Topic: BusinessIndustry

Last updated: February 8, 2019

The healthcare industry is different than other industries in that the healthcare industry services their patients.

Like all organizations, healthcare systems look to make money but due the industry that we are talking about, sometimes that changes. Most people within the United States do have health insurance, but there are those who do not. There are also those people who have insurance through the government.

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Regardless of where someone has their insurance, the reimbursement the health system gets for each person is different. Hospitals are merging together, and the people are comparing the prices that they are being charged by each institution. Patients want explanations for everything they were charged for and are using this information to make decisions for the next time they need to go to the hospital.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 looks 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 industry 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 provide faster recovery services for cheaper costs. With regards to pharmacies and the pharmaceutical institutes, the competition is very powerful. All of those organizations are investing hefty amounts of money for their R;D requirements, so they develop the new drug in the market before others do, so they can get the patent to make the drug for the upcoming number of years. The degree of competition in the business is due to competitive market price, high number of rivals, no cost differentiation etc.,Substitute Product Threat:The profit that is made by the pharmaceutical organizations are largely suffered by substitutes once the original patent right of the parent organization had expired. When one patent right has reached the expiry stage, several other drug making companies will get the 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 threat is very tight when it comes to healthcare organizations. For example, pharmaceutical sectors should have capital investment for the R;D requirements to create a new drug. Later they must develop protocols that meets a 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 a very limited number of buyers who go behind a large number of the same suppliers who persuade the industry. These companies can easily tell what percentage 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 provide best quality service which might be a criterion for patients to choose. Otherwise they have to approach even if there is a monopoly industry.Supplier Power:This is as high as private hospitals as they are very much as reliant on suppliers as drugs, medicines and the specific brand of medical devices that customers normally look for. The power is the 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 – Let 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 any significant contributions to the pharma industries. Due to Inflation and the 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 are the 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 have 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 an increase within the profit margin.In order to succeed, healthcare systems still need to keep up with the rest of the business world and transform and adapt with the rest of the world with their technology so that they are able to keep up with their peers. “Healthcare leaders must now devise ways to meet consumer demand while maintaining cultures of healing and stable business operations” (Haefner, 2017). Technology is leading our current healthcare industry, yet the systems are focusing on the patient experience.

The competition is fierce, and the health systems are fully aware of that. “Enhancing the experience of patients is one of the most focused components in the healthcare sector today” (business wire, 2018).


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