How Do I Conduct a Healthcare Market Analysis?

Healthcare market analysis involves the research and evaluation of data to determine the financial stability and growth prospects of the healthcare industry. It does this by identifying sources of revenue and competition. Another term for healthcare market analysis is healthcare environmental analysis. In business, a company's environment is comprised of customers, rival companies, and suppliers of resources.

For a business in the healthcare field to profit, customers must pay a price for products or services that is higher than the expense of providing such services. Competition limits the amount a company can charge, while suppliers can decrease profit by raising their own prices. Consequently, healthcare market analysis requires quality research. A quality analysis helps an investor or entrepreneur determine potential profit based on the economic traits of the industry and level of competition.

There are two types of research in healthcare market analysis: quantitative and qualitative. Quantitative research uses statistical data to calculate ratios or percentages that delineate the financial health of the healthcare sector. Qualitative research is based on an individual's personal interpretation of data, news stories, statistics, and industry knowledge.

Such market analysis is typically used to hypothesize about future growth or profit prospects. The relevant data needed for quantitative and qualitative research can be found in published reports from healthcare industry trade publications, financial analysts, and the companies within the industry. Information is also readily available for free on the Internet, however the source should be evaluated based on how current it is, its reputation, and its authority within the healthcare industry.

Once data is procured, healthcare market analysis requires the industry to be evaluated based on market size, demand, competition, the bargaining power of suppliers, and barriers to entry. Market size is determined by looking at the sales figures of the top businesses or organizations in the market segment. Smaller markets equate to less demand and lower profits for companies. For example, a healthcare market analysis might suggest that the healthcare industry is large and will continue to grow because of increasing life expectancies and advancements in medicine and technology.

Competition in healthcare market analysis is dependent on the sector of the industry a company is in. The healthcare equipment market, for example, may be controlled by a few companies. Hospitals, however, might compete for patients and contracts from insurance companies who offer managed care plans.

Barriers to entry determine how difficult it is for a new company to enter into the healthcare industry. Healthcare market analysis could reveal that startup costs for healthcare providers are high, winnowing the number of new companies that can enter the field. Furthermore, government regulations designed to ensure quality products and care might restrict competition and raise prices due to compliance and licensing requirements.