190-Who Are Those Guys?

Whenever an industry finds itself in the enviable position of having freedom in pricing, it usually finds that competition emerges out of the woodwork, from the least expected places. In many cases, the companies in these industries don’t conceive of new competition really having much of a chance to emerge. If they do see competition, they usually dismiss that competition as incapable of offering real competition.

Microsoft dominates the PC software market. It is likely to do so for many years to come. But Linux and Google have emerged to be a thorn in Microsoft’s side. Both of these alternatives have small market shares. However, both are able to limit Microsoft’s pricing power in some of its markets, especially governmental markets. (See the Symptom & Implication, “The industry leaders are losing share” on StrategyStreet.com.)

Healthcare pricing seems to be out of anyone’s control today. Maybe ObamaCare will fix that, though that is hard to see when, overnight, we increased demand without increasing any supply. It is more likely that healthcare cost growth will continue; indeed, even accelerate. But there is an emergent competitor: medical tourism. Ten years ago, few of us would have considered going to a foreign country to undergo an important medical procedure. As recently as 2007, more than 750,000 Americans traveled abroad for a medical procedure. That market is growing at better than 15% a year. And as medical tourism grows, so too will the skills and capabilities resident at the medical facilities these tourists visit. They will become stronger competitors. (See the Symptom & Implication, “Competition is expanding with the appearance of discounters” on StrategyStreet.com.)

Higher education is another area where school participants seem to have virtually unlimited pricing power. Along with that power has come a boom in for-profit college and university alternatives. These for-profit institutions are still a small factor in the market, but they are growing very rapidly. Now DeVry University and the University of Phoenix are unlikely to challenge the Ivy League any time soon. But eventually, they will put the breaks on the pricing freedom in many of the lesser known public and private institutions.


In the battle with unanticipated or smaller competitors, Microsoft has a mixed record. Linux may have challenged its leadership, but Microsoft has overwhelmed all of its operating system competitors. It may be that Microsoft has been successful here because this was their original market, where they learned to compete with tooth and claw. On the other hand, Google has proven to be a mighty competitor in the office suite market. As Microsoft was caught sleeping at the wheel with high prices, Google undercut them and emerged as competitor with a market share equal to that of the erstwhile leader. Apparently, Microsoft was concerned about giving up any profits in a market it dominated. That decision caused it to lose market share that it would love to have back today.

Leader’s Trap Examples – StrategyStreet.com

The medical tourism business betrays a weakness in US healthcare pricing. The weakness is that there is not one or even a few dominating companies able to set prices against Price Leader competitors. Pricing is set by individual hospitals or hospital groups. As a result, medical tourism continues to grow rapidly and gain share.

As the quality and reputation for Reliability of offshore medical treatment has grown, so has its acceptance in the US market. Medical tourism enjoys high growth rates today in 2022. Major US Standard Leaders have recognized the threat of these Price Leader products and have moved to introduce their own versions of these products. See HERE and HERE for more explanation.

Since 2009, medical tourism has certainly grown, though not at anywhere near the rate forecast in 2009. Still, the industry is promising high growth rates in 2022 as Americans’ quality concerns gradually ebb.  In 2019, an estimated 1.9 million Americans traveled abroad for medical treatment. Market growth is variously estimated at 16 to 32% per year.  The key driver, of course, is cost savings. For example, an angioplasty in the US costs an average of $55,000. This cost compares to an average cost of $3000 in Malaysia. Average cost savings across all medical tourism procedures range from 55 to 70% of the US cost.

Inhibiting this growth, is a US patient’s concern about the quality of care compared to the quality of care in the US. This concern is gradually declining as major US medical centers establish offshore facilities and foreign medical centers provide increasing numbers of US trained and certified medical professionals. Several US medical centers, including Harvard, Boston University, Johns Hopkins and the Cleveland Clinic, have established hospitals and clinics outside of the United States, hoping to capitalize on local and foreign medical tourism.   Many overseas hospitals are staffed in part by physicians and other health professionals who were trained in US hospitals. One hospital in India has 200 US trained board-certified surgeons.



Posted 5/10/10


If you face a competitive marketplace, read these blogs. We wrote them to help you make better decisions on segments, products, prices and costs based on the experience of companies in over 85 competitive industries. Much of the world suffered a severe recession from 2008 to 2011. During that time, we wrote more than 270 blogs using publicly available information and our Strategystreet system to project what would happen in various companies and industries who were living in those hostile environments. In 2022, we updated each of these blogs to describe what later took place. You can use these updated blogs to see how the Strategystreet system works and how it can lead you to better decisions.