Running head: EXPLORING BUSINESS MODELS OF PRIVATE HOSPITALS EXPLORING THE BUSINESS MODELS OF PRIVATE HEALTH CARE PROVIDERS IN AN EMERGING AFRICAN MARKET CONTEXT THESIS ANASTASIA NAA AKU SHIKA BULLEY ASHESI UNIVERSITY COLLEGE Thesis submitted to the Department of Business Administration, Ashesi University College in partial fulfillment of the requirements for the award of Bachelor of Science degree in Business Administration April 2016 EXPLORING BUSINESS MODELS OF PRIVATE HOSPITALS ii DECLARATION I hereby declare that this thesis is the result of my own original work and that no part of it has been presented for another degree in this university or elsewhere. Candidate’s Signature:………………………………………………………… Candidate’s Name: ANASTASIA NAA AKU SHIKA BULLEY Date: I hereby declare that the preparation and presentation of the thesis were supervised in accordance with the guidelines on supervision of thesis laid down by Ashesi University College. Supervisor’s Signature:…………………………………………………………………….. Supervisor’s Name: DR. GORDON ADOMDZA Date: EXPLORING BUSINESS MODELS OF PRIVATE HOSPITALS iii ACKNOWLEDGEMENT Foremost, I would like to express my sincerest appreciation to my supervisor, Dr. Gordon Adomdza, who has been extremely supportive and instrumental throughout this process. His wisdom and guidance have been key in aiding me not only to complete this project but continuously challenge myself to produce the very best result. I am grateful for him holding me to a high research standard and teaching me how to do research. I am also thankful to Dr. Sena Agyepong and Neperti Nicanor, who took time off their busy schedules to review my thesis at its various stages. Their insightful comments and constructive criticism helped me enrich my ideas and constantly improve my content. I place on record, my sincere gratitude to the respondents who agreed to partake in this study, without whom my research would not be possible. I hope the findings of my work would contribute positively to their organizations, aiding me return their favor of partaking in this study. Finally, none of this would have been possible without the love and support of my friends and family. They contributed tremendously in helping me gather my data, contact the key parties involved and generally keep me sane throughout this period. I warmly appreciate your generosity and understanding. EXPLORING BUSINESS MODELS OF PRIVATE HOSPITALS iv ABSTRACT A review of the private health sector of some economies shows the growing use of business models, by health care providers in the sector, to improve health care provision whilst simultaneously increasing financial performance. This growing use has been based on the ability of business models to engage the resource-based and market-based principles, which have been shown to provide a sustainable competitive advantage for firms in diverse industries. Emerging African economies like Ghana could leverage business models to improve the performance of their private health sectors. However, the application of business models is still unclear in these countries. This study thus sought to investigate how Ghanaian private hospitals apply business models, with reference to Alex Osterwalder's business model canvas. Findings were analyzed using the directed content analysis method. The results of the study showed the evidence of resource-based and market-based principles in Ghanaian private hospitals’ application of business models. The study also showed the existence of different business models within the Ghanaian private sector based on observed differences in the elements being utilized by each hospital. There were peculiar findings such as the reliance of private hospitals on the public sector for the provision of more advanced medical services, training and research; even as private hospitals are expected to be more efficient resource managers From the findings, further research is directed at investigating value flows between various blocks of the business model canvas and their impact on the Ghanaian private health sector. Keywords: Business model, Resource-based, Market-based, Ghanaian private hospitals EXPLORING BUSINESS MODELS OF PRIVATE HOSPITALS v TABLE OF CONTENTS CHAPTER ONE: INTRODUCTION ........................................................................ 1 Background .............................................................................................................. 1 Problem Statement................................................................................................... 2 Objectives of the Study ............................................................................................ 3 Theoretical Framework ........................................................................................... 3 Research Questions .................................................................................................. 3 Research Relevance ................................................................................................. 4 CHAPTER TWO: LITERATURE REVIEW ........................................................... 5 Overview of the Ghanaian Health Sector .............................................................. 5 The Ghanaian Private Health Sector ..................................................................... 6 The Use of Resource-Based and Market-Based Principles to Improve Private Firm Performance .................................................................................................... 7 The Resource-Based View of a Firm ...................................................................... 8 The Market-Based View of a Firm ....................................................................... 11 Application of Resource and Market-Based Principles to Business Models .... 12 What is a Business Model? .................................................................................... 13 Characteristics of a Business Model ..................................................................... 15 Business Models in the Health Sector .................................................................. 17 CHAPTER THREE: METHODOLOGY ............................................................... 20 Research Context and Population ........................................................................ 20 Research Sample .................................................................................................... 20 Sample Description .............................................................................................. 20 Sample Size .......................................................................................................... 21 Sample method ..................................................................................................... 21 EXPLORING BUSINESS MODELS OF PRIVATE HOSPITALS vi Research Method ................................................................................................... 22 Research Approach .............................................................................................. 22 Data Research Method ........................................................................................ 23 Expert Validity ..................................................................................................... 24 Data Collection Procedure .................................................................................. 24 Data Analysis ....................................................................................................... 