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The Mayo Clinic in Rochester, Minnesota is one of the best pulmonology centers in the United States. This clinic’s consistent focus on high-quality care in all specialties has made Mayo Clinic a famous brand all over the country. Through research, innovation, and adherence to skills’ excellence, the facility has excelled in the provision of respiratory and critical care for many years now, although it is considered to be one of the best hospitals for many other specialty care services, including Neurology, Gynecology and Endocrinology & Diabetes. The exceptional quality of clinic’s services makes it stand out in the national market. This paper analyzes the hospital, using Porter’s five forces model to determine its corporate strategy and service structure. The concept suggests that the structural factors that characterize a service area are entry barriers, threats from similar products, intensity of competition, customers’ power over prices, and ability of suppliers to bargain. According to Rodrigues (2013), the forces indicate the profitability and intensity of competition in a market. Although, Mayo Clinic Pulmonology Center faces some level of rivalry from its substitutes, it manages to stay at the top of the competition because of its advantageous price influences and existence of market barriers that deter new entrants.
Porter’s Five Forces
Threat of New Entrants
An industry in which businesses make huge profits attracts many competitors, and this, eventually, results in an overall reduction of profits (Hur & Riyanto, 2012). The financial reports of Mayo Clinic suggest that Pulmonology market in Minnesota is an excellent source of revenues for care providers. Hence, clinics, specializing in this area of medicine, have come up in the recent past. The overall entry rate for new businesses in this market has been low due to some environmental factors that bar their establishment. One of such factors is the loyalty of clients to superior brands, such as Mayo Clinic. Being the hospital with one of the best pulmonology centers, Mayo Clinic threatens the establishment of Respiratory Specialist centers in Rochester, MN.
Besides the preferred brands, the cost of entry is very high in this market. Quality pulmonary therapy requires expensive machines, such as heated humidifiers, oxygen concentrators, ventilators and BiPAP machines (Luga & McGuire, 2014). Although, suppliers and distributors of such equipment are easily accessible, many new organizations cannot afford all of them and still shoulder the cost of enormous benefits for specialists who work with them. For the same reason, even existing smaller medical facilities are hesitant to switch their services to pulmonology therapy. Furthermore, both the federal and state governments have strict entry and licensure policies that discourage new entrants. Thus, the new entrants’ factor is not a significant threat to the pulmonary department of Mayo Clinic.
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Threat of Substitutes
The Mayo Clinic Pulmonary Department services have many substitutes within Rochester MN, and beyond. Within the city, the alternatives include respiratory critical care specialist practicing privately, outpatient clinics and over the counter prescriptions. While some of these options may be cheaper and more accessible to patients in different parts of Rochester, they do not guarantee value for money, as much as mayo Clinic, whose services have been tested through many empirical studies. The local substitutes will have to invest a lot of resources to march the standards of Mayo Clinic.
However, there are closer substitutes of the clinic, which are other leading hospitals, like the Cleveland Clinic and the Massachusetts General Hospital. There are thousands of renowned medical facilities, offering competent Pulmonology care in the United States, but recent studies have ranked the Mayo Clinic Pulmonary Department above all of them (Mayo Clinic Consolidated Financial Report, 2016). Moreover, while some clinics have the cost advantage over Mayo Clinic, they are located very far from it; hence, they target different communities. Accordingly, if customers within the Mayo Clinic target community have to switch to one of these hospitals, they would incur significant costs. Lastly, since it was ranked as the best two years ago, Mayo Clinic has proved its keenness in maintaining quality of its services, reducing the need of customers to look for alternatives.
Degree of Industry Rivalry
As previously stated, entering the respiratory care industry costs a lot of resources and money. Therefore, it takes enormous efforts to displace the existing brands and become a serious competitor in this market. Nonetheless, entities and individuals still endeavor to explore the industry and challenge big facilities, like Mayo Clinic. Therefore, Mayo Clinic continuously puts in place various measures to increase its competitiveness. The clinic has a dedicated Center for Innovation that consistently conducts researches to promote innovation in medicine and care. The center works around the clock to improve healthcare delivery and experience with a focus on the patient. The hospital engages multidisciplinary specialists in transforming innovative medical ideas into real transformative solutions for practitioners and patients. The clinic is able to withstand the rapid evolution of the healthcare industry.
