Health sector strategies notice

HEALTH SECTOR
STRATEGIES
Ms Rogate Phinias Ibrahim
Email: rophinias@mzumbe.ac.tz
Department of Health System Management
School of Public Administration and Management
(SoPAM)
Mzumbe University
@2018
rophinias@mzumbe.ac.tz 1

STRATEGIC ANALYSIS
IN THE HEALTH
SECTOR

Introductory part
• Strategic Management- Is the process
of managing an organization by using
the available resources efficiently and
effectively in order to attain
organizational goals.
• Stages of SM
i. Situational Analysis
ii. Strategic Formulation
iii. Strategic Implementation
iv. Strategic Controlling

SITUATION ANALYSIS
The process of fitting an organisation
with the environment. It requires:
• to conduct internal environment- to
identify strengths and weaknesses
• To conduct external environment- to
identify opportunities and threats.
• This exercise is briefly called SWOT
analysis

SWOT ANALYSIS
SWOT Analysis- Is an examination of
organization’s internal and external
environment to determine strengths and
weaknesses of the organization,
opportunities and threats present in the
external environment.
SWOT Analysis involves the collection and
portrayal of information about internal
and external factors which have or may
have an impact on the business.

• Strengths- Things that an organization is good at or
possesses. Eg in the HCO(hospital) strengths can be,
location, skilled and expertise medical staffs, patient
centered care, cost effectiveness, well equipped operational
rooms, specialists etc.
• Weakness- Represent what organization lacks- does not
posses Or what organization does poorly (but should do
better) Or does not do (but should do). These are the Areas
Needing Improvement. Eg. In the HCO (hospital) weakness
can be patient waiting time, lack of skilled personnel, poor
finances etc.
• Opportunities- Favorable situations to the organization
which may positively affect the organization. Eg. In the
HCO (hospital) can be ease of public transportation to the
HCO (hospital), well known HCO (hospital) with good
relationship, ability to expand in HCO (hospital)
departments and health care etc.
• Threats- Unfavorable situations to the organization which
may negatively affect the organization. Eg. In the HCO
(hospital) can be the presence of other HCO (hospital)s
nearby, the competitor accepts most insurance, more
efficient independent laboratories etc.

Why SWOT analysis?
• Situations are not always the same
• Strategies are not ubiquitously (ever-present) suitable
• Situational variables are key in determining suitability
of strategy
What is needed?
• To correctly understand the environment in which
organizational strategy are applied (internal and
external)
• Adequately informed environmental analysis must be
performed
• To synthesize insights obtained from an internal
analysis of organizational strengths and weakness with
those from external analysis
• Creating strong ‘fits’ between strategies and
-Organizational realities
-Environmental realities

TECHNQUES OF ENVIRONMENTAL/SWOT
ANALYSIS
1. TREND IDENTIFICATION AND EXTRAPOLATION
2. SOLICITATION OF EXPERT OPINION
2.1 THE DELPHI TECHNIQUE
2.2 NOMINAL GROUP TECHNIQUE
2.3 DIALECTIC GROUP TECHNIQUE
3. PORTER’S INDUSTRY STRUCTURE ANALYSIS (PISA)
4. SCENARIO WRITING
5. CRITICAL SUCCESS FACTOR ANALYSIS
6. STAKEHOLDER ANALYSIS
7. SERVICE AREA STRUCTURE ANALYSIS (SASA)

TECHNQUES OF ENVIRONMENTAL
ANALYSIS
Solicitation of Expert Opinion
• Opinions of experts are used to sharpen the strategic
thinking of leaders.
• Can take a formal process
• Can take informal process
2.1 The Delphi technique
Involves:
– Identify relevant experts
– Solicitation of ideas from individual experts
– Synthesis of individual ideas and opinions
– Summary sent back to participants for development of
further ideas about the subject and receive the new ideas
– Process repeated until consensus reached

