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This commentary explores the dental healthcare market through the lens of Porter’s Five Forces, a model for analyzing the competitive environment of a market. By applying this framework, it is possible to elucidate the market dynamics affecting dentists, dental specialists, and patients, providing insights into the consequences and challenges faced by each group within this unique and complex market.
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Analyzing the Dental Market Through Porter’s Five Forces Framework
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Analyzing the Dental Market Through Porter’s Five Forces Framework
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Analyzing the Dental Market Through
Porter’s Five Forces Framework


Alessandro Quaranta1                                                                           Authors
Wang Lai Hui2                                                                                  Alessandro Quaranta - Clinical Professor,
                                                                                               School of Dentistry. The University
1
  Clinical Professor, School of Dentistry.                                                     of Sydney. Scientific and Education
The University of Sydney. Scientific and Education Manager,                                    Manager, Smile Specialists Suite,
Smile Specialists Suite, Newcastle-Neutral Bay, NSW.                                           Newcastle-Neutral Bay, NSW. Australia;
                                                                                               profalexquaranta@gmail.com
Australia; profalexquaranta@gmail.com
2
  Director, Smile Specialists Suite, Newcastle-Neutral Bay,                                    Wang Lai Hui - Director, Smile Specialists
NSW. Australia; drlizzyhui@gmail.com                                                           Suite, Newcastle-Neutral Bay, NSW.
                                                                                               Australia; drlizzyhui@gmail.com
Corresponding author:Alessandro Quaranta
E-mail: profalexquaranta@gmail.com

Abstract
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This commentary explores the dental healthcare market through the lens of Porter’s
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Five Forces, a model for analyzing the competitive environment of a market. By ap-             Commons Attribution-NonCommercial-
plying this framework, it is possible to elucidate the market dynamics affecting den-          NoDerivatives 4.0 International License.
tists, dental specialists, and patients, providing insights into the consequences and
challenges faced by each group within this unique and complex market.                          Authors contributing to Annali di
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Key words: Dental, healthcare, market
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Introduction                                                                                   which allows third parties to copy and
                                                                                               redistribute the material providing
The dental healthcare market represents a unique sector within the broader healthcare          appropriate credit and a link to the
industry, characterized by its imperfect, yet highly competitive nature. This commentary       license but does not allow to use the
seeks to dissect these dynamics using Porter’s Five Forces – a business tool traditionally     material for commercial purposes and to
used to assess the competitiveness of a market. These forces include the threat of new         use the material if it has been remixed,
entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of     transformed or built upon.
substitute products or services, and competitive rivalry.                                      How to Cite
                                                                                               A. Quaranta, W Lai Hui.
The dental market as a model of an imperfect highly competitive market                         Analyzing the Dental Market Through
                                                                                               Porter’s Five Forces Framework
The dental market is characterized as an imperfect yet highly competitive market for           Annali Di Stomatologia, 15(1), 39-41.
several reasons:                                                                               https://doi.org/10.59987/ads/2024.1.39-41
•  Imperfections Stemming from Entry Barriers: High costs for equipment and train-
   ing, stringent regulations, and limited insurance network access create substantial
   barriers for new dental providers. These barriers result in fewer providers in certain
   areas, contributing to imperfect competition due to restricted market access.
•  High Competition Driven by Price Sensitivity: Dental services, often seen as
   discretionary, evoke high price sensitivity among patients. This sensitivity leads pa-
   tients to actively compare prices and care quality, intensifying competition among
   providers.
•  Uneven Pricing Dynamics: The partial or non-coverage of dental services by in-
   surance plans leads to price discrimination and variable pricing among providers.
   This variability in pricing further contributes to an uneven playing field in the market.
•  Information Asymmetry: A notable power imbalance exists due to information
   asymmetry between patients and dental providers. Patients often lack the expertise
   to make fully informed decisions, relying heavily on provider trustworthiness. This re-
   liance complicates their ability to effectively compare different providers, as noted in
•  Concentration of Providers: The prohibitive costs associated with setting up a
   dental practice in many countries, as highlighted by Dunn [1] lead to a concentration
   of providers in certain regions, thus limiting competition.
•  Price Discrimination and Decision Factors: Studies like those by Gray [2] reveal
   that cost was overwhelmingly chosen as the key factor likely to prevent a patient
   from seeking dental treatment. In several countries, It is also common for uninsured
   patients to shop around for dental care, with price being a significant decision-making



