The healthcare market sales is concentrated mainly in 5 countries: United States (USA), China, Japan, Germany, and Italy, with the USA leading the consumer health industry with 31% of global retail value. Considering this data, there is opportunity for market expansion in other countries where the share of global consumer healthcare is approximately 1-2%. Such is the case of Thailand. We, then, examine the healthcare market in Thailand.
Thailand represents one of largest healthcare markets in Southeast Asia which gives healthcare companies the opportunity to expand their markets. Drivers of growth include increases in government funding, private participation, medical tourism, increased income levels and an ageing population. Thais are becoming more health conscious and more willing to spend on healthcare products, many of which aim to make them look younger and more attractive. It is also important to note the digital and mobile phenomena, which over last decade has brought changes in consumer behaviour and influence in their buying decisions (i.e. concerns about products’ components), implying the growth of global consumer healthcare sales.So, what exactly are “consumer healthcare” products? Most multinational pharmaceutical companies divide their consumer healthcare business as follows: Wellness health (oral, respiratory, etc), nutrition and skin health, over-the-counter (OTC) medicines and vitamins and dietary supplements. Everything from mouthwash or allergy medicine to multivitamins is included in consumer healthcare.
Analysis of the Healthcare market in Thailand: Porter’s Five Forces
1- Competitive Rivalry
The leading players in the consumer healthcare sector in Thailand are multinational brands that include: Herbalife, Amway, Nu Skin, Bayer HealthCare, Boehringer Ingelheim, GSK, Johnson&Johnson, Pfizer. Being internationally known and trusted, these pharmaceutical companies dominate the market, which makes it difficult for local brands to compete. The intensity of rivalry is low. Competing firms in this market are interdependent: the actions of one of them may affect the rest, so the competition is low.
2- Threat of new entry
The key to entering the consumer healthcare market in Thailand is possessing resources and local access. For this reason, the aforementioned multinational pharmaceutical companies have a clear advantage over newcomers. Economies of scale further increases these companies’ advantage over smaller ones. Increased production is necessary to purchase from suppliers at lower costs. When considering entering the consumer healthcare sector, it is paramount to consider that the registration process for new drugs can be time-consuming. It can take up to ten months to register a new drug with the Food and Drug Administration of Thailand (FDA). For all these reasons, threat of new entry is low.
3- Buyer power
The power of buyers is low. There are various channels to sell consumer healthcare products like pharmacies, supermarkets and specialty retail stores, so these buyers can not exert pressure on multinationals with regards to price. Companies will simply choose to sell their products with another retailer. As the final consumers rely more on products from multinationals than those produced by local and small companies, buyers could suffer from significant losses if they opt for other lesser-known suppliers. In the end, switching costs are high.
4- Supplier power
Suppliers in the consumer healthcare industry have low bargaining power. Because the market is dominated by big multinationals, it is unlikely for suppliers to be uncooperative with their competitors and further lower prices, as this would leave the door open for other types of companies and thus reduce their bargaining power.
5- Threat of substitutes
The main substitutes for consumer healthcare products in Thailand are prescription drugs and alternative medicine. In some cases, prescription drugs are more effective in comparison to OTC medicine, but the cost of prescription drugs is significantly higher. This price difference is one that many Thais often cannot afford. Furthermore, most OTC products are preventative, while prescription drugs treat illnesses and ailments that are already developed. Due to the purpose and costs of consumer healthcare products, the threat of substitutes is low.
Possibilities of Consumer Healthcare Products Market in Thailand
The consumer healthcare industry in Thailand is growing rapidly. The multinational pharmaceutical companies are cashing in on a market that is lucrative, considering you have the brand recognition and resources to participate. Since the market is highly concentrated, it is not very competitive.
On top of that, the social and cultural landscape of Thailand is evolving in many ways. Urbanization and universal health care have given thousands of citizens access to modern healthcare practices, as well as awakened a newfound consciousness with regard to wellness and appearance. Thais in urban areas have increasingly more money to spend and they are proving they are willing to spend more on consumer healthcare products. The digital phenomenon is also becoming influential in Thailand, and online shopping is becoming more and more popular in urban areas. All these reasons together make the Thai consumer healthcare market attractive for those companies that can afford to expand their businesses.