What are the Michael Porter’s Five Forces of Exact Sciences Corporation (EXAS).

Introduction

Competition in the business world is a reality that companies cannot avoid. Having knowledge about the market, competitors, and the industry itself is essential to survive and succeed. In business strategy, a commonly used tool to analyze competition is the Michael Porter's Five Forces framework. The framework considers five competitive forces that shape a company's industry environment. In this blog, we explore the Michael Porter's Five Forces of Exact Sciences Corporation (EXAS), a biotechnology company that provides diagnostic screening tests. With this information, we can understand the company's position in its industry and identify its competitive advantages and weaknesses.

Bargaining Power of Suppliers in Michael Porter’s Five Forces of Exact Sciences Corporation (EXAS)

The bargaining power of suppliers is one of the five forces described by Michael Porter that can impact the profitability and competitiveness of a company. For Exact Sciences Corporation (EXAS), there are several key factors to consider when analyzing the bargaining power of suppliers.

• Supplier Concentration: The bargaining power of suppliers is often higher when there are fewer suppliers available for a specific resource or material. In the case of Exact Sciences, the suppliers for their diagnostic tests and equipment may be limited, which could give those suppliers greater leverage in pricing and negotiations.
• Importance of the Resource: Suppliers who provide critical or unique resources have greater bargaining power. For EXAS, suppliers who provide the reagents and chemicals necessary for their tests could have substantial bargaining power due to their importance to the diagnostic products offered by the company.
• Switching Costs: If there are high costs associated with switching suppliers, their bargaining power increases. For example, if Exact Sciences has been working with a supplier for a long time and has developed equipment or tests tailored to their specific needs, switching to a new supplier could be time-consuming and expensive.
• Competition: If there are other companies that can offer similar resources or materials, suppliers may have less bargaining power. However, for Exact Sciences, there may not be many other companies offering the same level of diagnostic tests or equipment, which could result in higher supplier bargaining power.

Overall, while the bargaining power of suppliers is just one of the five forces described by Michael Porter, it is an essential factor to consider when analyzing the competitiveness and profitability of a company like Exact Sciences Corporation.

The Bargaining Power of Customers

Customers are the reason why businesses exist. They are the ones who buy products or services, creating revenue for the company. However, customers also have bargaining power, which can affect the profitability of a company. In the case of Exact Sciences Corporation (EXAS), the bargaining power of customers is one of the five forces identified by Michael Porter that can impact the company's success.

• High customer concentration: When a few customers account for a significant portion of a company's revenue, those customers have high bargaining power. This is because the loss of a large customer could have a significant impact on the company's revenue. In the case of EXAS, it deals with healthcare providers and individual patients who are looking for cancer screening solutions. The concentration of these customers could make it challenging to negotiate favorable terms with them.
• Ease of switching: If customers can easily switch to a competitor's product or service, it reduces their bargaining power. For example, if a patient is considering cancer screening options, it may not be too difficult to switch from one screening option to another. Therefore, to maintain a competitive advantage, EXAS needs to ensure that its product is superior to its competitors' products in terms of accuracy, cost, and accessibility.
• Price sensitivity: Customers who are price sensitive have higher bargaining power. They are more likely to negotiate better prices or switch to lower-priced alternatives. In EXAS's case, price sensitivity may be a factor for uninsured or underinsured patients. Therefore, the company could consider offering discounts or pricing schemes that cater to the needs of price-sensitive customers.
• Information availability: Customers who have easy access to information about a product or service have higher bargaining power. In the case of EXAS and its cancer screening solutions, patients and healthcare providers have access to information about the accuracy, cost, and accessibility of screening options. Therefore, to maintain a competitive advantage, the company must ensure that its product's information is correct, easily accessible, and up-to-date.

In conclusion, the bargaining power of customers is a crucial factor that could impact the success of the Exact Sciences Corporation. By understanding the factors that affect customer bargaining power, the company could implement strategic actions to maintain a competitive advantage and increase its profitability.

The competitive rivalry in Michael Porter’s Five Forces of Exact Sciences Corporation (EXAS)

Michael Porter’s Five Forces framework is used to analyze the competitive environment of a company. It helps to identify the intensity of competition and the profitability of the industry. The competitive rivalry is one of the Five Forces and refers to the degree of competition between companies in an industry. In this chapter, we will discuss the competitive rivalry of Exact Sciences Corporation (EXAS).

• Current Competitors: Exact Sciences Corporation (EXAS) develops and provides advanced cancer diagnostics that are designed to detect cancer early when it is most treatable. Its main competitors include Quest Diagnostics (DGX), Laboratory Corporation of America (LH), and Genomic Health (GHDX).
• Number of Competitors: The cancer diagnostic market is highly competitive, with a large number of companies operating in the marketplace. Exact Sciences’ direct competitors in the U.S. market number more than ten, and the market share is distributed among them.
• Industry Growth Rate: The cancer diagnostic market is expected to grow at a significant rate due to the increasing incidence of cancer and the rising aging populations across the globe.
• Brand Loyalty: Brand loyalty in the cancer diagnostic market is generally low. Quality of service, level of price, and product performance are all factors that impact customer preference in choosing among the available options.
• Switching Costs: The switching costs for customers to move from Exact Sciences Corporation (EXAS) to its competitors are relatively low. This gives customers the flexibility to change their suppliers, which can negatively impact the company’s market share.
• Product Differentiation: There are differences in technology and expertise among the players in the global cancer diagnostic market, with companies establishing their products according to the target customer group, the quality of service they provide, and the technology used.

