Introduction to the Industry and Hierarchy of the Products
The concept of product is increasingly becoming popular in the business sector, especially when it comes to explaining the sequence of movement and distribution of products on the basis of demand and market competition. Firms within a given industry always compete for the market share. When analyzing competitive rivalry within a given industry, issues such as size of market share, brand of a firm, and its dominance on issues such as innovation, and meeting the needs of consumers always play an important role. In this study, the researcher focused on United Arab Emirates’ city of Dubai. The city was chosen because it is the most populated in this country.
It has also experienced massive growth over the recent past as a strategic business and tourists’ hub in the entire region. The researcher conducted an overview of a number of developed industries in this city such as healthcare, education, automobile, food, and banking industries. The health industry was chosen because of its strategic importance in the growth of this city.
According to Kloep, quality healthcare is increasingly becoming a preserve for the rich in this society (19). The United Arab Emirates has a health insurance policy that provides for basic healthcare for all its citizens. However, the free services are only offered in government-sponsored hospitals. There are a number of private hospitals in this country which offer very high quality of healthcare services at a fee.
There are a number of factors that always influence buyers’ decision when planning to purchase healthcare products. Top private hospitals in this country are associated with the rich and the powerful. When purchasing healthcare services, a section of the society (the rich) always go for the image and social status. This trend has created competition among private players who are keen on making their brands be seen as the best in the market.
They not only focus on the primary product (healthcare services) but also additional care for the client and the friends and relatives who visit their patients. As Berkowitz says, brand is a major issue when people are choosing hospitals in this country (87). Everyone want to get the best medical care that the industry has to offer, and that is why ranching of the existing brands has been important.
A report by Etō shows that the number of private hospitals in the United Arab Emirates has been on the rise over the past one decade because of the increasing population in its major cities such as Dubai and Abu Dhabi (95). Firms believe that there is a huge potential in the healthcare sector, especially the city of Dubai who population has drastically gone up from 1.3 million people in 2005 to over 2.5 million in 2014. In this section, it is important to look at the top competitors in this industry to facilitate the analysis of their hierarchy in the market. There is one unique factor about the healthcare industry that makes it different from other industries in the market.
Firms are always keen to avoid publicizing their profitability growths, partly because of ethical concerns. Publicizing their profit growth is always a sign that they are celebrating the pain and medical problems of their patients. They even avoid delving into their market share. This means that the only way of getting their financial performance is to review the documents they provide to the government for purposes of tax. Their brand strength and popularity in the market may help in determining their market share in Dubai.
American Hospital
According to a study by Sanjo, American Hospital is one of the most popular healthcare firms in the city of Dubai (31). This acute care facility offers acute care services, surgical services, and general medical services. The facility has over 144 clinical examination rooms, 10-bed ICU unit and similar capacity in its Cardiac Intensive Care Unit. In 2005, the firm opened a new Heart-Center that was meant to meet the increasing needs of cardiac services in the city of Dubai. Its state-of-the-art renal and eye units have made it very popular among the rich in this society. Its surgery, pediatrics, primary care, obstetrics, and gynecology services are considered top notch in the country.
NMC Hospital Group
According to Kloep, NMC is currently the largest United Arab Emirates’ private health care provider (21). This firm has 2 main business branches: NMC Distribution and NMC Healthcare. In this study, the focus will be on NMC Healthcare. This firm started its operations in 1975 as a small pharmaceutical and clinic based in Abu Dhabi. It experienced massive success and spread its operations to Dubai a few years later. The available data shows that NMC controls about 18% of private healthcare market in Dubai. Although not considered to be among the top brands in terms of quality delivery, this firm has been appealing to the middle class who want quality healthcare services but cannot afford to spend lavishly for the services in the most expensive hospitals.
GMC Clinics
GMC Clinic is one of the top private healthcare providers in the United Arab Emirates. It offers a wide range of healthcare products, from inpatient to outpatient services. It is one of the brands that have won trust of many residents in Dubai because of the manner in which it takes care of the patients and their relatives. This hospital has also been keen on maintaining close interaction with members of the society. In 2014, this hospital invested over AED 500,000 in awareness campaign about cancer and diabetes which are currently some of the leading causes of death in the country (Woodman 88). It has also been active in sponsoring programs meant to protect the environment. These programs have helped it in promoting its brand image as a firm that is conscious of environment.
