Fresenius is the healthcare group, and it is headquartered in Bad Homburg vor der Höhe, Germany. The company was founded in 1912 more than a century ago. The company, since its inception, has evolved and expanded its footprint. It has a serious foothold in the German healthcare sector. The company operates through the following business segments: Fresenius Medical Care, Fresenius Helios, Fresenius Kabi, and Fresenius Vamed (Fresenius, 2020). The company holds “Forward Thinking Healthcare” core to its values that help in delivering better medicine for more people. The group has a presence in over 100 countries, including Europe, Latin America, North America, and Asia-Pacific. It has more than 270,000 employees. It is a major player in Brazil, where is operating longer any other country outside Germany. Porter’s five forces model will help analyze the competitive position along with threats and Opportunities the Company is exposed to.
Competitive Rivalry in the Market
The Healthcare industry is highly competitive; many companies are providing the best healthcare services. The companies are innovating and spending billions in research for better equipment, medicines, and treatments. The fundamental goal is to achieve a better, sustainable, and affordable solution. Fresenius is a competition with Baxter International and DaVita HealthCare Partners.
Fresenius has posted annual revenue of $ 38.1 billion (Fortune, 2020). In contrast, Baxter International has posted annual revenue of $ 11.1 billion (Fortune, 2020). DaVita HealthCare Partners earned the total consolidated revenue of $ 11.4 billion in 2018 (Davita, 2020).
Fresenius is a leading dialysis provider globally. Competition is intense in the healthcare market and Fresenius’s other venture face competition too. Fresenius is well positioned in this competitive landscape. The presence of multinational companies, the specialized healthcare industry is highly competitive.
Threat of Substitutes
Fresenius operates in a highly evolving industry. Their companies invest a massive amount of money in research and development. Fresenius group provides services to chronic kidney patients through dialysis. They manage hospitals, healthcare facilities, and essential supply drugs. The threat is high when there is an alternative available. Patients with chronic kidney failure have no other viable treatment option than dialysis. Other forms of treatment are through herbs or homeopathic medicine; they are not as effective. Their management business faces competition for a replacement if another company offers better services with effective cost. There are substitutes available, but no one competes at par with products and services offered by Fresenius. They have developed credibility over the century. Therefor threat of substitutes remains low.
The Threat of New Entrants
The barriers to entry are high, when there are relaxed regulations and entry into the market is difficult. According to Grant (2010), the common barriers to entry in any industry are regulatory framework, required capital and economies of scale. The healthcare infrastructure in Europe is among the best in the world. There is a special focus on patient access to the healthcare system (Reibling, 2010). The regulatory environment is stringent, and European Union law is supreme than domestic law (Hervey, 2011). To start a healthcare company, there is a significant capital requirement required. The European Union framework regarding healthcare is strict, and compliance is necessary. Then there is a licensing requirement last, but not least specialist human resources is a fundamental requirement. The presence of multinational companies also deters new entrants. The threat of new entrants remains low.
Bargaining Power of Buyers
In the Healthcare sector, especially managed healthcare, the consumer is in a disadvantaged position. The most important consumer is the chronic kidney patient; the patient needs dialysis depending upon its state. The service provider is aware of the fact. Dialysis is the only solution other than an organ transplant. The transplant has its prerequisites and its expensive surgery. The patient holds no bargaining power. The other consumers are hospitals and pharmacies. Hospitals purchase drugs produced by pharmaceutical production arms, and they usually place an order in bulk. If the required drug is unique and patented; Hospitals hold low bargaining power. Pharmacies are the distribution channels, and they have no leverage. Considering all the facts, consumers hold no bargaining power.
Bargaining Power of Suppliers
Usually, the important sources of supply are raw materials, Instruments, specialized equipment, chemists, and expert human resources. The raw material and instruments that are required in the manufacturing of drugs are commonly available in the chemical industry. The suppliers have low bargaining power as multiple suppliers are providing these supplies. The suppliers who produce specialized equipment can leverage their uniqueness and bargaining in their favor. Fresenius produces dialysis machines, so it is immune to that too. Chemists are available in abundance; they don’t hold any bargaining chip. Doctors are in short supply, and their services are demanded globally (Qin, X et al., 2013). Doctors hold high bargaining power. Considering all factors, suppliers in accumulation have low bargaining power.
References
Davita. (2020). Financial Reports. Available at: https://investors.davita.com/financial-information/financial-reports
Fortune. (2020). Baxter International. Available at: https://fortune.com/fortune500/2019/baxter-international/
Fortune. (2020). Fresenius. Available at: https://fortune.com/global500/2018/fresenius/
Fresenius. (2020). The Healthcare Group. Available at: https://www.fresenius.com/Group-Overview
Grant, R. M. (2010). Contemporary Strategy Analysis. 7th Edition.
Hervey, T. (2011). The impacts of European Union law on the health care sector: Institutional overview. European Union law and health, 16(4), 5.
Qin, X., Li, L., & Hsieh, C. R. (2013). Too few doctors or too low wages? Labor supply of health care professionals in China. China Economic Review, 24, 150-164.
Reibling, N. (2010). Healthcare systems in Europe: towards an incorporation of patient access. Journal of European Social Policy, 20(1), 5–18.