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The Healthcare NonProfit
Ecosystem:
Internal & External
Forces Shaping Strategy
Dr. Lior Naamati-
Schneider
Introduction to Environmental
Analysis in Healthcare Non-Profits
Why Does Environmental Analysis Matter?.
Healthcare non-profits operate in a dynamic environment
influenced by internal and external factors.
Strategic decision-making relies on understanding financial
models, regulations, competition, and socio-economic trends.
A well-executed environmental analysis helps
organizations adapt, sustain operations, and maximize
impact.
CHANGINGENVIRONMENT
Demographic changes
Economical changes
Lifestyle changes
Technological changes
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VUCA world
VUCA describing a frameworkfor understanding dynamic,
unpredictable environments where rapid changes, interconnected
factors, and unclear information shape decision-making and
strategic planning.
In healthcare,VUCA highlights the need for leadersto develop
adaptable and resilient strategiesto manage rapid advancements,
multifacetedchallenges,and shifting patient and system needs.
Volatility
The rate at which things change
and the speed of change
Uncertainty
The lack of predictability and the
degree to which the outcome of a
situation is unknown
Complexity
The number of variables involved
in a situation, the interconnections
between them, and the difficulty
of understanding them
Ambiguity
The lack of clarity and multiple
interpretations of a situation
The world is changing rapidly, leading to significant
transformations in health systemsglobally. Economic pressures,
demographic shifts, and technological advancements, along with
global trends and extreme crises, create a complex and turbulent
ecosystemthat healthcare systems must adapt to and thrive
within.
TheHealthcareMarket–
AUniqueEcosystem
What makes the healthcare
non-profit market different?
Essential Service – Healthcare is a basic need, unlike
other markets.
Government Regulation – Strong public sector
involvement impacts operations.
Complex Funding Models – Reliance on donations,
government funding, insurance, and patient fees.
Ethical & Social Impact – Decisions prioritize public
health over profit
TheHealthcareMarket–
AUniqueEcosystem
Competitive Pressures in Healthcare Non-
Profits
Other hospitals, clinics, and private healthcare
providers.
Government policies impacting healthcare access.
High-tech and biotech industries influencing medical
innovations.
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Financial Models & Revenue Sources
How Do Healthcare Non-Profits Sustain Operations?
A diverse funding
strategy reduces financial
vulnerability.
Organizations must balance
cost-effectiveness with service
quality.
Government Funding – Public healthcare funds, grants, and subsidies.
Insurance Reimbursements – Payments from HMOs and private insurers.
Philanthropy & Donations – Charitable contributions from individuals and
organizations.
Service-Based Revenue – Patient fees and healthcare programs.
Internal and external factors determine an
organization's ability to achieve its mission.
Strategic planning relies on a deep
understanding of both internal capabilities and
external pressures.
Healthcare non-profits must adapt their
strategies to changing environments to ensure
long-term sustainability.
Why is Environmental
Analysis Crucial for Strategy?
The Connection Between Internal & External Analysis and Strategy
Environmental Factor Impact on Strategy
Internal Strengths
Build competitiveadvantage by leveraging expertise,
technology, or partnerships.
Internal Weaknesses
Identify and address gaps in funding, resources, or
infrastructure.
External
Opportunities
Develop growth strategies by capitalizingon funding,
partnerships, or new healthcare trends.
External Threats
Create risk management plans to mitigate policy shifts,
economic downturns, or technological disruptions.
Example:
•Internal Weakness → Staff shortage → Strategy → Develop volunteer training
programs.
•External Opportunity → Advances in digital health technology → Strategy→
Implement telemedicine services to expand patient reach and improve accessibility.
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STRATEGIC MANAGEMENT
❑Managerial process that involves developing the goals, and
resources of the organization
❑The goals of strategic planning are to redesign the organization and
its products in a way that will fulfil its profit and growth goals
❑Previous studies have found that strategic management of nonprofit
organizations contributes to their survivability and improves
their performance
Strategic management is often described as involving two major
processes: formulation and implementation of strategy
❑ Formulation of strategy involves analyzing the
environment in which the organization operates
❑ Making a series of strategic decisions about how
the organization will compete
❑ Formulation ends with a series of goals or
objectives and measures for the organization to
pursue
STRATEGIC MANAGEMENT- FORMULATION
Environmental analysis includes the:
❑ Remote external environment, including the political, economic,
social, technological, legal and environmental landscape
❑ Industry environment, such as the competitive behavior of rival
organizations, the bargaining power of buyers/customers and
suppliers, threats (Porter's 5 forces)
❑ Internal environment, regarding the strengths and weaknesses of the
organization's resources (i.e., its people, processes and IT systems)]
STRATEGIC MANAGEMENT- FORMULATION
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Strategic decisions responses to strategic questions about how the organization will compete,
such as:
• What is the organization's business?
