Porter’s Five forces model analysis of Healthcare Sector:The porter five forces are widely used to find out the competitive advantage among various companies of the same industry. It provides various inferences viz., it look at different sectors of people who are competing with each other and also various factors that persuades the competition level across the industries….
Competitors Threat: This factor decides if in the health care there are other competitors who are providing similar services already at an earlier time scale. In the private health care industry, the competition is highly intense due to the fact that within a particular limit, there are several clinics that are run by private individuals. if an individual is sick, there are several local clinics who provides faster recovery services for cheapest price… With regards to pharmacies and the pharmaceutical institutes, the competition is very powerful.
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All of those organizations are investing hefty amount of money for their R;D requirements, so they develop the new drug in the market before others do. So they get patent to make the drug for the upcoming number of years. The degree of competition in the business is due to various factors viz., competitive market price, high number of rivals, no cost differentiation etc.,Substitute Product Threat:The profit made by the pharmaceutical organizations are largely suffered by substitutes once the original patent right of the parent organization is expired. When one patent right has reached the expiry stage, several other drug making companies will get an opportunity to create the same drug under a different brand. Most recently substitutes like alternate medicines which take care of primary complex. Other substitutes include Ayurvedic and Herbal medicines based on the natural belief of people.
New Entrants Threat:This is very tight when it comes to healthcare organizations. For example, pharmaceutical sectors should have capital investment for the R;D requirements to create new drug. Later they must develop protocols that meets governance model before they start creating it. These obstacles lessen the entry rate of new organizations which maintains the profit margin for those who already exist in the same industry.Bargaining Capability of Buyers:As far as health care is concerned, there are very limited number of buyers who go behind large number of same suppliers which persuades the industry. These companies can easily tell what % of buyers are willing to buy a specific product. As People gets sick and suffer from ailments more often than not, irrespective of whether economic situations are better or not, pharma organizations and hospital industries provides best quality service which might be a criteria for patients to choose. Else, they have to approach even if there is a monopoly industry.
Supplier Power:This is high as private hospitals are very much reliant up on suppliers as drugs, medicines and the specific brand of medical devices that customers normally look for. The power is as same as when a customer does not ask medicines by its drug name instead they ask by its brand name given by the supplier. For example, Malaysia provides a large supply of special doctors and the related precision medicines so their bargaining power is very high.Competitive forces analysis of Healthcare Sector (political-legal, economic, social, and technological)Political – L-et us look at the political force of macro-environment. The guiding principle behind the pharma industry has been changing day to day.
All the institutions have found ways to reduce their overall cost in health care sector. Even the governmental organizations have had a greater push for further negotiations to reduce the cost for large contracts.Economical – Look at these factors in health care, it is very simple to understand the dynamics involved. It is logical to interpret all stages of business before making significant contribution to the pharma industries. Due to Inflation and every changing interest rates will have larger positive impact in this industry as the number of patients will neither to be reduced or increased based on the global economic climate. It continues to exist as they are…Social: Some of the social factors that concentrate on problems viz.
, fertility decrease rate, aging population, and preferences over sex and eating habitual changes are the related social factors when it comes to health care. Arrival of internet ; IT has condensed the communication cost spent in the medical consultation and other services.Legal – On the legal perspective, providing safety clinical features and legislation of medical devices supported in solving many issues in the healthcare industry.Environmental – This has also impacted the health care industry. Many private and government institutions have assumed the Green IT where all communication related to health care are sent and received electronically.
For this industry to be successful in the latest era, reducing the cost is an imperative area to be considered for increase the profit margin.