UnitedHealth Group Inc. is a health care company with its distinctive and diversified services and products based in the US. The company is ranked on the 5th in Fortune 500 rankings in terms of collecting revenue. The health care industry in USS is ever evolving and attracting different investors to conduct business activities. The analysis of industry is useful for new entrant but the significance of industry analysis is even higher for the existing company. This analysis would help existing players to develop strategies and plans for the future by keeping in view the industry dynamics. Porter’s five forces analysis is a useful tool for analyzing the healthcare industry of the US.
Competitive Rivalry
The healthcare industry of the US is booming with a massive revenue collection of 800 billion US dollars. The industry is growing at a striking pace of 6.7% from 2014-2019 annually. Due to its massive size, several companies and investors shifted the focus towards the healthcare industry of the US making the market competitive. UnitedHealth Group is facing tough competition from its rivals in the industry that mainly includes Antherm Inc., Humana Inc., healthcare Services Corp., Aetna Inc., and Centene Corp. with a market share of 9.25, 8.4%, 5%, 3.8%, and 3.8%, respectively. The market share of UnitedHealth Group Inc. is 12.5% and the company maintaining a leadership position in the health care market of the US. This massive penetration of large companies along with the existence of small players, the competition in the market is high for UnitedHealth Group Inc. (Statista, 2019).
Bargaining Power of Suppliers
Healthcare companies are dependent on their suppliers for medical equipment and raw material to provide services and manufacture products. There is some equipment that needs high technological involvement and the number of suppliers is not abundant for those supplies such as the latest machines for diagnosing different diseases like cancer. The companies rely on suppliers in this equipment with their strong bargaining power. In the case of service, companies require health care specialists such as doctors and staff for providing service. Despite migration of experts from all over the world, there is still a shortage of medical staff that strengthens the power of suppliers. The gap between the demand and supply of doctors is likely to be increased by 100,000 doctors by 2030 in the US (Mann, 2017). Other those few basic item suppliers, the overall supplier power in the healthcare market of the US is high.
Bargaining Power of Buyers
There are several numbers of large and small companies making the market competitive and providing options for consumers for their healthcare. This provides consumers several options for picking the healthcare service. The products and services of healthcare companies are not massively different from one another which makes it easy for customers to move to another option in case of even minor benefit. The prices of healthcare products and service are bargained to an extent but in terms of competition, they are competitive and affordable in the industry due to difficult retention of buyers (Kirkwood, 2016). Therefore, the bargaining power of buyers in the US Healthcare industry is high due to massive competitive and strict regulations to maintain the least level of standards by the government.
Threat of Substitutes
Healthcare is the basic need of human life from its existence and there has been exceptional evolution and innovation in ways of providing healthcare to human beings. A human being cannot survive without having healthcare and there is no chance of substitute and the threat of substitute for healthcare is low. There is a difference between innovation in ways of providing healthcare and substituting it with some other service or products. From manual healthcare to electronic technology based machines are all serve the same purpose of providing healthcare facilities and services to human beings (Stratmann & Baker, 2017). The technologies will continue to evolve, the expertise will continue to prose but there is the lowest possible for a substitute of healthcare.
The Threat of New Entrants
The healthcare can be provided by starting a small setup by a professional doctor and even, the trend of online appointment from doctors is increasing. Even an individual can set up the healthcare services unit by fulfilling the basic legal obligations. It is easy to start a business at a basic level in the healthcare industry which makes the threat of new entrants high for the healthcare industry (Stratmann & Baker, 2017).
References
Kirkwood, J. B. (2016). Buyer power and healthcare prices. Wash. L. Rev., 91, 253.
Mann, S. (2017). Research shows a shortage of more than 100,000 doctors by 2030. AAMVNEWS. Available at: https://news.aamc.org/medical-education/article/new-aamc-research-reaffirms-looming-physician-shor/
Stratmann, T., & Baker, M. (2017). Barriers to Entry in the Healthcare Markets: Winners and Losers from Certificate-of-Need Laws. Mercatus Research Paper.
Statista. (2019). Market share of leading health insurance companies in the United States in 2016, by direct premiums are written. Available at: https://www.statista.com/statistics/216518/leading-us-health-insurance-groups-in-the-us/