Threat of entry.

Entering the particular industry requires huge capital due to

what is being catered in the market. According to the article, Health Insurance
Industry by Groat. T. and other supporting information from the web, the
industry requires high economies of scale in order to provide good packages
of insurance from providers and to cover wide geographic location. Switching
cost, as discussed in a study by Lamiraud, K. (2013), is high in this industry in
terms of search costs, brand loyalty, status quo bias, brand equity and others.
Due to these costs to consider, new entrants may encounter problems for
market penetration. Also, factors like established brand identities, favorable
geographic locations and good distribution channels that aid in the marketing
efforts of the companies are also enjoyed and vital in this industry, thus
gaining incumbent advantage over new entrants. These factors show that the
potential entrance of new companies in the industry is difficult, thus making
the threat of entry low.
Power of suppliers. IMS suppliers consist of the insurance providers,
accredited hospitals/clinics and the card supplier. The card is provided by the
IWC, the HMO affiliate and sister company of IMS, and is primarily
manufactured by Colorado Printing Press. The insurance providers of IMS
are: IMS Wellth Care Inc. (IWC), Cocolife, Prudential Life, Filipino Doctors
Preventive HealthCare Management Inc., HealthWise Preventive Care and
Services Inc. and the Provident Plans International Corp. On the other hand, a
total of 308 hospitals and clinics are accredited by IMS nationwide. The
following suppliers do not have the power of monopoly in the market
especially since a number of potential substitutes are present, with similar
services to offer. Suppliers are said to have little distinction of services against
other suppliers (Groat, T. 2007). The suppliers in this industry are usually
dependent on the company to provide them with sales and revenues. Overall,
the power of suppliers is weak in this industry.
Power of buyers. According to an article in Investopedia, individual buyers do
not pose much of a threat on the insurance industry. Buyers, said by Groat, T.
in an article in worldissues360, have low bargaining power since the
insurance companies have more knowledge with the costs and services than
the consumers. The companies are the ones that can better negotiate for
discounted healthcare service rates with its hospitals and providers.
Additionally, seeing it as more of a necessity than a luxury that caters great
aid to consumers brings them to product purchase. These factors stated
above points to the power of buyers being weak.

Threat of substitutes. The companies in the insurance industry have plenty of

potential substitutes which may be its direct competitors, indirect competitors,
employer-based plans and government health insurance. However, due to the
high switching cost studied by Karina Lamiraud (2013), which suggests that it
may affect consumer decisions in terms of search costs, brand loyalty, status
quo bias, brand equity and others, finding substitutes may be disregarded.
Also, according to Santerre and Neun, authors of Health Economics, when
consumers switch over time, premiums rise and benefits decline perhaps due
to inflation rates. In addition to this, products are differentiated when it comes
to packaging which expresses low threat for substitutes.
Rivalry among existing competitors. The industry growth in health insurance is
considered a growing one as discussed in the product life cycle. Since the
industry is growing, companies also grow and evolve thus creating more
rivalry among competitors. Rivalry in the industry is driven not only by the
price, but more importantly, its features. The general concept of insurance,
particularly health service, is almost similar to all; but the health card
packaging is the factor that gives differentiation and creates rivalry among
companies.Companies, who try to rise and differentiate themselves from
others, create the best package of benefits that would suit the customers
needs. Designing different features of a health card insurance package is vital
because it makes the company distinct from one another, which creates high
competitive rivalry.
Implications on profitability. Porters five forces determine the competitive
intensity and therefore profitability of a market. Thus, having a low threat of
entry expresses profitability and good market share percentages for there will
be few new competition; weak power of suppliers and weak power of buyers
establish more freedom and control for the companies due to low bargaining
power for buyers and no monopolization of suppliers; low threat of substitutes
similarly discourages intense competition and presents high profitability;
however, high rivalry among existing competitors indicate a more competitive
industry and decrease profit potential for the existing companies; but this
circumstance may be seen as an advantage in a way that it pushes
companies to cater the best packages possible in the best way they can so as
to capture the market and rise above competitors. Overall, the factors convey
that the market for health card insurance product is profitable.