Moreover, Mayo Clinic has a unique competitive strategy that gives it an edge over rivals. It emphasizes on quality of care, as a way of leveraging patients’ experiences. The facility focuses on technology, empathetic care, and expertise. It measures the quality of its services with the number of successful diagnoses, integration of confidential health information in care, and mortality rates. Furthermore, it requires its doctors to be available for appointments, to dedicate the patients enough time, and to treat them with dignity and respect. The organization shows commitment to sustain its competitive position because it has trained its workers to fit into a work culture of excellence in knowledge and in strong work ethics. Mayo Clinic also uses strategic marketing to offset the competition from its rivals. Through its continuous integrative care approach and emphasis of teamwork, the clinic has provided high-quality care that has gained popularity through word-of-mouth testimonies from the public.
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Bargaining Power of Customers
Mayo Clinic has few substitutes, and many of them offer services of lower quality. Therefore, there are low chances of its customers switching to other care providers, and, as a result, their bargaining power is very limited. Many environmental considerations lower the bargaining leverage of customers. First, as one of the finest in the country, the Mayo Clinic Pulmonary Center has a substantial competitive advantage over other products on the market. The facility is well-known, and it commands a lot of public confidence and trust. Second, the pulmonary care patients tend not to exercise their price sensitivity for the sake of getting quality care. Besides, the healthcare market uniquely gives customers almost no bargaining influence. Its products fall in the category of essential commodities that the law of demand and supply exempts (Christopher, 2016). The need to get well supersedes the sensitivity to prices. Furthermore, cheaper alternatives to Mayo Clinic eventually give less value for the money paid. Nevertheless, Mayo Clinic treats each customer, as though he/she is so important that their switching to other products would adversely cost the company. Therefore, it is to the advantage of the hospital that they do not have many alternatives of similar quality within the reach.
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Bargaining Power of Suppliers
Suppliers in the U.S. healthcare industry have low bargaining power because they have a high level of rivalry due to their big number (Christopher, 2016). The clinics do not allow them a lot of room to negotiate their buying prices for the products. Large medical facilities, like Mayo Clinic, have a great buying power and can, therefore, discuss the rates at which they can buy products. Moreover, medical organizations as buyers can quickly switch from one supplier to another with positive effects on costs. Hence, the suppliers’ need to maintain their loyal customers compels them to reduce their profit margins, enabling buyers to realize more revenues from sales of their supplies.
Mayo Clinic has maintained a leading position in the provision of respiratory care services in the United States for the reason that of its advantageous positions on the competition ladder and product pricing. The hospital is in an industry that is not easy to enter due to cost implications, high competition, and strict government policies. Therefore, its products do not have many similar substitutes within reach of its target market except prescription products, which cannot be used for critical care. Despite the relatively small number of alternatives, the industry has a high degree of rivalry. Since patients consider the quality of care importantly, competition is driven by innovation. The central position of innovation gives the hospital advantage over many others, as it is still one of the market leaders in this area. Alongside innovation, the clinic has state of the art care standards that keep the customers coming. Furthermore, the organization is in an industry where patients do not enjoy much freedom of choice. Healthcare, especially in critical respiratory cases, is not only a necessary but also an urgent need. Moreover, patients within the Mayo Clinic’s target population are not likely to seek similar care elsewhere, because it is one of the best in the whole country. Apparently, reaching the other hospitals that rival the clinic in quality of pulmonary care would be costly on its target market. Lastly, the hospital’s suppliers have limited bargaining power, because they are many in the industry. Hence, Mayo Clinic can push its suppliers for a discount, but it has no compelling reason to offer its services at discounted prices to its buyers.
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