Zulekha Hospital
Founded in 1964 in Sharjah, Zulekha Healthcare Group has expanded to become one of the most successful private hospitals in the country. The firm is currently very active in Dubai. Its Dubai Branch has a 79-bed capacity spread in various units. Many consider Zulekha a specialty hospital because of the quality of care it offers in the field of cardiac and renal care. It is particular popular among the middle class members of the society.
Tawam Hospital
Tawam Hospital has emerged as one of the leading premium healthcare facilities in the United Arab Emirates. It has a bed capacity of 461 patients, making it one of the largest private healthcare facilities in the country. It notes that Tawam Hospital is an affiliate of John Hopkins, one of the best healthcare centers in the world. Tawam has made an effort to ensure that its quality of services meets that of the parent company. It has been in operations for the last 36 years and has become very popular among the expatriates working in the city of Dubai. It controls about 16% of the market share in this industry (Woodman 88).
Justification of the Industry Using PEST Model
The United Arab Emirates’ private healthcare sector is one of the most robust in the region. The country’s economy has experienced massive growth over the past two decades, and its city of Dubai has become the central business center and tourists hub in the entire region. The growth in population of Dubai City is primarily driven by the increasing number of expatriates who come to work in various sector of the economy.
As mentioned in the section above, there are a number of industries in this country which have become very attractive to investors all over the world. However, the researcher settled on the healthcare sector for this analytical study. In this section of the report, the researcher provides justification as to why this sector was chosen for the study. The analysis will be done on the external environment using PEST analysis.
The political environment plays a very critical role in the development of an industry. According to Lunt, Horsfall, and Hanefeld (65), a firm cannot survive in a country that has political instability. For instance, many firms which were operating in Syria have been forced to either relocate or shut down their operations because of the political instability in the country. The United Arab Emirates has enjoyed a long period of political stability despite the constant politically-instigated wars common in the region. The political class has also avoided any negative influence on the private sector.
The Dubai government has particularly created an enabling environment for firms in the healthcare sector to operate in the country. Hospitals in the country, both private and public, are assured of security because of the sensitivity of the nature of their work. This is one of the reasons that made the researcher to believe that this is a lucrative industry that is worth analyzing.
The economic environment is also critical when conducting an analysis of an industry. The United Arab Emirates is one of the emerging economies in the world. The country was affected by the 2008/2009 global economic recession that affected most of its trading partners. However, the country has recovered from this shock and it is currently experiencing a healthy growth. The improved economy has been particularly very beneficial to the private healthcare sector. It means that people have more disposable income that they can spend in purchasing healthcare products. A report by Woodman shows that the country’s healthcare market is poised to grow by 7% within the next one year (43). The growth of the market is directly attributed to the growing number of the middle class in the city of Dubai.
The active business community in this city is increasing the number of people who have enough to spend on basic needs, save, and afford some little luxury. This is an indication that the demand for the products offered in this industry is increasing considerably. This bright future that the economy of this country presents to the healthcare sector made it relevant to choose it as an industry of choice.
The social environment in the city of Dubai has been conducive for growth of the healthcare industry. A large number of dwellers in the city of Dubai are expatriates who work in various sectors of the economy. This population is very attractive to the players in the private healthcare sector because of their willingness to spend high quality health services.
Technology is another critical component of the external environment that influenced the decision to choose this industry. Technology has transformed the healthcare sector, especially in terms of methods of treatments used and diseases that can now be successfully managed. In the United Arab Emirates, the government has been supporting projects meant to boost treatment or management of diseases such as cancer and diabetes. Massive development of this industry is partly due to the heavy investment support it has received from the government.
Product Hierarchy
Brands Position in the Market
Substitutability
According to Kloep, substitutability of a product shows its competitive strength in the market (34). In Dubai, people can opt to the government sponsored public hospitals whose services are free for the citizens of the United Arab Emirates. However, a vast majority of the residents of this city are expatriates who have come to work in various industries. These people do not qualify for the free medical services offered in the government sponsored facilities.
