Porters 5 Analysis of the Impact of Covid-19 on the Healthcare Sector

Porters 5 is an industrial analysis metric that evaluates a sector’s competitive landscape by analyzing the supplier’s and buyer’s bargaining power, the threat of substitution, and the threat of new entrants (Safari, Farhang, & Rajabzadehyazdi 5). Accordingly, the impact of Covid-19 on each of these forces will be analyzed.

The suppliers’ bargaining power entails the number of vendors in the market, the uniqueness of the product, and its pricing. In this case, the suppliers constitute ventures retailing medical equipment such as gloves, protective wear, and even masks, which are present in high demand resulting in the escalation of prices (IBISWorld). As a result, there is a shortage of these supplies, making some nations initiate production of the merchandise. Given the current situation, suppliers have higher bargaining power and hence dictate the product’s prices. On the same note, suppliers comprise dealers who retail drugs used in managing the symptoms of the Covid-19 illness. These drugs are also in high demand, which has resulted in high prices. Therefore, the suppliers have a high negotiating power based on the high demand for medical equipment and drugs.

The buyer power comprises the ease of buyers in the accessibility of the products, the number of suppliers, and switching costs. In this case, the buyers comprise the patients and medical professionals who seek medical services. The ongoing global pandemic has resulted in the crowding of most hospitals to the extent that patients suffering from other ailments cannot access healthcare services (IBISWorld). The pandemic has tested the capability of most healthcare systems in the world. Presently, the healthcare capacity and technical expertise are insufficient in treating patients suffering from both the virus and other illnesses. The switching costs are high due to the low probability of acquiring the service from an alternative healthcare facility since the hospitals are crowded.

The threat of substitution refers to the accessibility of alternative medical services in curing illnesses. Presently, the main alternative in treating illnesses is traditional medicines and the adaptation of a healthy and nutritious diet. China had resorted to souring traditional medicine amid the pandemic crisis in the country. Similarly, other nations have resorted to this alternative. At the same time, the World Health Organization (WHO) encourages people to adopt a healthy diet to build resistance against infection. Unlike the standard industry case scenario, the pursuit of alternative products would favor the healthcare industry, given that it is presently overwhelmed.

The threat of new entrants refers to the ease of establishment of firms in the industry. There are barriers to entry in the healthcare industry, including high technical requirements and extensive capital. Given the shortage of healthcare workers around the globe, new entrants would encounter challenges in contracting employees (IBISWorld). Moreover, the procurement of healthcare equipment, for instance, beds, ICU apparatus, etc., would be hampered by the present shortage in the industry. Also, low-cost items such as masks, protective garments, needles, and testing kits, amongst others, are currently overpriced and insufficient to service the market needs. Moreover, the industry is strictly regulated amid the Covid-19 pandemic complicating the entry of a new firm. Therefore, there exist barriers to entry into the healthcare industry.

Competitive rivalry refers to the strength of competitors with regard to product quality and technical rivalry. There is a low, competitive rivalry between hospitals as they are overwhelmed by inflowing patients. The Covid-19 pandemic has resulted in a shortage of even the most basic hospital facilities. As a result, the conversion of schools and parking lots into temporary care facilities is being carried out to accommodate a large number of patients. For instance, India is converting its trains into hospital wards. Therefore, if a healthcare firm was to be established at the moment, it would attract customers to the facility.

Works Cited

IBISWorld. “Coronavirus Impact on Industries & Sectors Around the World.” Industry Insider, 7^th April 2020. https://www.ibisworld.com/industry-insider/press-releases/ibisworld-monitors-the-coronavirus-impact-on-industries-around-the-world/.

Safari, Negin, Maryam Farhang, and Elaheh Rajabzadehyazdi. “The study on the competitive status of construction companies based on Michael Porter’s five competitive forces (Case study: Armeno Project Development and Management Company).” European Online Journal of Natural and Social Sciences: Proceedings 5.3 (s) (2016): pp-72.

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