Porter Analysis
Porter Five Forces Analysis One of the most effective ways to measure the level of attractiveness of medical device industry is Porter Five Forces Analysis. According to porter (2008), there are five forces that influence the level of profitability of any industry; therefore, companies must obtain sustainable competitive advantage in order to survive. These forces are rivalry, threat of substitutes, threats of new entrants, supplier power, and buyer power. (Porter, para 3)
Rivalry
The medical device industry is one of the most competitive industries in the US. There are many small firms that produce or outsource medical technologies, which make the industry pure competition. According to Holtzman (2012), “This industry has traditionally had a low level of industry concentration, with no one firm dominating. Small companies are common and typically specialize in developing niche technology, while larger players frequently seek to acquire these firms to expand their product range or gain access to a particular technology.” (Holtzman, para 3) Thus, low industry concentration indicates that it is not very profitable market due to the high competitiveness level. Moreover, medical device companies in China and Brazil are considered another threat to US companies. Chinese, Brazilian, and Indian markets are growing steadily and attracting more consumers than the US market. According to Holtzman, (2012), “With the combined economies of Brazil, India, and China predicted to be larger than those of the G6 countries (United States, Canada, the United Kingdom, Germany, France, and Japan) in less than 40 years, these markets could fuel the medical device industry for the next 50 years.” (Holtzman, para 15)
Threat of Substitutes Substitutes are products from other industries that cause threat to products sold in the medical device industry. The large number of substitutes offered decreases the prices of medical devices, which cause a fall in profits. As more
Rivalry
The medical device industry is one of the most competitive industries in the US. There are many small firms that produce or outsource medical technologies, which make the industry pure competition. According to Holtzman (2012), “This industry has traditionally had a low level of industry concentration, with no one firm dominating. Small companies are common and typically specialize in developing niche technology, while larger players frequently seek to acquire these firms to expand their product range or gain access to a particular technology.” (Holtzman, para 3) Thus, low industry concentration indicates that it is not very profitable market due to the high competitiveness level. Moreover, medical device companies in China and Brazil are considered another threat to US companies. Chinese, Brazilian, and Indian markets are growing steadily and attracting more consumers than the US market. According to Holtzman, (2012), “With the combined economies of Brazil, India, and China predicted to be larger than those of the G6 countries (United States, Canada, the United Kingdom, Germany, France, and Japan) in less than 40 years, these markets could fuel the medical device industry for the next 50 years.” (Holtzman, para 15)
Threat of Substitutes Substitutes are products from other industries that cause threat to products sold in the medical device industry. The large number of substitutes offered decreases the prices of medical devices, which cause a fall in profits. As more