When they use government hospitals, then they are treated as private patents and they have to pay almost similar costs as those charged in private hospitals. This limits the substitutability of the services offered by the private hospitals. The expatriates have little choice but to use these services because they cannot access free medical programs. Moreover, these private institutions are believed to be better positioned to offer better care for these expatriates as compared to the public hospitals.
Substitutability of the products offered by the above firms depends on the kind need that a patient has. Majority of the residents of Dubai prefer using private healthcare facilities than those offered by the government because of the perceived quality. Some of the private hospitals discussed above also specialize on management of specific diseases, reducing substitutability of their products.
For instance, American Hospital is known for its specialized care for patients having cardiac problems. From cardiac arrest to heart failure, American Hospital has state-of-the-art facility that can help save life of a patient in very critical condition. It means that every time one develops a heart-related problem, especially if there is a sense of emergency then what comes to the mind immediately is the service offered at American Hospital. The high costs associated with the services of this hospital may make one consider using other alternatives available in the market, but when one is driven by the desire for quality and the need for assurance that the patient will survive the delicate health condition, then services offered at American Hospital may be considered irreplaceable.
Zulekha is another specialist hospital whose services may not be easily substituted by some of its rivals. It offers a wide range of medical services, but specializes on renal care. Diabetes is one of the leading causes of death in Dubai. This firm has a renal centre that offers a wide range of services using the best medical equipment available in the market. Tawam Hospital is also known for its high quality products. Unlike its market rivals, this hospital prides itself of close working relationship with John Hopkins, one of the top three best hospitals in the world. It services are very popular among patients who are planning to leave the country for further treatment abroad, especially in the United States. Cancer patients have particularly found its services not easily replaceable.
Level of competition
The United Arab Emirates’ economy has experienced phenomenon growth over the past one decade due to emphasis it has laid on infrastructural development. It has the third largest economy in the Arab World. In Dubai, over 85% of the population are in active employment in various sectors of the economy and are aged from 18-65 years. The rest are children below 18 years and the elderly over 65 years. Woodman says that over 95% of the population in Dubai is aged below 65 years (98). In Dubai, about 91% of the residents are expatriates who are not qualified to use free government healthcare services. This demonstrates the huge size of the market for the private hospitals. Most of these expatriates are in gainful employment, hence are able to afford the cost of private healthcare services.
The level of competition in this market is stiff due to the attractiveness of this market currently and in the future. These hospitals have been keen to promote their brand in the market. For instance, GMC Clinics spent over AED 500,000 in awareness campaign about cancer and diabetes in 2014. This was not only meant to promote cancer and diabetes awareness, but also to promote the firm’s brand.
BCG matrix of the healthcare industry
Sequence of consumer choice
Consumers in this market make choice of the product they want to purchase based on the perceived quality of service offered by the individual care providers and their ability to pay for the services. The sequence starts by analyzing the problem, then determining the firm that can best solve the problem, before finally narrowing down to the issue of affordability of the service offered at different institutions.
Future of the product item selected
The stiff market competition currently experienced in the industry and the growing economy of the country will definitely redefine the future of the healthcare services in this country. Firms will focus more on delivering high quality care and improved customer relation policies as they struggle to remain appealing to their customers. Use of technology in this industry is also expected to increase in the future.
Works Cited
Berkowitz, Eric. Essentials of Health Care Marketing. Sudbury: Jones & Bartlett Learning, 2011. Print.
Etō, Hajime. New Business Opportunities in the Growing E-Tourism Industry. London: McMillan, 2015. Print.
Kloep, Michael. Managed Equipment Services As a Conceptual Business Opportunity Model for the GCC with Focus on UAE: An Institutional and Economic Analysis. Burgdorf: Herz, 2012. Print.
Lunt, Neil, Daniel Horsfall, and Johanna Hanefeld. Handbook on Medical Tourism and Patient Mobility. New York: Cengage, 2015. Print.
Sanjo, Yasuo. “Quality Choice in a Health Care Market: A Mixed Duopoly Approach”. The European Journal of Health Economics 10.2 (2011): 207–215.
Woodman, Josef. Patients Beyond Borders: Everybody’s Guide to Affordable, World-Class Medical Travel. Chapel Hill: Healthy Travel Media, 2015. Print.