Porter’s Five Forces Analysis of Healthcare Industry 

The healthcare industry offers rehabilitative, preventive, palliative, curative, and other services to sick people and patients. Today, we’ll discuss Porter’s five forces analysis of the Healthcare industry; bargaining power of suppliers and buyers; threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management.

Three main areas of the Healthcare Industry

• Financial of hospitals
• Pharmaceutical drugs and products
• Medical services

Statistical facts and figures of the Healthcare Industry

• 10% GDP spending of developed countries is healthcare
• The US spent 2.7% of GDP earnings on healthcare comprising over 4.3 trillion USD
• 18.3% of spending is on health, as per the nation’s GDP

Top Companies in the Healthcare Industry

• Stryker
• CVS Health
• Johnson & Johnson
• Abbott Laboratories
• Phillips
• Pfizer
• United Health
• GE Healthcare
• Cardinal Health

Porter’s five forces analysis of Healthcare industry would analyze the bargaining power of suppliers and buyers; the threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management. Here’s the Healthcare industry Porter’s five forces analysis of hospital and medical business as follows;

Porter’s Five Forces Analysis of Healthcare Industry

Let’s discuss Porter’s five forces analysis of Healthcare Industry as a competitive force in strategic management and they’re as follows;

Bargaining Power of Suppliers in Healthcare Industry

The bargaining of suppliers is moderately high in the Healthcare Industry as a competitive force in strategic management. Some of the main factors impacting the bargaining power of suppliers in the Healthcare Industry Porter’s 5 forces analysis of hospital and medical business are as follows;

I-Heavy Reliance on Healthcare Facilities

Governments, patients, and ordinary people are heavily reliant on hospitals and healthcare units. It is because anyone could become sick at any time or a plague could shut down the whole country. Heavy reliance on the healthcare industry amplifies its bargaining power.

II-High Switching Cost

When it comes to the health of a patient, often they have limited options and they don’t want to take the risk of moving to another healthcare facility. It is highly uncertain that the other hospital won’t have the required treatment options and professional expertise.

Bargaining Power of Buyers in Healthcare Industry

The bargaining of Buyers is lower in the healthcare business as competitive forces in strategic management. Some of the main factors impacting the bargaining power of suppliers in the Healthcare business 5 forces analysis of the hospital and medical industry are as follows;

I-Limited Options

From an ordinary patient’s perspective, they have limited treatment options available to them. They can either choose this or that; they can’t change it in the middle. In case of an emergency situation, they don’t have the choosing option; their husband, wife, or parents would choose the best treatment option on their behalf when the patient is unconscious.

II-Follow Professional Expertise

While going through a serious and severe medical condition, patients have no other choice but to follow the doctor’s advice and their expert opinion. As a result, it increases the bargaining power of healthcare facilities, hospitals, and doctors.

Threat of New Entrants in Healthcare Industry

The threat of new entrants is Moderate in the hospital and medical business and Healthcare industry as competitive forces in strategic management. Some of the main factors impacting the threat of new entrants in the hospital and medical business 5 forces analysis of Healthcare industry are as follows;

I-High Cost

While building a new healthcare facility, then it requires a lot of capital investment. Along with capital investment, they have to carry the high expenses of experienced doctors, nurses, and administrative staff. The hospital would generate any profit or not, but they have to carry a lot of expenses for an indefinite time.

II-Regulatory Compliance

Healthcare institutes and facilities have to comply with the regulations of the country. It could be in the form of experience, qualification, and license of the doctors and nurses; and the administrative and generator staff. They have to maintain cleanliness in the healthcare facility to stop the spreading of germs and viruses.  

Threat of Substitutes to Healthcare Industry

The threat of substitute products and brands is higher in the Healthcare industry as competitive forces in strategic management. Some of the main factors impacting the threat of new substitutes in the hospital and medical business 5 forces analysis of Healthcare industry are as follows;

I-Multiple Healthcare Service Providers

There are various healthcare facilities and hospitals operating their business in the healthcare industry. They offer medical treatment in various categories; affordable, premium class, and medically insured options. Rich and wealthy people want private and premium quality medical treatment; whereas the working class goes to the government hospitals or their insurance company is offering it.

II-Alternative Treatments

Acupuncture, ayurveda, and homeopathy are some of the other treatment options alternative to allopathic medical treatment. Many people don’t like and believe in Western allopathic treatment; they prefer natural and herbal medicine and treatment to avoid allopathic medicines.

Competitive Rivalry in Healthcare Industry

The competitive rivalry among Healthcare industry is very high in the hospital and medical business as competitive forces in strategic management. Some of the main factors impacting competitive rivalry in the Healthcare business 5 forces analysis of the hospital and medical industry are as follows;

I-Tough Competition

The healthcare industry has become highly competitive in various categories. Hospitals have to maintain a top-quality staff of doctors and nurses to attract and maintain the attention of customers. It allows them to remain competitive in the market and differentiate themselves from other hospitals.

Conclusion: Healthcare Industry Porter’s Five Forces Analysis |5 Forces Analysis of Healthcare Industry

After an in-depth study of Porter’s five forces analysis of healthcare industry; we have realized that Healthcare Industry is the world’s top-growing business and industry. If you are learning about the Healthcare industry 5 forces analysis of hospital and medical business; then you should keep in mind the abovementioned bargaining power of suppliers and buyers; threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management.