Conclusion: The competitive rivalry in the cancer diagnostic market is high. Exact Sciences Corporation (EXAS) faces fierce competition from other companies like Quest Diagnostics, Laboratory Corporation of America, and Genomic Health. It is important, however, to note that the growing demand for cancer diagnostic tests presents opportunities for growth and differentiation within this highly competitive environment.

The Threat of Substitution

The threat of substitution is intense in the Exact Sciences Corporation (EXAS) industry, particularly in the field of cancer diagnostics. Substitution is the likelihood of the customers switching to alternative solutions for detecting cancer, such as traditional biopsy or imaging techniques. In essence, the threat of substitution reduces the demand for the company’s products and services, which could affect the profitability and market share of the company.

There are several factors that contribute to the threat of substitution in the cancer diagnostics industry. One of the primary factors is the availability of alternative diagnostic methods such as imaging technologies like MRI and CT scan or biopsy test, which are widely accepted by customers. Also, customers tend to substitute the products based on the price or the speed of the diagnostic method. If the cost of a diagnostic test or the time taken to complete the test is lower in an alternative technique, then customers will switch to the new method.

The threat of substitution is exacerbated by the level of competition in the industry. The cancer diagnostics market is highly fragmented, with hundreds of players vying for a larger market share. This forces the diagnostic companies to improve their products continuously to maintain their customer base. Startups and new entrants are also challenging the market leaders by introducing new, innovative products that can either match or exceed the benefits of the existing products in the market.

However, Exact Sciences overcomes the threat of substitution by utilizing Porter’s Five Forces model. The company uses differentiation as a competitive advantage by offering Cologuard, the first and only FDA-approved non-invasive colon cancer screening test, capable of detecting 92% of cancer cases. Furthermore, Exact Sciences has created a strong brand and consumer demand through widespread marketing and public relations efforts creating a sense of loyalty among consumers to their unique product offering. Exact Sciences offers value to customers beyond just detection, through patient communication and treatment guidance with their comprehensive testing platform, thereby increasing the customer's switching cost.

• Exact Sciences leverages the superior technology of Cologuard to provide a differentiated diagnostic method not matched by traditional screenings from competitors in the market.
• Exact Sciences has created a strong brand image through ubiquitous advertising and robust public relations efforts that have helped them to gain a considerable market share and loyal customer base
• The company has established a comprehensive testing platform that supports doctors through the entire patient journey from screening to ongoing monitoring.

The Threat of New Entrants

The threat of new entrants is one of the five forces identified by Michael Porter in his framework for analyzing the competitive forces that affect a business. In the case of Exact Sciences Corporation (EXAS), this force refers to the likelihood of new companies entering the field of cancer screening tests and competing with EXAS.

There are several factors that determine the level of threat posed by new entrants:

• Barriers to entry: The higher the barriers to entry, the lower the threat of new entrants. The barriers to entry in the cancer screening industry are relatively high, as it requires significant investment in research and development, regulatory approval, and marketing to establish a foothold in the market.
• Brand recognition: Established companies like EXAS have a significant advantage over new entrants because they have already built brand recognition and a loyal customer base.
• Access to distribution channels: Companies that have established relationships with hospitals, clinics, and other healthcare providers have an advantage over new entrants who may struggle to gain access to these key distribution channels.
• Economies of scale: Companies like EXAS that have achieved economies of scale are in a better position to compete with new entrants because they can produce and distribute their products more efficiently.
• Regulatory environment: The regulatory environment for cancer screening tests is complex and constantly evolving. Companies that are already established in the industry have an advantage over new entrants who may struggle to meet regulatory requirements.

Overall, the threat of new entrants is relatively low for Exact Sciences Corporation. The barriers to entry are high, and EXAS has already established itself as a leader in the industry with significant brand recognition and economies of scale. While new entrants may emerge in the future, EXAS is well-positioned to defend its market share and continue to grow.

Conclusion

In conclusion, Michael Porter’s Five Forces model is an effective tool for analyzing the competitive position of a company like Exact Sciences Corporation (EXAS). The model considers the five key forces that affect the company's ability to compete in the market, which includes the threat of new entrants, bargaining power of suppliers, bargaining power of customers, threat of substitute products, and intensity of competitive rivalry. EXAS indeed faces a high level of competition in the market due to the emergence of new players and the increasing bargaining power of customers. However, with its innovative and reliable products and its strong brand reputation, the company has established itself as a formidable competitor in the industry. By regularly analyzing their competitive position through the Five Forces model, EXAS can identify areas where they need to improve and develop strategies to maintain their market position. As the healthcare industry is constantly evolving and growing, it is essential for EXAS to stay on top of industry trends and adapt to the changes to ensure they continue to deliver value to their customers. Overall, the Five Forces model provides a helpful framework for assessing the competitive landscape of companies and identifying key areas for improvement. With its strong market position, reliable products, and commitment to innovation, EXAS is well-positioned to succeed in the highly competitive healthcare industry.