Porter's five forces analysis of Australia's medical devices industry

Porters Australia

Porters Five Forces Analysis of Medical Devices in Australia

Threat of New Competition -- Medium

The threat of new competition in the medical devices industry is believed to be at a medium level. This is primarily due to the fact that this industry is heavily regulated and must comply with legislation such as the Therapeutic Goods Act of 1989 (Department of Health and Ageing, 2011). The regulatory environment acts as a deterrent for many potential competitors. However, given the profitability potential in the industry, there is still a significant threat from new competitors as many firms will tackle the regulations.

Bargaining Power of Buyers -- High

Buyers, or in this case patients, also have a significant amount of bargaining power in regards to medical devices in most cases. Although a few devices may command a virtual monopoly in which the person's health is absolutely dependent on a specific device, most devices have a plethora of substitutes in which consumers can select from. Furthermore, in non-emergency situations, potential patience may also have the luxury of delaying a procedure to wait for new emerging technologies to reach the market (Consumers Health Forum of Australia, 2007). Obviously in emergency situations the patient would have less power but in most cases the buyers power would be relatively high.

Bargaining Power of Suppliers -- Medium

According to Innovation Dynamics, there were 655 medical devices companies in Australia in 2007 (AusMedtech, 2011). Although this may seem like a large number of firms, the industry is highly fragmented with many smaller producers while there are fewer numbers of larger conglomerations of manufactures. This gives the suppliers in the medical devices industry a moderate amount of supplier's power due to the number of firms and Australia's population.

Competitive Rivalry - High

Among the firms in the medical devices industry competition is extremely high among competitors and expected to increase indefinitely into the future as the Australian population continues to age (Perrott & Hughes, 2005). As the population gets older the demand for new medical devices also grows. Thus this represents a growing market with increasing opportunities for profitability. As a result of this trend, firms are competing constantly to position themselves in a way that will allow them the greatest market share possible.