Many important modern concerns could be related to the sphere of business which continues its rapid growth and remains one of the most significant forces of modern society. The sphere of business attracts people who want to realize their potential and improve the financial state. It results in the involvement of many individuals in the most topical sphere of activity. The main market trends and peoples requirements also impact various industries and introduce changes to their structure.
For these very reasons, there are various analysis tools aimed at the precise investigation of a certain industry to determine the level of its attractiveness and whether it is worth financing or not. The given paper revolves around the research of the medical device industry and the level of its attractiveness for the potential investors in terms of the modern business environment. The work rests on the main concepts of PESTEL and Potters five forces analysis.
The medical device industry is influenced by a complex of factors peculiar to modern society. Economic stress, reforms in the sphere of policy and health-care delivery introduce significant shifts into the healthcare complex (Sumpio, 2013). Being dependent on this sector, the industry responds to the changes by the alteration of its showings and working conditions. At the moment, it remains rather attractive for the stakeholders because of the great market size and the possible level of incomes.
The global market for medical devices is about $132.8bn, with the European share about $29.9bn (Topham, n.d.). There is also the tendency towards the continuation of its growth. Figure 1 presents the value of the market in the UK. At the beginning of 2016, the value reached 20 billion and continued to grow (Medical Devices for UK Lifestyle Disorders, n.d.).
The given factor gives rise to a great number of concerns related to the sphere of business and investment of the medical device industry. However, the most important concerns are the attractiveness of the business and the expected level of incomes peculiar to the chosen industry. Despite the positive perspectives, there are still some risks related to the medical device sector. The high price of the equipment and facilities determines the big opening stock needed for the involvement in this industry (Hilmersson, 2014). It could be rather challenging for actors characterized by the middle level of financing. In this regard, the analysis of the most significant aspects of the medical device industry becomes vital.
As any global industry, it is influenced by megatrends peculiar to the current stage of the evolution of the business environment. These macroeconomic forces define the vectors of the development of business, industry and pose the challenge to various companies (Stonehouse & Snowdon, 2007). Analysis of the most significant megatrends and their possible implications might provide the strategic information needed for the formation of the efficient course of the development of the industry and trigger the innovation process.
The medical devices sector is characterized as the one which follows the most important and topical patterns of modern society. The character of the industry determines its adherence to modern principles and innovation practices. For this reason, the medical device industry rests on the popular modern megatrends. The sphere of future computer electronics has a great impact on the given sector as it introduces technologies needed for the most complicated devices created by the industry. This trend also alters the way people think and perform various activities which are essential for medical devices.
Top technologies and robotics are trends closely connected with the previous one. They are based on the idea of the dominance of technologies and Artificial Intelligence used to perform the most complicated kinds of activity and achieve the next level of the devices efficiency (Mittelstaedt, Shultz, Kilbourne, & Peterson, 2014). Additionally, the evolution of the medical device industry is also influenced by the trends of the social sphere as it is focused on all groups of people.
In brief, the majority of the most significant megatrends have a certain impact on the given industry. This fact predetermines the further growth of the given sector supported by the undying interest towards these trends. In this regard, the attractiveness of the medical device industry will remain at a stable high level which will contribute to the evolution of the given sphere.
Furthermore, the PESTEL analysis should be conducted as the continuation of the research to determine other important factors which influence its state. This analysis tool is aimed at the description of the macro-environmental factors that form a framework for the functioning of an industry and helps to conduct the strategic analysis for the market research (Hanson, Hitt, Ireland, & Hoskisson, 2014). It might help to see the advantages and disadvantages of a certain industry and determine its further perspectives. There are six dimensions of the given analysis
Political
The medical device industry is characterized by a very clear and efficient policy. A company working in terms of the given industry has to act following the governmental regulations and limits to guarantee the high quality of the final product. The constant monitoring of the devices produced by the industry is an essential part of its policy. Additionally, the given sector is rather diverse as regulations vary in different regions. This fact impacts the given dimension, introducing the pattern according to which the companies comprising the industry organise their functioning.
Economic
The world financial crisis has a great influence on the medical device industry. However, despite the economic downturn, it continues to remain attractive for the potential actors and shareholders. At the moment, the given industry is characterized by the stable growth of the size of the market and the level of incomes (Hourd & Williams, 2008). This fact could be related to the specificity of the medical devices which guarantee a stable interest in this sphere and the gradual increase of the incomes. Health is one of the most important concerns of the modern age; that is why any business based on the provision of equipment needed for its maintenance is predetermined to remain beneficial. In 2015, the medical devices industry managed to improve its showings and create the basis for its further evolution (Hourd & Williams, 2008).
Social
Social factors have an outstanding impact on the medical device industry as its targeted audience is rather diverse and characterized by the numerous complicated demands on the quality of final products. The companies belonging to the given sector have to remain in line with the peculiarities of society and organize marketing campaigns resting on various social implications. It could result in the significant improvement of the level of the performance of the industry, attract new actors and consumers. Social implications comprise the essential part of the functioning of the given industry and should be considered while analysing the attractiveness and perspectives of the industry.
