a great deal of power. When patents of these companies expire, they lose their monopoly and many company produce a generic drugs and these companies charge less rate because they did not have to pay initial cost of R & D. Hospitals and insurance industry have no substitutes.

Competitive rivalry:

In healthcare industry the competitive rivalry is very intensive. Intensive competitive rivalries mostly in insurance industry and in biotech discover. There is competition between the pharmaceutical companies because these companies want to take competitive advantage over their competitors and they want to make a such drug that can treat to disease. Many companies invest huge money into R & D but only one company will take benefit if it produce new drug that can treat to disease firstly in the market then company can get more profit from drug.

Rivalry in insurance industry is intensive because people do not want buy more than one insurance policy. Many large companies buy insurance policies from insurance company for the purpose to provide health care to their employees. Large insurance companies must compete the business of large companies.

There are not many hospitals in a particular area so hospitals face less rivalry of competition. If anyone is sick, he will go to the nearest hospitals. No price competition between hospital therefore less competitive rivalries.

SWOT Analysis:

SWOT analysis stand for Strengths, Weaknesses, Opportunities, and Threats. Strengths and Weaknesses come from internally and Opportunities and Threats come from externally. SWOT analysis is necessary at least once in a year to evaluate and analyse the influences on strategy of the company.

The benefits of a SWOT analysis are that it provides learning and knowledge vital to the

organization's survival and prosperity. And other outcome of the SWOT analysis which is

becoming extremely important is an understanding of company's boundaries and the

development of boundary spanning skills and insight to help navigate the changing

environment. It assesses the capabilities against rivals and judged during implementation

stage of strategy

Strengths: List your capabilities and resources that can be base your competitive advantage.

Weaknesses: Weakness can absence of the strength. Weakness may be reverse of your


Opportunities: Which opportunities are available in the market and how can we succeed.

Threats: Threats are harmful for company. We see what our threats are and how can we

minimize them and can a threat become our opportunity.

SWOT Analysis of Healthcare industry:

SWOT analysis is helpful for hospitals and medical companies. SWOT analysis help to maximize the value and generate effective strategies for the company.


Innovative service

Modern Hospital environment

Skilled and experienced management team

Extraordinary reputation

Special expertise

Cost advantages

Geographic advantages

Reporting and decentralization of decision making

Supportive local media


Absence of marketing plan

Damaged reputation

Gaps in capabilities

Lagging in technology

Staff problems

Geographic barriers

Undifferentiated service lines

Structure that is not fit for purpose

Systems and processes that is not fit for purpose

Poor track records

Inconsistency in service quality

Lack of clear quality

Poor standard of customers care


Availability of new technology

Changes in population profile

Lack of dominant competition

New market segment that offer good profit

New market

Captured increased percentage of market


Generic products

Cost pressures

Patient choices

Competitor has innovative service

New competitors

Expiration of company patent

Regulations changes

Economic shifts

New competition

Shifts in market demand


Environment analysis is important in assessing the process of crafting strategy in Healthcare sector because environment has impact on strategy. The organization exists in the context of a complex commercial, political economic, social, technological, environmental and legal world. This environment changes and is more complex for some organizations than for others. How this affects the organization strategy could include an understanding of historical and effects, as well as expected or potential changes in environmental variables. Many of those variables give rise to opportunities and others will exert threats on the organization strategy. That's why analysis of environment is important to make strategy. SWOT analysis is useful for hospitals, medicals group. Through SWOT analysis we list that what are strengths, weaknesses health sector have and what are opportunities and what are threats it can face. After environmental and SWOT analysis we can make effective strategy for health sector.