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     Analyzing the Dental Market Through Porter’s Five Forces Framework

         factor. Providers often engage in price discrimination      In markets where reduced competition from new entrants
         based on insurance coverage and patient’s willing-          is experienced existing dental practices can benefit from
         ness to pay.                                                a relatively stable market position.
     In essence, the imperfect nature of the dental market           The limited entry of new providers may result in fewer
     stems from entry barriers and variable pricing, while its       choices and potentially higher prices for buyers (patients).
     competitiveness is driven by patient price sensitivity and      However, in the context of the EU and other countries
     the need for providers to compete through price, quality,       (Latin America), the mutual recognition of professional
     and service offerings.                                          qualifications facilitates the cross-border mobility of den-
                                                                     tal professionals, which introduces a nuanced dimension
     Porter’s five forces of competition                             to the threat of new entrants. While traditional barriers
                                                                     such as the cost of education and practice setup remain,
     The Five Forces of Porter is a widely recognized frame-         the ease of movement across borders provided by mu-
     work for analyzing the competitive environment of a             tual recognition agreements can stimulate competition
     market. Developed by Michael E. Porter of Harvard               by reducing regulatory constraints. This can lead to
     Business School [3], this model provides a comprehen-           increased market fluidity, offering patients more choic-
     sive view of the competitive forces that shape industry         es and potentially more competitive pricing structures.
     attractiveness and profitability. It examines the interplay     However, it also poses a challenge for existing practices
     of five key forces: the threat of new entrants, the bar-        that may face new competitors, capable of offering di-
     gaining power of suppliers, the bargaining power of buy-        verse and possibly more affordable dental services. The
     ers, the threat of substitute services, and the intensity or    overall effect is a gradual shift towards a more dynam-
     products of competitive rivalry. By evaluating these forc-      ic and less predictable market landscape, where dental
     es, businesses can develop strategies to improve their          providers must adapt to the increased potential for new
     market position and competitive advantage.                      entrants within their local markets.
     •    Threat of New Entrants: This force examines how
          easy or difficult it is for new competitors (dental pro-   Bargaining Power of Suppliers
          viders) to enter in a market, thus affecting compe-
          tition.                                                    Suppliers of dental equipment and materials hold signif-
     •    Bargaining Power of Suppliers: This force looks            icant power due to the specialized nature of their prod-
          at the power of suppliers to drive up the prices of        ucts. The cost, the quality, and the timing of delivery of
          business (dental providers) inputs. In the dental in-      these supplies directly influence the operational efficien-
          dustry, suppliers of dental materials and equipment        cy and service quality of dental practices.
          can have a significant influence, especially if there      The businesses (dental providers) will depend on sup-
          are few alternatives.                                      pliers for quality materials, which can have an impact on
     •    Bargaining Power of Buyers: This refers to the             profit margins and service pricing.
          power of the customers (dental patients) to negoti-        In the case of Dental Specialists, these practices may
          ate lower prices or better services. In dentistry, pa-     require more advanced equipment and may face higher
          tients often have a high degree of price sensitivity,      operational costs, influencing service pricing. Efficient
          especially for elective procedures not covered by          supply chain management and negotiations are there-
          insurance, giving them a certain level of bargaining       fore vital for maintaining a competitive edge in the den-
          power.                                                     tal market.
     •    Threat of Substitute Products or Services: This
          force is about the danger of customers (dental) pa-        Bargaining Power of Buyers (Patients)
          tients choosing alternatives to traditional services.      The leverage of patients and dental insurance in the
     •    Competitive Rivalry: This is the degree of com-            dental market is magnified by their price elasticity and
          petition among existing players (incumbent dental          the discretionary nature of dental expenditures, The dis-
          providers) in the industry. In the dental market, the      cretionary nature of many dental services, coupled with
          rivalry can be high due to a mix of local and larger       varied insurance coverage, enhances the bargaining
          group practices, the range of services offered, and        power of patients and insurance [4,5]
          the quality of care. This force is often the most pow-     . Dentists will need to balance service quality with com-
          erful of the five, as it encompasses the direct com-       petitive pricing to attract and retain patients.
          petition the businesses (dental practices) face in the     As for the buyers (dental patients), they will enjoy greater
          daily operations.                                          leverage in price negotiations, especially for uninsured
                                                                     patients who shop around for services.,
     THE DENTAL MARKET AND THE FIVE FORCES OF
     COMPETITION                                                     Threat of Substitute Products or Services
     Threat of New Entrants:                                         The dental market faces threats from alternative treat-
     In most of the developed high-income countries, the             ments and advancements in dental technology.
     dental market exhibits significant barriers to entry, pri-      The proliferation of substitute products, such as di-
     marily due to the high costs of dental education, practice      rect-to-consumer dental aligners and home whitening
     set-up and equipment, and compliance with stringent             kits, represents a burgeoning challenge for traditional
     regulations. The research by Dunne [1] highlights these         dental practices. Dental professionals must respond by
     barriers, emphasizing the financial and regulatory hur-         emphasizing the benefits of professional care and the
     dles new dental providers must overcome. This high en-          potential risks associated with unguided treatments.
     try threshold limits the influx of new competitors, thereby     While the quality and safety of such substitutes can be
     shaping the market’s competitive landscape.                     variable, their accessibility and lower cost can attract a