Technological
Traditionally, the given industry depends on this factor heavily. The rise of digital technologies triggered the significant process of change within the sector and contributed to the reconsideration of the approaches and strategies used for the manufacturing of certain devices. The recent industry now poses itself as one of the most technologically developed spheres the goods of which are characterized by the implementation of the newest technologies. Additionally, the Internet becomes an important tool which promotes the industry’s engagement and popularity. The majority of companies working in the given industry have their site which is used as the framework for the companys advance and popularization.
Environmental
The given concern becomes essential in modern society and impacts many manufacturers and industries. However, the effect of this factor on the medical device industry is not immense and does not alter the approaches used by it. The industry does not belong to the group of agents which are considered to be the main polluters (Hilmersson, 2014). For this reason, the image of companies does not suffer from the environmental claims and problems peculiar to modern society. Additionally, the insignificant impact of the environmental factor implies low spending related to the improvement of the equipment for it to meet modern demands. The combination of these factors determines the perfect attractiveness of the given industry.
Legal
Several legal implications control the functioning of the given industry and introduce certain limits to make it more efficient and safe. The quality of the final product should be at a high level as it is aimed at the protection and improvement of the life of people. It means that the level of the responsibility is extremely high and the penalties introduced by the governmental regulations are implemented to decrease the error rate. If the products of the industry are taken as unreliable, the procedure of recall could be initiated. This fact proves the challenging character of the whole business and impacts the level of its attractiveness.
More information related to the medical devices industry could be obtained using Potter’s five forces analysis. It assumes that 5 main forces form the competitive power of any company or organization. The results of this analysis promote a better understanding of the perspectives of the company and the risks associated with its functioning.
The threat of new entry
The company focused on the market of medical devices should have a great opening stock to be able to compete with rivals and align its functioning. The complexity of the new entry makes the given industry more powerful and protected from the external actors. In its turn, it increases the level of the attractiveness for the potential shareholders because of the great level of security of their investments.
Threat of substitution
This factor is insignificant for the medical device industry as at the current stage of the evolution of technologies it is impossible to substitute the products of the given industry. This fact makes the investments in the industry more perspective because of the absence of real rivals in the future.
Competitive rivalry
The above-mentioned information evidence that the sphere of medical device industry does not have the significant rivals which will be able to conquer the market segment and pose a threat to the further evolution of the given industry. It could be considered as another important advantage of the given industry.
Buyer power
The are many buyers all over the world who are interested in the goods produced by the given industry. For this reason, they are not able to dictate terms and get costs down. The diversity of buyers also increases the level of incomes of the industry and promotes its development.
Supplier Power
Unfortunately, the market is occupied by a few significant suppliers which are taken as the most credible and reliable ones. However, the industry continues its growth and introduces new goods to the market.
The given analysis proves the great competitive power of the medical device industry and promotes the increase of its attractiveness.
Therefore, the investigation of the market turbulence shows that the composition of customers is unlikely to change and the situation will remain stable for the next several years.
Finally, the impact of these factors upon the corporations which are related to the industry is extremely great. Being the main agents, they respond to the slightest changes in the world market. For example, the financial crisis of 2008 increased prices combined with the new campaign aimed at the improvement of the image of the sector (Hourd & Williams, 2008). This strategy initiated by CEOs helped the sector to continue its evolution.
It follows from this analysis that the medical devices industry could be described as a very attractive industry which might provide a range of possibilities for a potential shareholder. Additionally, the data obtained due to this very analysis might help CEOs to create an efficient strategy (Smith, 2000) to face various challenges and initiate the change process.
References
Hanson, D., Hitt, M., Ireland, R., & Hoskisson, R. (2014). Strategic Management: Competitiveness and Globalisation. Sydney, Australia: Cengage Learning. Web.
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Hourd, P., & Williams, D. (2008). Results from an exploratory study to identify the factors that contribute to success for UK medical device small- and medium-sized enterprises. Proceedings of the Institution of Mechanical Engineers, Part H: Journal of Engineering in Medicine, 222(5), 717-735. Web.
Medical Devices for UK Lifestyle Disorders. (n.d.). Web.
Mittelstaedt, J., Shultz, C., Kilbourne, W., & Peterson, M. (2014). Sustainability as Megatrend. Two Schools of Macromarketing Thought. Journal of Macromarketing, 34(3),253-264. Web.
Smith, B. (2000). Lessons for CEOs from the Consolidation of the Medical Device and Diagnostic Industries. Journal of Medical Marketing: Device, Diagnostic and Pharmaceutical Marketing, 1(2), 148-160. Web.
Stonehouse, G., & Snowdon, B. (2007). Competitive Advantage Revisited: Michael Porter on Strategy and Competitiveness. Journal of Management Inquiry, 16(3), 256-273. Web.
Sumpio, B. (2013). Application of Porter’s Five Forces Model and generic strategies for vascular surgery: should be stuck in the middle? Vascular, 21(3), 149-156. Web.
Topham, D. (n.d.). Medical devices. Web.