TECHNQUES OF ENVIRONMENTAL
ANALYSIS
2.2 Nominal group technique
– Group is convened
– Each individual generates ideas
– Group members take turns to present (no evaluation)
– After all ideas have been presented discussion follows
– Rating is then given individually, shared and more rating
continues accordingly
2.3 Brainstorming
• Group is convened
• Group members present ideas (no evaluation)
• Then ideas are discussed and evaluated
• Best idea is selected
2.4 The Dialectic inquiry
– Is a thesis and antithesis technique
– It is a point and counter point technique
– An intellectual exchange dialogue
– It is a debate process

SERVICE AREA STRUCTURE
ANALYSIS (SASA)
FORCES DRIVING INDUSTRY COMPETITION
Potential
Entrants
Suppliers Buyers
Substitutes
Threat
Of New
Entrants
Threat
Substitute
Products or
Services
Bargaining
Power
of Suppliers
Bargaining
Power
of Buyers
Industry
Competitors
Rivalry
Among
Existing Firms
___________
Source: Reprinted with permission of The Free Press, a division of
Macmillan, Inc. from Competitive Strategy: Techniques for Analyzing
Industries and Competitors by Michael E. Porter © 1980 by The Free
Press

• SASA suggests that, there are 5 forces that
drive an industry competition:-
- Potential entrants to the industry
- The Suppliers
- The Buyers
- Available substitutes
-Rivalry among existing business
organizations
Potential Entrants- In HCOs, anybody who
wants to come in and provide health service
are potential entrants to the industry. Every
new entrant is a threat to the existing
industry.
Industry Competitor- The existing health
care provider lets say at Changarawe are the
Industrial competitors, they compose
competition in Changarawe village.

Suppliers- These have great influence to the
industry since they have a power of
bargaining upon the industry service whether
to supply your service or not. They are strong
if they are few, with few substitutes/product
Buyers- Their bargaining power relies on the
price, they like low price. They are powerful if
they purchase large volume.
Substitutes- Is the commodity that the client
may replace with the other products.
Substitute goods limit returns to an industry
because at some point consumers will switch
to alternative product or service.

Qn: What are factors that will influence potential
entrants to go to the particular industry?
-Easy entry into the industry more new entrants
-More new entrants more threats
-Less new entrants less threats
Note: New entrants might be an opportunity. How?
Because,
 New entrants might come with new technology
and the existing industry may copy from them
and do wonderful things.
 Also they may come with good things like new
customer care style so the existing one can adopt
it.
 They can also change your mindset

• When is entry easy?
– Common technology
– Little brand franchise/licence/authorization
– Access to distribution channels-If you don’t have the
channel of distribution it will be easy for new entrants
– Low scale threshold-minimum capital of entering
service area
– Loose legislation-when the laws of the land are not
strict, many entrants will find the way
Smooth registration procedures
Bargaining power of suppliers
• When is it strong? What is the impact?
• When is it weak? What is the impact?
Bargaining power of buyers
• When is it strong? What is the impact?
• When is it weak? What is the impact?

STAKEHOLDER ANALYSIS
Stakeholders- Are those people who have stake in the
success of the organization.
Internal - operate within the
system/subsystem/organization eg manager, other
employees etc
Interface – function both internal and externally (the
doctors, outsourced staff) eg medical staff,
corporate officer of the parent company etc
External - operate outside the system/subsystem or
organization eg suppliers, competitors,
media, regulatory agencies, community etc

STAKEHOLDER ANALYSIS
The process of stakeholder analysis
culminate at stakeholder mapping
• Who are they?
• What services are they providing?
• How best are they providing the
services?
• Where are they providing the services?
• Can they provide other services as well?
• How else can we use them?

SCENARIO WRITING
• Is a detailed and plausible view of how the
business environment of an organization
develop in future.
• A coherent story about the future using the
world of today as a starting point
• Views are based on the data collected the
SWOT analysis
• Requires making careful assumptions
• It gives a complete picture of the future
• It is quietly difficult to write as always a
question is what to include in the scenario.

