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AHEAD of the event, the Zoetis business consulting team led by Nick Steele, National Consulting Manager, applied Porter’s five forces analysis to the UK companion animal veterinary practice industry.
By examining the current attractiveness of the industry, we can begin to form opinions of how it may change in the future and what that change might look like.
- How attractive is the industry to new entrants (both traditional practices and corporate)?
- What is the current level of competitive rivalry within the industry?
- How likely is it that veterinary services could be provided by substitute providers?
- How much power over the industry do its customers have?
- How much influence do its suppliers have?
Looking at each of these, the analysis determines the attractiveness of the industry and, therefore, the likelihood that it will evolve and change.The following opinions were presented as a starting point and the contributors invited to discuss whether they agreed or disagreed.
- High threat of new entrants. There has been a 36 per cent growth in the number of ‘corporate’ practices compared to 9 per cent in the number of independent small animal only practices, because access to capital favours corporate entrants.
- Medium threat of substitutes. The threat of substitution for preventive services is higher than for therapeutic/surgical services.
- Low bargaining power of suppliers. Substitute products from suppliers are widely available and there is a low barrier and cost to switching.
- High bargaining power of customers. Although the number of clients is increasing (which would indicate a dilution of power), customer power is increasing as the cost of switching practice is low and they demonstrate low loyalty.
- High competitive rivalry. The limits to pet ‘medicalisation’ means growth comes largely from attracting clients from other practices. Buying groups have allowed independent practices to gain a competitive advantage and these groups have grown 74 per cent over the past three years. Add to this that 25 per cent of small animal practices in the UK belong to a corporate or charity; this sector has grown by 36 per cent in three years.
We can see that practices are consolidating to increase their competitiveness.