Porter\'s 5 Forces Analysis of the Medical Devices Industry in Australia

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.

Threat of Substitute Products -- High

It was identified that there is a significant threat to most medical devices in the Australian market. Australia is an advanced economy with a great deal of innovation that floods the market with quality products. Although not all medical devices can be substituted with competing products, most of them can. There are many options for medical treatments in modern medicine and doctors have many options to treat patients. As a result, medical devices can become quickly obsolete as new treatments are introduced.

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.