McKesson Corporation is the largest and oldest healthcare company across the nation. The company serve to over 50% hospitals in United States and the 20% of the physicians. The company successfully deliver almost one-third of the medications used in North America daily. The corporation is successfully operating in over 16 countries. The company is in the era of new complexities and technicalities involve in the healthcare. It believes in improving healthcare system in different areas- one partner, one patient and one product at a time. And it is successfully operating in this mission by working virtually on all the aspects of the healthcare. There are 78,000 employees working for the company and making the patient’s life healthier (McKesson, 2019).
The company is operating in the international health care market. It is necessary for it to determine industrial analysis in order to identify its own strategic position in the industry. Porter five forces model helps the company in determining the external factor analysis. It identifies new opportunities and threats to be overcome by the company for growth. Here is the detailed Porter five forces analysis of McKesson Corporation;
Bargaining Power of Buyers
The consumers are highly demanding in the medical and healthcare industry. With the increase use of internet, buyers can easily get information about the best medication and treatments. Consumers have wide variety of choices among healthcare providers, because of which they have high bargaining power. They want high class treatment and lowest possible price. They prefer availing the offers and discounts. That is why, the market share of the company is relatively small than the revenue generated in United States. However, McKesson successfully expanded itself geographically in order to mitigate the risk. It increases its customer base in different countries (Institutional affiliation, 2018).
Bargaining Power of Suppliers
The suppliers in the medical and healthcare industry have high bargaining power. This is because of the dependency of the companies on suppliers for raw materials and medical equipment. This gives the suppliers more control over prices. This greatly effects the profitability of the companies like McKesson. However, McKesson has controlled the situation to some extent by developing the efficient supply chain. This helps the company in reducing its dependency on any one supplier. Moreover, the company also engaged in experimenting the product with different raw materials and designs. This helps the company in ensuring the availability of other supplier if previous one increases the prices (Institutional affiliation, 2018).
Threats of New Entrants
Threats of the new entrants in the health care industry are very low. This is mainly because of the healthcare and medical fields complexities. The industry has barriers to entry due to the strict regulations and quality measures imposed by the government. Huge capitalization is required in setting up healthcare hospitals, as new innovations and technologies in treating patients are needed. Moreover, the industry has big competitors operating and have huge market share. It is difficult for the new entrant to work in the competitive environment. It is necessary for McKesson to improve its products and services for maintaining the market share. The company should spend more on its research and development, so that more reasonable treatments can be identified (Akansha, 2019).
Threats from the Substitute Products
There are numerous substitutes available in the industry for any one drug or medicine. For example, hundreds of painkillers are available of different brands in United States. This leads the company in maintaining huge product portfolio to maintain the market share in the industry. Therefore, McKesson has increased its service portfolio than physical product portfolio to mitigate the risk. The company also did its research in identifying the consumer preferences and their needs. It also increased its switching cost, which restrict the consumers to switch to other competitors (Institutional affiliation, 2018).
Rivalry of Existing Players
The healthcare and medical industry is highly saturated. The competition between the existing firms is very intense. The main competitors of McKesson are Amerisource Bergen, EMIS group, Walgreens Boot Alliance, Owens and Minor etc. As suggested by the Porter five forces, the high competition pressurises the companies to lower the prices. This results the companies in having low return on the assets ratio. McKesson is competing with the firms and has the toll on its profitability in the long run. The company has successfully developed the sustainable differentiation of brand and products. The company is successfully operating in the international market and achieving its milestones (Craft, 2019).
References
Akansha, 2019. McKesson Company analysis. [Online], Available at: https://www.coursehero.com/file/p706md1/McKESSON-COMPANY-ANALYSIS-11-problems-that-the-current-approach-is-facing-With/, [Accessed on: 31st December, 2019].
Craft, 2019. McKesson Competitors. [Online], Available at: https://craft.co/mckesson/competitors, [Accessed on: 31st December, 2019].
Institutional affiliation, 2018. Industry analysis of McKesson. [Online], Available at: https://www.homeworkmarket.com/files/climb_2901_review_31-01-20180-3446803.doc, [Accessed on: 31st December, 2019].
McKesson, 2019. About us. [Online], Available at: https://www.mckesson.com/about-mckesson/, [Accessed on: 31st December, 2019].