Introduction
The five forces framework is a tool used by businesses and investors to understand the competitive dynamics of an industry. The framework, developed by Michael Porter in 1979, is used to analyze the forces that influence the profitability of an industry. The analysis of the health industry in Kuwait using the five forces framework reveals that it presents numerous opportunities for investors; however, it also poses risks that should be taken into consideration.
Supplier Power
In Kuwait, the health sector is heavily reliant on external suppliers of medical supplies and equipment. A majority of these providers are from abroad and hold a strong foothold in the market, enabling them to set prices and terms of supply (Nasrallah et al., 2019). This gives them considerable bargaining power over the industry, which could lead to lower profits for investors.
Buyer Power
The buyers of health services in Kuwait are primarily individuals and insurance companies. The buyer power in this industry is relatively low, as there are few options for buyers to choose from and the services are often expensive (El Mallakh, 2019). This means that buyers are unable to negotiate for lower prices, which could result in investors earning lower returns.
Threat of New Entrants
The health industry in Kuwait is highly regulated, and the barriers to entry are relatively high. This makes it difficult for new entrants to enter the market and compete with existing players (El Mallakh, 2019). It also limits the potential for new competitors to enter the market, which could lead to higher profits for existing investors.
Threat of Substitutes
The threat of substitutes in the health industry in Kuwait is relatively low. This is because the services provided by the industry are specialized and cannot be easily replaced by other industries (El Mallakh, 2019). This provides existing players in the industry with some protection against competition, potentially leading to higher profits for investors. Moreover, the licensing and regulatory requirements are also complex and time-consuming. This complicates entry for those who are just starting to establish themselves quickly in the market.
Competitive Rivalry
The healthcare market in Kuwait is highly competitive due to the presence of numerous private and public health facilities and service providers. This has resulted in a wide range of choices for patients (Nasrallah et al., 2019). Furthermore, the government has been actively encouraging reforms in the healthcare sector, while also making investments in its infrastructure, thereby allowing new entrants to enter the market (El Mallakh, 2019). This, combined with the increasing demand for high-quality healthcare services from both locals and expatriates, has created a highly competitive climate where healthcare providers must offer the best services and facilities to attract and retain customers. This has the potential to drive down prices and reduce profits for investors.
Conclusion
To summarize, the five forces framework analysis of the Kuwaiti health industry presents a plethora of advantages for investors but also risks that must be heeded. The competitive rivalry in the industry is relatively high, which could lead to lower prices and lower profits for investors. Taking all of these factors into account, it is recommended that investors carefully evaluate the risks and potential rewards before investing in this industry.
References
El Mallakh, R. (2019). Kuwait: Trade and investment. Taylor & Francis.
Nasrallah, A., Abdul-Sater, E., & Sami, A., & Dunn, J. (2019). Shaping the future of Kuwait’s healthcare industry. Oracle Cerner. Web.