FOR PROF.MACQUEEN ONLY(2)

We learned that the healthcare marketplace is characterized by intense competition and rivalry—elements that will only intensify as healthcare entities of all kinds vie for the opportunity to serve target markets. Successful navigation of this environment requires a deep understanding of marketplace competitors.

Competition is multidimensional, and its vastness must be clearly understood if marketing success is to be achieved. The critical task of accurately indentifying the competitive elements in a market is greatly facilitated by Michael Porter’s Five Forces Model.

Porter’s Five Forces Model provides useful insight into the multifaceted nature of competition. The nature of competition in any industry is based on five forces:

First is Existing Competitors. The most obvious competitive force, jockeying for position through new product development, innovative promotion campaigns, and so on. Rivalry among existing competitors is especially intense when competitors are numerous and are equivalent in terms of size and power.

Next is Potential Entrants: Entities that might potentially enter the market place represent significant threats to existing competitors. New entrants bring new capacity and resources to the market along with desires for market share.

Next we have Substitutes. Substitutes are products that differ from particular offerings but largely, and sometimes complexly, fill equivalent wants and needs. As a result, competing offerings can greatly impact the performance of healthcare entities and even threaten their very existence.

Then comes Suppliers. They provide the components necessary for healthcare organizations to offer goods and services to their customers. Suppliers can raise their prices, lower the quality of the components that they provide, or simply go out of business—all situations that can yield potentially devastating effects. Suppliers are particularly powerful if they are few in number, if few substitutes exist, and if entities are not key customers.

And lastly is Buyers. Porter’s term buyer is equivalent to the term customers, which is better suited for the healthcare marketplace. Customers possess significant bargaining power over healthcare entities because their patronage ultimately determines institutional survival, growth, and prosperity.

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