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A. Quaranta et al.

segment of cost-conscious patients. It is therefore es-           ing patients both challenges and opportunities in their
sential for both dentists and specialists to stay updated         healthcare choices. Future research should focus on
with technological advancements and alternative treat-            evolving market trends, especially the impact of tech-
ment methods to remain competitive.                               nological advancements and policy changes on these
                                                                  dynamics.
Existing Rivals
                                                                  References
Intense competition exists among dental providers, driv-
en by patient price sensitivity and variable pricing strat-       1.   Dunne T, Klimek SD, Roberts MJ, Xu DY. Entry, exit, and
egies. This is exacerbated by information asymmetry,                   the determinants of market structure. The RAND Journal
                                                                       of Economics. 2013;44(3), 462–487. doi:10.1111/1756-
as noted by Baldwin [4] and Sever [6] which can lead
                                                                       2171.12027.
to quality of service and trust-based competition rather          2.   Gray L, McNeill L, Yi W, Zvonereva A, Brunton P, Mei L.
than just price or quality.                                            The “business” of dentistry: Consumers’ (patients’) criteria
High competition necessitates differentiation through qual-            in the selection and evaluation of dental services. PLoS
ity of service, pricing strategies, and building patient trust.        ONE. 2021;16(8): e0253517. https://doi.org/10.1371/jour-
The high competition is also a drive for an increased                  nal.pone.0253517.
                                                                  3.   Porter ME. How Competitive Forces Shape Strategy. Har-
need to specialize and offer superior expertise to buyers.
                                                                       vard Business Review. 1979.
Patients can benefit from competitive pricing and a range         4.   Baldwin A, Sohal A. Service quality factors and outcomes
of service quality options but may face challenges in as-              in dental care. Managing Service Quality: An International
sessing service quality due to information asymmetry.                  Journal. 2003;13(3):207-216.
                                                                  5.   Nasseh K, Bowblis JR, Vujicic M, Huang SS. Consolidation
                                                                       in the dental industry: a closer look at dental payers and
Conclusion
                                                                       providers. Int J Health Econ Manag. 2020 Jun;20(2):145-
An analysis of the dental healthcare market, through the               162.
focus lens of Porter’s Five Forces, reveals a complex             6.   Sever I, Verbič M, Sever EK. Valuing the delivery of den-
                                                                       tal care: Heterogeneity in patients’ preferences and will-
interplay of factors affecting dentists, specialists, and              ingness-to-pay for dental care attributes. J Dent. 2018
patients. The market’s imperfect yet competitive nature                Feb;69:93-101. doi: 10.1016/j.jdent.2017.12.005. Epub
demands strategic responses from providers while offer-                2017 Dec 11.




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