Background
Many approaches to contemporary economic analysis are created to examine one or another industry based on specific criteria. Porter’s Five Forces model is a simple tool that is intended to assist in primary sources of competition identification (Mind Tools Content Team, n.d.). It considers the following concepts: rivalry, bargaining power of suppliers, bargaining power of buyers, and the threats of new entrants and substitutes. This report will implement Porter’s Five Forces model to evaluate the medical devices supplies industry in Saudi Arabia in detail.
Porter’s Five Forces Model
The first concept of the model is the competitive rivalry that considers the number and the strength of competitors in the market. The industry is expected to grow for further years as the population, and the level of the wealth of citizens rises, conceiving the increase in demand for healthcare that is related to medical devices supply. The major competitors on the market are Johnson & Johnson, General Electric, Medtronic, Koninklijke Philips Electronics NV., Baxter International, and others (Market Research Future, 2018, para. 2). However, 94% of local demand is covered by import, while the national policy support companies located in the country (Medical Devices, n.d., para. 2). It implies that there is an opportunity for any company to grow without being oppressed by competitors.
With respect to supplier power, there is a general tendency in the Saudi Arabia market that determines the approach of competitors to prices. The ability of suppliers of raw materials to dictate prices for manufacturers is weak as many local companies can offer their products for low prices (NBC Editors, 2021). For instance, Saudi Arabia is the largest producer of plastic, which is one of the vital materials for medical device production (Saudi Arabia aims to be among the top 10 global plastics exporters, 2020).
Currently, the import potential is significant due to free trade agreements that make it impossible for local companies to manipulate their medical devices’ prices. It implies that external suppliers are capable of offering the same quality, lower-cost products (Medical Devices, n.d., para. 2). Therefore, buyer power is strong as it is relatively simple for a customer to switch their choice to a cheaper alternative that influences the pricing policy of local companies.
The next threat is a substitution, referred to as a chance to find another product that fulfills the same need. However, it is not possible for healthcare to be provided without medical devices, and there is no alternative for existing products, which competitors in the current market cannot produce (The Importance of Medical Devices and ISO 13485 Comes to the Forefront, n.d.). Finally, the positions of companies in the examined industry can be affected by the threat of new entrants into the market.
With respect to the possibility for a company to access a sector in the medical devices industry, it is necessary to refer to the above-mentioned statistics of the demand fulfillment by local companies’ products (Medical Devices, n.d.). From this, and the fact that the level of competition is low derives the further conclusion. New entrants in the market will not influence the positions of the leaders of the industry but rather lower the number of medical devices exported from other countries.
Conclusion
Porter’s five forces model is proved to be useful for accessing the main sources of competition in the industry of medical devices. Based on the implementations of the concept, further conclusions can be outlined. The level of competitive rivalry is low, and supplier power is weak, while the power of buyers is strong. In addition, there is no threat of substitution, and new entries are not expected to affect the positions of local manufacturers.
References
Market Research Future (2018). Saudi Arabia medical devices market competition to heat up with innovative technologies going mainstream during forecast period 2018-2023. Web.
Medical Devices. (n.d.). Web.
Mind Tools Content Team. (n.d.). Porter’s Five Forces. Web.
NBC Editors (2021). Saudi Arabia medical devices market forecasted for significant growth. Web.
Saudi Arabia aims to be among top 10 global plastics exporters. (2020). Web.
The importance of medical devices and ISO 13485 comes to the forefront. (n.d.). Web.
