Dentistry and Porter Five Forces Competition Analysis

 

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According to Professor Porter there are five forces or powers that determine the degree of competition in a business environment:

  1. Supplier power: the fewer the supplier the less power a business would have.
  2. Buyer power: the fewer the buyers the less power you would have.
  3. Competitive rivalry: how many other businesses provide similar products or services.
  4. Threat of substitution: how easy is it for customers to find another way or product to achieve the same result.
  5. Threat of new entry: how easy is it for new businesses to enter the market and compete against you.

I would argue that in dentistry in general and particularly in Canada, all the forces work against the dentists especially the newbies. Here is how:

  1. Supplier power: there is only a handful of major dental supply companies that dentists deal with. In Canada, these are Henry Schein, Patterson, and Sinclair. Their prices are very comparable. It’s a situation similar to the case of phone and data providers: Telus, Bell, and Rogers. Consequently, dentists have very little bargaining power when they purchase equipment and materials
  2. Buyer power: the end customer of dental services is the patient. Unfortunately, the population to dentist ratio is falling across Canada. This gives the patients more bargaining power over dentists. Moreover, there is only a few insurance companies that provide dental plans and they have tremendous bargaining power over dentists as patients rarely go to the dentist unless the service is covered by their plan.
  3. Competitive Rivalry: dentistry is a homogenous health service and it’s very difficult to differentiate yourself from other dentists without stepping on the toes of the licensing jurisdictions. In the eyes of the patients, all dentists are the same. Moreover, a lot of dentists are willing to throw their colleagues under the bus in the hope of winning over some patients.
  4. Threat of substitution: this might be the only power that keeps dental clinics open. People will always have teeth that need to be checked and maintained. However, it might not take long before patients can bypass the dentist to achieve their goals. Just look at the increasing number of over the counter dental products such as whitening products and night guards.
  5. Threat of new entry: although it’s still quite challenging to get into a dental program in Canada, it’s not really the case for foreign-trained dentists. Canada has relaxed its criteria for immigration and foreign dental credentials. For more information, please refer to my blog on the oversupply of dentists.
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