• Who is the target customer for the organization's products and services?
• Which businesses, products and services should be included or excluded from the portfolio
of offerings?
• What is the geographic scope of the business?
• What are the important opportunities and risks for the organization?
• How can the firm generate more value for investors
STRATEGIC MANAGEMENT- FORMULATION
Implementation results in how the organization's resources are structured (such as by
product or service or geography), leadership arrangements, communication, incentives,
and monitoring mechanisms to track progress towards objectives, among others
STRATEGIC MANAGEMENT-
IMPLEMENTATION
The implementation stage involves decisions
regarding how the organization's resources
(i.e., people, process and IT systems) will be
aligned and mobilized towards the objectives
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What is a Strategy Pyramid?
The strategy pyramid is a framework that helps organizations align
their actions with their overall vision and mission.
The pyramid starts with the vision and mission at the top, which
provide a clear and overarching direction for the organization. The
next level is values, the guiding principles that shape the
organization's culture and behavior.
Why use the Strategy Pyramidfor StrategicPlanning?
The Strategy Pyramid is helpful for strategic planning because
it visually organizes and prioritizes different aspects of a plan.
It helps to break down the overall strategy into smaller, more
manageablecomponents, making it easier to implement and
measure progress.
KEY
TAKEAWAYS
❑ Healthcare market is increasingly adopting
competitive business practices- At one
level or another
❑ Hospitalsare becoming more:
✓ client-oriented organizations
✓ business- oriented organization
Healthcare Non-Profits Operate in a Complex
Ecosystem
Environmental Analysis is Essential for
Strategy
Strategic planning development processes
have been inculcated in hospitals over the
past decade.
S W O T
What advantages
does the
organization have?.
Strengths-Internal
What external
factors could benefit
the organization?.
Opportunities-External
What challenges or
gaps exist within
the organization?
Weaknesses-Internal
What external risks
could negatively
impact operations?.
Threats-External
SWOT
ANALYSIS
SWOT analysis is a strategic
planning tool used to
evaluate an organization's
internal strengths and
weaknesses and external
opportunities and threats.
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SWOT
ANALYSIS
Informs strategic decision-making to maximize strengths and opportunities.
Identifies areas for improvement to address weaknesses and mitigate threats.
Helps align mission and vision with real-world challenges and resources.
Why is SWOT Important?
Key Internal Factors in Healthcare Non-Profits:
Human Resources – Medical staff, volunteers, board members.
Infrastructure – Hospitals, clinics, medical equipment, IT systems.
Financial Stability – Access to consistent funding sources.
Operational Efficiency – Processes, governance, and leadership.
Internal Strengths & Weaknesses:
Strengths: Skilled workforce, strong donor base, advanced technology.
Weaknesses: Staff shortages, outdated systems, financial instability.
S W
O T
Internal Factors: Strengths And Weaknesses (S, W)
S W
O T
Key External Forces Impacting Healthcare Non-Profits:
Government & Policy Changes – Regulations affecting funding and service
delivery.
Market Competition – Private hospitals, pharmaceutical companies, and
telemedicine providers.
Economic Conditions – Inflation, healthcare costs, donor willingness to
contribute.
Technological Advancements – Digital health, AI in diagnostics, remote care
solutions.
External Opportunities & Threats:
Opportunities: New funding sources, partnerships, telemedicine adoption.
Threats: Policy shifts, donor fatigue, economic downturns.
External Factors: Opportunities And Threats (O, T)
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SWOT Analysis Framework for Healthcare Non-Profits
Examples for HealthcareNon-ProfitsKey QuestionsCategory
Strong donor network, skilled medical
professionals, advanced healthcare technology.
