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Porter's Five Forces In Healthcare

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The model of the Five Competitive Forces, developed by Michael E. Porter, is based on corporate strategy, industry structure and the way they change. Porter has identified five competitive forces that shape every industry and every market and they determine the intensity of competition and hence the profitability and attractiveness of an industry. We further look into how the strategy and industry structure is placed in the field of healthcare and hospitals and analyze the attractiveness of the overall industry. 2.2 Rivalry among competitors Industry Rivalry is one of the 5 forces used to determine the intensity of competition in the industry. Competition in health care is the potential to provide with a mechanism to reduce cost and hence accessible …show more content…

The healthcare sector is expected to continue with its accelerated growth momentum and by 2020 it is expected to reach $ 280 billion [5]. As per 2015 data, no. of beds to population ratio is just 0.09% and no. of physicians to population ratio is 0.07%. Comparatively bed to population ratio is 0.38% and no. of physician to population is 0.19%. The numbers are similar for US and UK [9]. India has multiple players in the healthcare segment but there is a huge gap in the demand and number players in the market. Also, considering the growth potential projected in the next few years, it is a highly attractive industry for the existing players. Considering government hospitals as incumbents: This does not impact the industry attractiveness for private players by much because of following reasons in urban areas. ­ Accessibility in terms of commuting and waiting time is much more in govt. hospitals than the private clinics ­ Even though the cost of physician in govt hospitals are almost nil, the opportunity cost could …show more content…

This can be further substantiated by the fact that the operating margins of Apollo, Wockhardt and Fortis being consistently above 15­20% year on year. 2.2 (f) Rivalry among incumbents will increase if high class Govt hospitals like AIIMS, MAMC etc are accessible in the vicinity. This rivalry will increase to the extent that it will bring down the cost per patient in private hospitals and attractiveness of the industry will be reduced but it is less likely to happen in the near to medium future pan urban India. The important differentiation is most of the famous govt. hospitals also have medical colleges associated with it and it is a great source of research experience. Many private hospitals counters this by poaching the experienced physicians with high remuneration. The Private players also looking to various methods to reduce cost including economies of scale and scope so that more people can be treated with better facilities. 2.2 (g) Bed occupancy rate remains high for the last 5 years despite increase in number of beds. Also the growth of in­patient volumes in line with addition of beds are also increasing. Hence the excess capacity is in general small and Industry attractiveness is high

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Porter’s article has strong analysis and provides persuasive examples to support his argument. He carefully explains the five forces and demonstrates how they affect the competition in business. For example, when discussing about rivalry among existing competitors, Porter briefly mentions about different forms of rivalries and its intensity. After that, he analyzes the situations that lead to different level of intensity in rivalry carefully. Porter illustrates that “ The intensity of rivalry is greatest if: Competitors are numerous or are roughly equal in size and power…Industry growth is slow…

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This model is considered as the most potent and useful tool and is widely used by organisations. This model deals with external factors that influence the nature of completion and internal factors how firms compete effectively to be more profitable. Porter’s 5 forces is used. Industry Rivalry : Porter (1980) reiterated that intensity of rivalry is dependent on number and size of direct competitors as numerous and/or equally balanced competitors may lead to intense competition. The rivalry for market share becomes intense when product differentiation and switching costs are

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This theory is based on the concept that there are five forces that determine the competitive intensity and attractiveness of a market. Porter 's five forces help to identify where power lies in a business situation. This is useful both in understanding the strength of an organization 's current competitive position, and the strength of a position that an organization may look to move into. Strategic analysts often use Porter’s five forces to understand whether new products or services are potentially profitable. By understanding where power lies, the theory can also be used to identify areas of strength, to improve weaknesses and to avoid mistakes.

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Each of the forces is determined how competitive in that industry as well as the structure of the industry. Porter’s five forces factors are consists of competitive rivalry, the threat of new entrants, the threat of substitutes, bargaining power from

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