24 Ethical Consideration ............................................................................................ 27 CHAPTER FOUR: RESULTS AND DISCUSSION .............................................. 28 Hospitals’ Profiles .................................................................................................. 28 Hospitals’ Age ...................................................................................................... 28 Hospitals’ Founders............................................................................................. 29 Services Offered by Hospitals .............................................................................. 30 How Ghanaian Private Hospitals Create, Deliver and Capture Value from the Perspective of the Business Model ........................................................................ 33 Customer Segment ............................................................................................... 33 Customer Relationships ....................................................................................... 34 Key Partners ........................................................................................................ 36 Key Resources ...................................................................................................... 38 Key Activities ....................................................................................................... 40 Value Proposition ................................................................................................ 41 Channels .............................................................................................................. 41 Cost Structure ...................................................................................................... 43 Revenue Streams .................................................................................................. 44 Business Model Canvas of Ghanaian Private Hospitals ..................................... 45 EXPLORING BUSINESS MODELS OF PRIVATE HOSPITALS vii Factors that Explain the Differences between the Business Models being used amongst Ghanaian Health Care Professionals .................................................... 49 Founder Type ....................................................................................................... 49 Age ....................................................................................................................... 49 Services Rendered ................................................................................................ 50 Linkage of Findings to Resource-Based and Market-Based Principles ............ 50 An Illustration of Private Ghanaian Hospitals in reference to Public Ghanaian Hospitals.................................................................................................................. 52 Business Model Canvas of Ghanaian Public Hospitals ...................................... 52 Differences in the Relationships between blocks of the Business Models of a Private and Public Ghanaian Hospital................................................................ 55 Differences in the Elements of the blocks of the Business Models of a Private and Public Ghanaian Hospital ................................................................................... 61 Summary of the Illustration of Private Ghanaian Hospitals in reference to Public Ghanaian Hospitals ............................................................................................. 62 CHAPTER FIVE: CONCLUSION .......................................................................... 64 Purpose of the Study .............................................................................................. 64 Key Findings ........................................................................................................... 64 Recommendations .................................................................................................. 69 Limitations of the study ......................................................................................... 71 Suggestions for Future Research .......................................................................... 72 BIBLIOGRAPHY ...................................................................................................... 73 APPENDIX A ............................................................................................................. 79 Table A1 .................................................................................................................. 79 Interview Questions ............................................................................................... 82 EXPLORING BUSINESS MODELS OF PRIVATE HOSPITALS viii LIST OF TABLES Table 1: VRIO- Framework to Identify Important Resources (Steininger et al, 2011, adapted from Barney (1991; 1995)) ………………………………………………...9 Table 2: Description of Business Model Concepts (Adapted from Steininger et al., 2011) ……………………………………………….................................................16 Table 3: Operational Definitions of Coding Categories ……………….………….25 Table 4: Type of Services offered by Private Hospitals and the Related Frequencies ……………………………………………….…………………………………….31 Table 5: Frequency of the Various Customer Segments Targeted by Private Hospitals ……………………………………………….……………………………………33 Table 6: Frequency of the Various Customer Relationship Methods Used by Private Hospitals………………………………………………….……………………….35 Table 7: Frequency of the Various Key Partners Ghanaian Private Hospitals Collaborate With ………………………………………………….……………....37 Table 8: Frequency of the Various Key Resources Ghanaian Private Hospitals Utilize ………………………………………………….……………………….…………...38 Table 9: Frequency of the Various Key Activities Ghanaian Private Hospitals Perform ………………………………………………….…………………………40 Table 10 : Frequency of the Various Channels Ghanaian Private Hospitals Utilize ………………………………………………….…………………………...............41 Table 11: Frequency of the Various Cost Structure Components of Ghanaian Private EXPLORING BUSINESS MODELS OF PRIVATE HOSPITALS ix Hospitals ………………………………………………….…………………………43 Table 12: Frequency of the Various Cost Structure Components of Ghanaian Private Hospitals ………………………………………………….………………………...44 Table 13: The Key Findings of the Study and their Relations to the Theoretical Framework of the Study ………………………………………………….………...66 Table 14: Findings Showing Key Blocks and Vital Elements under each Key Block………………………………………………….……………………………...70 EXPLORING BUSINESS MODELS OF PRIVATE HOSPITALS x LIST OF FIGURES Figure 1. Business Model Canvas (Osterwalder & Pigneur, 2010) ……………….15 Figure 2. Investigated Hospitals’ Age and their Associated Percentages………….29 Figure 3. Investigated Hospitals’ Founder Categories and their Associated Percentages…………………………………………………………………………30 Figure 4. Business Model Canvas of Ghanaian Private Hospitals………………...45 Figure 5. Business Model Canvas of Ghanaian Public Hospitals………………….53 Figure 6. An Illustration of the Relationship between Key Partners and Key Activities when relating the Ghanaian Private and Public Health Sectors……………………57 Figure 7. An Illustration of the Relationship between Customer Segments and Key Activities when relating the Ghanaian Private and Public Health Sectors………...58 Figure 8. An Illustration of the Linkages Associated to Value Proposition in the Ghanaian Private and Public Health Sectors……………………………………….59 Figure 9. An Illustration of the Linkages Associated to Channels in the Ghanaian Private and Public Health Sectors………………………………………………….60