STRATEGIES
FORMULATION
PRACTICAL STRATEGIC
PLANNING
with
Worked out examples

STRATEGIES FORMULATION
Forming strategies involve five logical stages
1. Forming Directional strategies-Establish vision,
mission, goals, objectives and values of an
organization.
2. Forming adaptive strategies- Identify, evaluate
and select ways to accomplish vision, mission,
objectives, goals and values.
3. Forming Implementation strategies- Identify,
evaluate and select ways to enter in the market
4. Forming Positioning strategies- Identify, evaluate
and select ways how consumer will see your
products
5. Forming Operational strategies-Putting things
into order. rophinias@mzumbe.ac.tz 20

1.Directional Strategies
• Directional strategies are formed when
the organization is new or confirmed if
an organization exists.
• Directional strategies are represented
by vision, mission, values, objectives,
and goals of an organization.
• Vision and mission may change
depending on the situation.

VISION
• Vision is a dreamed image for the future of
the organization. It is an expression of hope
for the future of an organization.
• It is imaginary and kind of fantasizing
(dreaming)
• Key question might be; What do we want to
be in the future?
Features of Vision
 It is futuristic
 It can be time bound
 It honors the past
 It provides people with sense of direction
 It is about excellence

• Common phrases for vision statements;-
 To be
 To become
 Becoming
 To have
 Having
Example 1: Vision of Mzumbe University
To be a leading institution in Africa for demand driven
knowledge generation, application, preservation and
dissemination for socio-economic development by 2025
Example 2: Vision of the MoH
To be the centre of excellence in promoting communities’ pro-
activeness, confidence, commitment and culture of hard
working in striving for better livelihood embracing gender
equality and children’s rights.

Mission
• Mission is the statement of organization reasons for
existence.
• It describes the purpose of all the organizations in the
service category.
• The fundamental question; Why do we exist as an
organization?
• Features of Mission statement
 It is not changing easily
 It distinguishes the organization from other
organizations
 It should identify the scope of operations in terms of
service and market.
Example: Mission of Mzumbe University
To provide opportunities for acquisition development,
preservation and dissemination of knowledge and skills
through training, technical and professional services.

Core values
• Core values are fundamental
principles of an organization.
• They are about ethical behavior to
which all members collectively aspire.
{ goals, objectives and targets to be
discussed later}

2. Adaptive Strategies
• AS outline the major strategic emphasis for a
health care system to accomplish directional
strategies.
• They are formulated after the directional strategies.
They are more specific than the former.
• They are decisions or choices whether an
organization should expand, contract or
stabilize/maintain ie. Expansion strategies,
contraction strategies or stabilization strategies
respectively.
i) Expansion strategies are Diversification, Vertical
integration, Market development, Product
development and penetration

a)Diversification- Adding new products or services
to the existing ones.
Why diversification?
–Not achieving revenue objectives
–Not achieving growth objectives
They are two types of Diversification
- Related and Unrelated diversification
Related Diversification-The HCO chooses to enter a
market that is similar or related to its present
operations. Eg. Opening pharmaceutical shop,
starting a health insurance scheme, making
artificial limbs etc
Unrelated Diversification-The HCO enters a market
that is unlike its present operations. Eg. Opening
a shopping center, restaurant, gymnasium etc

b) Vertical Integration- The HCO may decide to
grow/expand along all the channels of distribution.
• Growth can be upward (upstream vertical
integration) or downward (downstream vertical
integration)
• Upward growth is intended to bring clients/patients
into the HCO (hospital) through its suppliers ie.
movement to the supplier side eg. Referral HCO
(hospital)- building clinics in the community etc
• Downward growth intends to capture clients who
exit the HCO (hospital) (grow towards
customers/patients) Eg. Rehabilitation unit
• UG captures patients who enter the HCO whereas
DG captures patients who exit the HCO

c)Market development-Is a strategy used to enter new
market with new product or service. It is used when
HCO is fairly strong in the market.
Example; Opening new clinic or health center in a new
geographical area (Present service in a new
geographical area)
d)Product development-Is a strategy used to introduce
new product/service to present market/geographical
area. Example; a HCO (hospital) can open clinic
designed to serve the special needs of women in the
present area
e)Penetration-A strategy used to serve the present
market with present products/services. It is
implemented by increasing marketing strategies such
as promotions, increasing advertisements, increasing
the number of sales etc.

