The Indian Health Service (IHS), an agency within the U.S. Department of Health and Human Services, was responsible for providing federal health services to 1.51 million American Indian and Alaska Natives in 2000. Several opportunities related to health care exist for the IHS: potential public and private collaborations, continuation of the Clinton Administration's legacy of meaningful tribal consultation, and increasing the numbers of American Indian physicians, nurses, and other health related professionals. Modifications in federal programs such as Medicare and Medicaid pose a serious threat to the IHS because the IHS relies on these programs to offset the overall lack of funding. This article provides a framework for identifying the ways in which the external environment affects and determines the IHS' strategic responses to ensure competitiveness within the U.S. health care market. Value chain analysis will be used to evaluate the competitive advantages and disadvantages of the current IHS internal environment.