Analyzing Substitute Products Impact on Northwestern Memorial

This report examines the impact of substitute products, specifically alternative medicine, on the business potential of Northwestern Memorial Healthcare Corporation using Porter's Five Forces analysis. It discusses the rising popularity of alternative medicine, including herbal medicine, homeopathy, chiropractic, and acupuncture, and its potential to substitute conventional medical treatments. While conventional medicine still dominates the market, the increasing use of alternative therapies, driven by factors like lower costs and growing consumer acceptance, necessitates that healthcare providers like Northwestern Memorial consider incorporating or adapting to these trends. The report references studies and statistics on the usage of complementary and alternative medicine (CAM) to illustrate the changing healthcare landscape and its implications for traditional healthcare providers.

Effect of availability of equivalent, substitute products on the business
potential of Northwestern Memorial using five force analysis of the
organization
Northwestern Memorial Healthcare Corporation is a non-profit integrated health care unit based
in Chicago United States. The corporation through its subsidiary units operates an integrated
healthcare system consisting of the academic section, a hospital for treatment of acute and
tertiary inpatient care and also ambulatory care and wellness services. It offers medical teaching
services through its hospitals. The institute is also engaged in healthcare services in areas like
gynaecology, medicine, paediatrics etc. through a number of physicians.
We are going to study the impact of the availability of equivalent substitute products ( third
factor of the five forces model of industry structure) on the business of the healthcare unit.
The meaning of equivalent, substitute product means products that can substitute conventional
items. In healthcare “alternative medicine“ is considered as a substitute for the conventional
approach. Alternative medicine consists of methodologies like herbal medicine, homoeopathy
medicines, chiropractic, acupuncture, naturopathy, massage therapy etc. Though research is
going on in some of the areas of alternative medicine still there is not enough data which show
that these methods are scientifically proved correct. Still, a large number of consumers have
started using these alternative medicines. The progress is so encouraging that even health
insurance companies are offering insurance coverage for treatment using alternative medicines.
One of the reasons for consumers gradually shifting to this alternative medicines is because of
the low cost of treatment compared to cost of treatment using conventional medicines. Though
alternative medicines are popular in eastern and far eastern countries, it is yet to gain popularity
in the United States, though it has made penetration during the last two decades. Now how the
healthcare units are facing this changed scenario. One way of thinking is that if this kind of
treatment appears legitimate, it is better to accept that. So some healthcare units have started
giving acupuncture services. Initially, physicians resisted the use of chiropractic into healthcare
delivery by various means through litigation, advertisements and publishing scientific validity
but even then chiropractic is getting increasing popularity. Now doctors have started ignoring the
threat as they feel the penetration is very less to pose a challenge to conventional medicines.
In the case of developing countries use of alternative medicines may be as high as 95% (Robinon
& Zhang, 2011). Even in the United States, there is an increase in the use of herbs. The survey
conducted by NCCAM i.e. the National Center for Complementary and Alternative Medicine,
during 2007 indicated that 17.7 % of adults have started using herbal products during one year
period. Complementary and alternative medicine (CAM) was used most commonly by whites
(43.1%) followed by Hispanics (23.7%). The present trend indicates that in some countries,
herbs more commonly used in SPAs and naturopathy treatments and in other countries also they
are getting a lot of popularity.( Frass et al.,2012). Total nominal of medicines in the US between
2002-20162 is 450 billion dollar out of which percentage of branded conventional medicines is
72% (Statistics & Facts U.S. Pharmaceutical Industry). So the above findings can lead to the

conclusion that conventional medicines are still in the driver’s seat but due to the increasing
growth of alternative medicines the company has to implement some of the methods of
alternative medicines due to popular demand.
References
Frass, M., Strassl, R. P., Friehs, H., Müllner, M., Kundi, M., & Kaye, A. D. (2012). Use and acceptance of
complementary and alternative medicine among the general population and medical personnel: a
systematic review. The Ochsner Journal, 12(1), 45-56.
Robinon, M. R., & Zhang, X. (2011). The World Medicine Situation (Traditional Medicines: Global
Situation, Issues and Challenges). Geneva. World Health Organization, Geneva, Switzerland.