1.How attractive is the radiation therapy opportunity for Guidant? First we will determine the size of the market and its growth potential. Then we will assess the attractiveness of the market for radiation therapy in general using the concept of Porter's 5 forces. Furthermore we will connect this information with Guidant's specifics and its complementary assets to find out if this specific market is attractive for the company.
Market size and growth potential
The market's size is yet unknown, because, as with many new technologies, it is just now taking shape. In table A on page 14 of the case, a matrix of different growth scenarios together with different developments regarding the dominant technology can be seen. If we take Ginger Howard's statements on the potential of the technology and the larger mental barriers of patients to leave radioactive material in their body for a long period of time, it seems most likely, that the market will be dominated by non-stent products and that it will become very large, namely between 636 million and 1.73 billion dollars. Concerning the markets growth potential, one can take a look at comparable markets and how they performed in the past. As can be seen in exhibit 1 page 16 of the case, the market for coronary angioplasty (which is fitting because it is a low invasiveness technique as well and because both markets will be strongly interconnected in the future) has been growing since 1990. Radiation therapy can be seen as a complementary service to CA. Therefore this trend will most probably also affect it. Furthermore heart disease-rates are continuously increasing and becoming a larger concern to society, which may help to overcome scepticism and increase the market's growth potential. The above information shows quite clearly that the market for radiation therapy is potentially very large and has great potential for growth.
Further market analysis
As a next step we will now identify and determine the extent of Porter's 5 forces in the market. To do this we will answer the following questions: 1.) How big/small is the threat of the entry of new competitors into the market? It is very likely that competitors will enter the market. For example Johnson and Johnson, a main adversary of Guidant, holds 20% of Iso-Stent's equity. Medtronic also showed their interest to acquire Angiorad. Additionally both Boston Scientific and Schneider supposedly are developing technologies in this field. 2.) How intense is competitive rivalry in the market? The market is still in its making so at the time being there is no competition but as can be seen in 1.) there will be most probably in the near future. 3.) Is there a threat posed by substitute products or services? The market for radiation therapy itself seems not to be threatened by substitute products, but the market will probably split into different product groups as there are many different approaches to radiation therapy, which will be competing against each other. 4.) Do customers have significant power? Customers namely hospitals and physicians do have power to some extent, because there will be many interchangeable products in the market, but no trend towards a monopsony or oligopsony has been detected. 5.) Do suppliers have significant power? Suppliers hold considerable power, because the supply-chain in radiation therapy is very complicated and the suppliers are few and specialised, thus reducing competition amongst
them. On the other hand being specialised makes them vulnerable to hold-up situations. This could be used against them by potential customers. The facts stated above show, that the market will be highly competitive and that customers, through their freedom of choice between a range of different substitute products, have some and suppliers because of the complexity of the supply chain in this field considerably power. Taking all the above into consideration the market shows big promise, but...