What are our internal
advantages?
Strengths
Limited funding, outdated infrastructure, staff
shortages.
What internal challenges do we
face?
Weaknesses
Government healthcare grants, new
partnerships, technological advancements
(telemedicine, AI).
What external factors can we
leverage?
Opportunities
Policy changes, donor fatigue, increasing
competition from private healthcare providers.
What external risks do we need
to mitigate?
Threats
Porter’s Five Forces
Potential
New Entry
BuyersSuppliers
Substitutes
Competitive
Rivalry
Bargaining power of
suppliers
Threat from
substitution
products and/or
services
Threat from
New Entrants
Bargaining power of
customers (buyers)
✓ The model determines the
level of coemption
✓ It works at the “industry”
level, not at the
organization level
✓ It attempts to define
attractive and unattractive
industries in terms of
“profitability”
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Porter’s Five Forces
Threat from New Entrants
Time and cost of entry
Specialist knowledge
Economies of scale
Cost advantages
Technology protection
Barriers to entry
▪ The key question here is whether another
company could very easily offer the same
product and enter the market.
▪ The things which stop new companies from
entering a market are referred to as barriers to
entry
Porter’s Five Forces
Bargaining power of customers (buyers)
Number of customer's
Size of each order
Difference between competitors
Price sensitivity
Ability to substitute
Cost of changing
Buyers mainly influence the profitability through their
ability to lower prices
In general, buyers who meet the following conditions
have strong bargaining power:
✓ The total number of buyers is small, and each buyer
purchases a large amount and accounts for a large
percentage of the seller’s sales
✓ The seller’s industry consists of a large number of
relatively small companies
Porter’s Five Forces
Threat from substitution products and/or services
Substitute performance
Cost of change
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Porter’s Five Forces
Bargaining power of suppliers
Number of suppliers
Size of suppliers
Uniqueness of service
Your ability to substitute
Cost of changing
Suppliers can exert bargaining power on
by raising prices or reducing the quality
of purchased goods and services
A supplier group is powerful if:
✓ It is dominated by a few companies
✓ Its product is unique or at least
differentiated
Buyer
Power
Threat of
Substitution
Supplier
Power
Threat of New
Entry
Porter’s 5 forces model - Overview
Threat of Substitutes
The more substitutes available, the
less power the firm has to increase
their prices.
Bargaining power of
suppliers
How easily can suppliers for the
company change prices of their
inputs, as well as if the company
can easily switch suppliers if
needed
Threat of Substitutes
The more substitutes available, the
less power the firm has to increase
their prices.
Bargaining power of
customers
The ability of customers to go to
competitors or otherwise force the
firm to reduce their prices in some
ways
.
Number of competitors
and their threat to the
firm. Higher rivalry = less
firm power
Competitive
Rivalry
Porter’s five-force analysis model has a global and profound impact on strategy
formulation. Applying it to the analysis of competitive strategy can effectively
analyze the customer’s competitive environment.
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P
E
S
T
L
E
POLITICAL
Government policies, regulations,
taxation, trade restrictions, and
political stability affecting the
business environment..
SOCIAL
Demographics, cultural
trends, lifestyle changes, and
consumer behaviors shaping
market demand..
ECONOMY
Interest rates, inflation,
economic growth, exchange
rates, and employment levels
that influence business
operations..
TECHNOLOGICAL
Innovations, automation, research &
development, and technological
advancements affecting industries.
ENVIRONMENT
Sustainability concerns, climate
change policies, carbon footprint,
and environmental protection
regulations.
LEGAL
Employment laws, consumer
protection, health and safety
regulations, and industryspecific
laws.
PESTLE Analysis
The PESTLEAnalysisis a strategictool used to analyze external macro-environmental factors that can impact an
organization. It helps businesses and researchers assess the broader forces influencing an industry or market.
Instructions:
1️⃣ In teams, design a new healthcare non-profit organization:
Define its mission, vision, and core values.
Identify funding models and revenue sources (government grants, donors,
patient fees).
Analyze external challenges and competitive pressures using SWOT
2️⃣ Present your organization’s strategic plan and discuss how it will remain
sustainable.
Strategy DevelopmentHealthcare BusinessModel Challenge
Apply business strategy principles to design an effective healthcare non-profit model.
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