Analysis of the General Environment Factors

Market Size and growth rate Market size of the intentness is 40 billon and the industry has been growing at the rate 20% during the period 2000-08. The industry is currently in the rapid growth and takeoff phase since many innovations ar coming up and the industry is being attracted by many big corporate to enter in. Number of rivals The industry is divided into two sub segments bit tests and specialised tests. In routine test segment, the industry is fragmented into many small companies at the local and regional direct.In specialised test segment, the industry is dominated by few large companies such as Piramal, SRL Ranbaxy, etc. Since there is moo follow associated with setting up labs at local level and the industry has bright future prospects so it is attracting large number of local companies and also big corporate to enter the grocery. Scope of competitive rivalry closely companies in this industry compete at local geographic area since there is less cost associated wi th setting up the labs in local areas and hence it is easy for local players to enter in the market.Moreover, routine market comprises of 61% of the total market share which includes large number of small players and hence the arguing is fierce at local level. Also, companies present globally have competitive advantage in terms of high end applied science since it requires large investments which is not afforded by small players. Therefore looking at the long term perspective, globalisation is conducive for the increase in bottom line. Number of buyers There are two types of buyers doctors and patients. But most patients visit symptomatic centres only on the recommendation of doctors.Therefore referring doctors extol discretionary power to refer the patients to any diagnostic centre. Also the number of local diagnostic centres are many and doctors refer the patients where they have tie up and one which provide them better incentives. Therefore doctors enjoy high bargaining power . But specialized test centres are very few so they have significant bargaining power. Degree of product specialisation Routine segment is characterized by low product differentiation because routine tests include simple tests interchange fitting blood test, sugar test, etc. hich does not occupy much technical competency. And since there are large number of players in this segment and there is low product differentiation, this has led to fierce competition and low profitability. Whereas, specialized segment is characterized by presence of economies of scale so there is high product differentiation in terms of technology, modus operandi. Also, this segment is capital intensifier therefore it has fewer number of players. Product innovation The industry is characterized by rapid product innovation, for example, introduction of genome studies, molecular diagnostics and so on.As the methods of diagnosing are becoming more sensitive and specific, it is leading to rapid obsolescence o f old technology. Also there are opportunities to overtake rivals by being first to market with next generation products like Tele-Radiology, Tele Pathology. Supply/demand conditions Also as there are large number of players in routine segment, there is intense rivalry at local level. This rivalry has resulted in price wars. In specialized segment, which comprises of national players, there is moderate rivalry since players compete in similar markets and market potential is high.Pace of technological change As mentioned earlier, industry is marked with rapid change in technology and, methods of diagnosis. Rapidly advancement of technology in the methods of diagnosis and equipments is leading to rapid obsolescence of old technology. Most diagnostic centres need new technology with a need to replace equipments every sextuplet months which is not financially viable for most of the centres. Vertical integration Most competitors operate only in one segment that is diagnosis.But some co mpetitors like Piramal operate in multiple stages, for example it operates through B2C (Business to customer), D2C (Doctor to customer), B2B (Business to Business) modes. Economies of Scale The industry is characterized by economies of scale. But in routine segment, despite of the presence of economies of scale, none of the players has able to achieve high end volumes, due to intense competition and absence of government policies for restricting the entry of newer players, in order to gain substantial cost advantage. Specialized segment is also characterized by significant economies of scale.