Question

which of the following forces (buyer, supplier, rivalry, substitutes, threat of new entrants) do you see as more powerful than others in the U.S. healthcare system today? Explain your answer.

Answer 1

The healthcare industry seems to be growing tremendously. This has new opportunities for the health sector. There are many healthcare providers & the industry is categorized into two groups namely healthcare, equipment services & life sciences & the second category is pharmaceuticals & biotechnology.

I would see “the bargaining power of suppliers” as more powerful in the US healthcare industry compared to other forces because suppliers hold a high bargaining power as the industry majorly depends on their services. There are few suppliers compared to the buyers & every American needs to consult a healthcare in lifetime which means that everyone would be a customer at some point in the industry. In spite of the cost of healthcare demand doesn’t stop because both people & government are concerned about their quality of life.

The buyers have a weak bargaining power because to avail a healthcare service they have to pay price as they can’t afford any life saving operation in case of injury. Hence high quality care with fewer prices must be considered for this industry to gain margin

For substitute of existing products consumers prefer shops where they can get medicines at cheap cost. Hence they would prefer Wal-Mart or any other stores that offer cheap prices. However substitutes for complete health coverage plan lacks & the situation seems to be less alarming even for the future prospects.

There are very few companies dominating this sector hence threat of new entrants seem to be low. The situation would continue for some time because of expensive switching costs & insure premiums

The rivalry among the competitors seems to be very intense. The industry gains majorly from switching costs. An individual signing a healthcare policy is able to use the services of only one provider & are not able to switch another company.