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Apply Porter's five forces for Aravind case study to increase the understanding of the role of entrepreneurship.




Aravind Hospital-Porter five forces


Porter's five forces are a familiar method of analyzing business competition that companies usually use. It divides five forces from industrial organization economics to determine the intensity of competition. The five type of forces include in the porter’s five forces is threat of substitute products, bargaining power or customers, threat of new entrants, bargaining power of supplier, and last was competitive rivalry among existing firms.

 

First, let’s apply the substitute of products on the Aravind. As we know that Aravind is almost an authority agency in the Ophthalmology community. There are very few organizations or entrepreneurs that can threaten Aravind's position in the ophthalmology field. It means that the threat of substitute products to Aravind is substantially low especially in India. Another reason, Aravind is always taking care of forming a good reputation and image, and the price is low, but the quality is still good and most of the customers will give more trust to Aravind other than choose another company. This has caused obstacles that block the substitute product and services to engage in the ophthalmology area.

 

For the threat of new entrants is almost the same situation with the substitute of products. Because of Aravind's good reputation and assurance. This has caused the Aravind to be very stable and almost acquire most of the ophthalmology market in India. There is a high barrier in the India market, if there is still another threat of new entrants, it will be more possible from the other developing country.

 

Besides that, the bargaining power of the supplier is constantly more flexible based on management and change. If the suppliers of Aravind was more, the bargaining power of supplier to the Aravind is low, if the suppliers of Aravind was less or one, the bargaining power of suppliers to the Aravind is higher because of the dependency on only one supplier. However, the technology was improving daily and the product differentiation also increased. This will slowly increase the bargaining power of the supplier because of the unique product, especially to the Aravind eye hospital is the specialty for ophthalmology that needs special medical equipment.

 

Another was the bargaining power of the customers. Aravind eye hospital provides a better service and product to the customer at an affordable price for a very long time. This shall be able to attract the customer, but it also set up a benchmark and fixed customer thinking with the quality of the Aravind. This has caused the bargaining power of the customer to increase. However, there is not much hospital that can replace Aravind eye hospital in the community of ophthalmology because Aravind eye hospital price and quality are higher than normal hospital standards, and especially in India, there is almost no other competitor. It means that there is less choice for the customer when they want to solve the cataract problem so that the bargaining power of the customer will decrease accordingly.

 

As a conclusion, there was less competitor for Aravind in the ophthalmology field because of its own good services. And it was a high barrier in the market, which means that there is also low threat from new business in India and there will be higher loyalty customers as there is less choice in the India market. This has also cause that bargaining power of the customer and supplier relatively low accordingly.



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