How would you define the geographic and product markets of large healthcare organizations such as the Mayo Clinic, Cleveland Clinic, Kaiser Permanente, and Johns Hopkins? What are the barriers that keep new competitors from entering those markets? (Showalter, 20170222, p. 496) Showalter, S. (20170222). The Law of Healthcare Administration, Eighth Edition, 8th Edition [VitalSource Bookshelf version]. Retrieved from vbk://9781567938791 Always check citation for accuracy before use.

Geographic markets for products are limited to a greater or lesser extent by the cost of transporting the product and legal barriers, such as those imposed by entry regulation that may prohibit trade among jurisdictions. Transportation costs of shipment between two areas may create a differential in prices in the two areas.

Explanation

The health costs in these organisations are also too high which can only be borne by the elite class, thereby giving them a position of monopoly power in the healthcare market. One must define first the market for the product of interest and second, the geographic market in which trade in the product occurs.

For both product and geographic market definitions, two types of substitutability are relevant:

Demand substitutability

Supply substitutability

Demand substitutability depends upon the extent to which consumers of the good or service are able to switch to substitutes for that good or service in response to a price increase.

In contrast, supply substitutability depends upon the extent to which existing providers could expand output, and/or firms not currently producing the good or service could enter the market for that good or service. In specific applications, the product market is defined first.

Then, given a definition of product, the geographic area over which commerce in the product takes place is examined.

When the cost of transportation is high relative to cost of production, geographic markets tend to be small; the converse holds true when relative transportation cost is low.

Choosing which percent rule to apply depends on the comparative risks of under - or overstating the size of the market.

Barriers for new competitors are:

Price: A successful company with a large market share may be able to charge prices substantially higher than what customers would be willing to pay if they had more options. If a competitor tries to enter the market, the established company can often afford to lower its own prices below what the competitor can match.

Contractual: Some barriers to entry may be illegal and may violate antitrust regulation. A new competitor entering the same market could find it difficult or impossible to get its products into any stores and negotiation with existing distributors for prices.

Location: Companies with the ability to operate in any part of the world can create a barrier to competition by locating manufacturing facilities in places with much lower labor costs or regulatory requirements.

Regulatory: Regulations are intended to serve the public good by promoting better safety and environmental standards or promoting competition.