ii. Contraction strategies include divestiture, liquidation,
harvesting and retrenchment.
a)Divestiture-Is a strategy whereby the HCO permanently
or completely leaves the market despite its current
viability. Example; changing a HCO to be a hotel. A key
reason for divestiture is financial underperformance and
lack of strategic fit.
b)Liquidation-Is a strategic choice where the HCO sells its
assets either partially or completely. However, such
assets still have value and may be sold for other uses.
Example; an old HCO building may be sold for an
alternative use.
c)Harvesting-Is a strategy chosen when the market has
entered long term decline. The HCO attempts to reap
maximum short term benefit before the service/product is
eliminated
d)Retrenchment-Is a strategy directed towards reduction of
personnel, the range of service/product or the
geographical market served in response to declining
profitability and increased costs of the HCO.rophinias@mzumbe.ac.tz 30

iii. Maintenance strategies include
enhancement strategy and status quo
strategy.
a)Enhancement- This is applied when the
HCO believes that expansion or
contraction of operations is not appropriate
but something needs to be done. It
focuses on quality (TQM), innovations,
efficiency and speed of the HCO.
b)Status quo-This strategy aims on
maintaining services at current levels with
assumption that the market has matured
and periods of high growth is over.

3.Market Entry/Implementation
strategies
These strategies are used by the HCO to enter into the market
when expansion strategies had used unlike contraction
strategies. There are three ways to enter in the market ie.
Purchase, Cooperation and development.
i. Purchase- Allow the HCO to use its financial resources to
enter a market quickly. It includes acquisition, licensing and
venture capita investment.
a)Acquisition-Are entry strategies to grow through the purchase
of an existing organization, a unit or product/service of an
organization.
b)Licensing-Acquiring a technology or product through licensing
avoids the risks of technology development and may be
viewed as an alternative to acquiring a complete company.
License agreement provides rapid access to proven
technologies and reduces the financial risk of the HCO.rophinias@mzumbe.ac.tz 32

c)Venture capital investment- Offer an opportunity to
enter a market while keeping risks low by making
minor investment in young and growing
enterprises
ii. Cooperation strategies include mergers, alliances
and joint venture.
a)Mergers- Two organizations (HCOs) combine
through mutual agreement to form a single
organization often with a new name. Reasons may
be eliminating competitors, increase market share
and profitability.
b)Alliances-Formation of a formal partnership
c)Joint venture-Combination of resources of two or
more organization to accomplish a designated
task.
iii. Development-The HCO enters a market by using
internal resources. Development includes internal
development and internal venture.rophinias@mzumbe.ac.tz 33

4. Positioning Strategies
• Positioning strategies focus on ways of making
products/services of a HCO more visible and appealing to
customers vis-a-vis competitors’ products/services.
• There are three generic positioning strategies such as Cost
leadership, differentiation strategies and focus
differentiation
a)Cost leadership- Provides products/services at lower cost
than that of competitors’
b)Differentiation- Strategy to make products/services appear
different from those of competitors. Thus a product/service
is seen by all clients/patients unique among a group of
competing products/services.
c)Focus Differentiation-Make product or service different or
unique for a selected market segment
.

STRATEGIC
IMPLEMENTATION
PRACTICAL STRATEGIC
PLANNING
with
Worked out examples

Evaluation of Alternative
Strategies
• Methods of evaluating Alternative
strategies:-
1. SWOT matrix
2. Product Life Cycle (PLC) analysis
3. Portfolio matrix analysis

1. SWOT MATRIX
Internal/Ext
ernal
Strength Weakness
Opportunity 4. FUTURE QUARDRANT 2. INTERNAL FIX IT
QUARDRANT
Threat 3. EXTERNAL FIX IT
QUARDRANT
1. SURVIVAL QUARDRANT

1. Survival Quadrant (Q1)
 Suppose you have weak HCO then surrounded
by many threats what will you do? ie. HCO is
internally weak and facing a lot of external
threats.
 Strategies applied are unrelated diversification,
divestiture, liquidation, harvesting and
retrenchment.
2. Internal Fix It Quadrant (Q2)
 Your HCO is so weak but surrounded by several
opportunities, what will you do?
 Strategies employed are retrenchment,
enhancement, market development, product
development, vertical integration and related
diversification. rophinias@mzumbe.ac.tz 38

3. External Fix It Quadrant (Q3)
Your HCO have much strengths but attacked
by a lot of threats what will you do?
Strategies to be employed are related
diversification, unrelated diversification,
market development, product development,
enhancement and status quo.
4. Future Quadrant (Q4)
The HCO is internally strong and the external
environment is offering lots of opportunities.
Strategies to be applied are related
diversification, vertical integration, market
development, product development and
penetration.

