Porter’s 5 Forces of Age Advantage
1. Bargaining power of supplier – HIGH As it has been mentioned before in the external analysis, staffing difficulties is one of the issues threatening the aged care service company. The issue of labor shortages then limits the ability of Age Advantage to recruit key people and add up the bargaining power of suppliers who provide workers for aged care service. As labor costs represent the largest fixed costs for aged care service providers, this can be considered as a threat for the business. 2. Bargaining power of buyer – MEDIUM
Based on our research, there is a fair level of choice and options regarding age care service providers in Malaysia resulting in medium level of bargaining power of buyer. However, it is assumed not to be a significant problem for Age Advantage. As with our unique age in place service, we believe that we have a higher degree of competitive advantage compared to other aged care service providers existing in Malaysia. 3. Threat of substitutes – LOW The threat of the development of robotics for assisting with health care and aged care can be said as embryonic at the moment as it faces cost and price barriers as well as low social acceptance.
Also, the existence of aged home can be said as not hazardous with the trend of ageing people preferring to receive service at home rather than residing in aged care facilities. Hence, the threat of substitutes for this business can be considered as low. 4. Threat of new entrants – LOW The low threat of new entrants is a result of high start-up costs for this kind of business as well as the length of the franchise agreement which could reach up to 10 years as people tend to avoid this kind of too-long-term contract.
Besides, adequate training and well-trained labor force is essential for aged care service as this business deals with the life of people. Not forgetting as well the requirement of license approval from the government in order to enter the aged care service industry. As a result, it results in a high degree of entry barriers causing a low degree of threat of new entrants. 5. Intensity of rivalry – LOW As it has been stated previously, there is only a fair level of choice and options regarding aged care service providers in Malaysia.
Derived from the research we have done, age in place service is still rare in Malaysia as most aged care facilities have not provided a service of aged care at clients’ own homes. With the competitive advantage we own, it is believed that intensity of rivalry surrounding our business is low as the kind of service we provide is still considered one of a kind in Malaysia. 6. Complementary product We also add up a complementary product like insurance that when released pays the cost of aged care. Therefore, the insurer and their products become the complementor and the consumer gains additional value.