CASE 1
A private investor in Mvomero District Council owns a geriatric
home. The geriatric home which is located at Mzumbe is a
unskilled establishment, has weak management, has unsound
financial resources but enjoys client loyalty. In the past five
years it has been attracting clients from other districts in
Morogoro region. Rumours are circulating from regional
administration that a powerful new investor is seriously
planning to enter this seemingly lucrative service area. The
current investor is scared of the ensuing fierce competition.
Required
a)Prepare a SWOT analysis quadrant and plot the position of the
scenario given above.
b)Suggest three strategies appropriate for the private investor
described in the situation.

2. PRODUCT LIFE CYCLE
ANALYSIS
• This method is based on the principle that all
products/services go through several distinct phases/stages.
The PLC is used to map the life span of the product/service.
• There are 4 stages of PLC;-
i. Introductory stage-This is the first stage in which the
product/service is initially promoted. Public awareness is
very important to the success of the product.
ii. Growth stage-Here is where the HCO service/product starts
to grow. A lot of money is spent on advertising. You
concentrate on telling consumers how much better your
product/service is than your competitors’ product.
iii. Maturity stage-During this stage, sales grow at a very fast
rate and then gradually begin to stabilize.
iv. Decline stage-Is the stage in which sales of HCO
product/service begin to fall.

CASE 2
In Ifakara, a project to distribute Misoprostol
drug is about to begin and people have to
use them, many women have died but
they fear to use the drugs.
Required: Analyze this case using the PLC
method paying special attention to what
will happen with the following items; The
costs of the project, the utilization of
misoprostol, excessive bleeding after
childbirth.

3. PORTIFOLIO ANALYSIS
• Analyzes the position of the health care product/service in terms of
-Market share and
-Rate of market growth
 Relative Market Share- Defines as a ratio of a product/service unit to
the market share held by the largest revival or leading provider of
the product/service. RMS can be high. Medium or low. Example,
discuss the care of Inpatient and Outpatient service in the HCO- You
need to compare the IP and OP services all the year and then find a
ratio.
 Market Growth Rate- This is usually measured by changes in the
level of gross services revenue or growth in service utilization. eg,
number of admissions, inpatient days, bed occupancy rate etc. MGR
can be high, medium or low.
 On the RMS, one can compare his health organization against the
largest health provider but on the MGR one review his own
product/service within the time period.

Evaluation Of Market Entry
Strategies
-
Rapid
entry
High
control
desire
Slow
entry
Low
control
desire

• Rapid entry with high desire of control
-Joint venture
-Alliance
• Rapid entry with low desire of control
-Licensing
-Acquisition
-Mergers
-Capital venture
• Slow entry with high desire of control
-Internal venture
-Internal development
• Slow entry with low desire of control
-Investment

CASE 3
Two health care organizations have competed for the same market for
many years. Every organization has been trying hard to create and
maintain superior performance over the other. For that matter each
organization has seriously attempted to develop alternative
strategies to gain competitive advantage over the other. Indeed, the
competition has always been stiffening without any of them
achieving superior performance over the other. Then an emerging
market was identified. For this reason each organization was
carefully thinking about how to enter the market smartly bearing in
mind their market entry objectives were very unique, as shown
below;
Organization A was cautious. Its objectives were to enter the market
slowly but with a less desire for control of the market.
Organization B did not want to waste time. Its objectives were to enter
the market quickly with high desire for market control.
Required:- Identify only two market entry strategies for each
organization and plot them in the market entry matrix drawn on page
45.

Health sector strategies notice

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