Factors Affecting Demand and Supply in the Diagnostic Services Industry

This report explores the factors that have an impact on the demand and supply of diagnostic services in the healthcare industry. It discusses the market structure, competition, technology, and staff behavior. The report also focuses on Sonic Healthcare, an Australian organization that provides laboratory, pathology, and radiology services, and how it is navigating these factors.

Economics

Contents
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................2
Introduction to the company........................................................................................................2
Industry Background...................................................................................................................3
Market structure of the industry..................................................................................................3
Factors that have impact over demand of an organisational service...........................................5
Factors that have impact over supply of an organisational service.............................................6
Demand elasticity of the organisational service..........................................................................7
Impact of the event on industry...................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

EXECUTIVE SUMMARY
Economics is the important aspect regarding the determination of the factors that have
impact over business. In health and social care, must for the management to use this concept
towards determination of the factors that have influence over demand and supply along with
ascertaining the demand elasticity associated with products and services. In the current report,
Sonic healthcare is diagnostic organisation that provides the services related to laboratory,
pathology and radiology. Though the use of economics concept determined that numerous
factors are support of creating demand of their services such as high use of technology and
timely service. Still, some factors are present that have negative over demand and supply such as
competition and behaviour of staff. The current issue of Covid-19 brings the boom in diagnostic
service when opportunity is provided to them regarding locals testing.
INTRODUCTION
Healthcare organisations has the special role towards the nation and society. They always
under the obligation to provide best products/services according to the market needs. It is the
duty upon management to analyse the demand and supply aspects so properly able to meet out
the societal requirements. This has huge importance towards the improvement in production
activities along with bringing change in technologies for improving existing services. This also
provides the opportunity regarding introduction of new and advanced medical equipment’s that
are more competent in nature of providing better care services. In overall performance of such
activities, best for the management to apply the concepts of economics (Bartenev, 2019). The
main aim of this report is also about ascertaining the demand and supply of organisational
service along with the factors that have influence over same. The organisation considered to
analyse the concept is Sonic Healthcare. It is an Australian organisation that provides the
diversified services like laboratory, pathology and radiology services. The operations of an
organisation prevail under the health-medical diagnostic industry.
The aspects cover in report includes introduction of an organisation, industry/sector
background, market structure of the industry/sector, factors that influence demand for the
company’s product, factors that influence supply of the company’s product, demand elasticity of
the organisational product and impacts of an event on the industry.
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MAIN BODY
Introduction to the company
Sonic Healthcare Limited is an Australian organization that gives laboratory facility
administrations, pathology, and radiology services. The Sydney-based organization has its
underlying foundations in the pathology practice of Douglass Laboratories, and since has gotten
one of Australia's biggest indicative organizations. It has existing business activities in Australia,
New Zealand, United States, United Kingdom, Germany, Switzerland, Belgium and Ireland. It is
the biggest clinical research centre supplier in Australasia and Europe and the third biggest in the
US, it utilizes more than 37,000 individuals. It was listed on the Australian Stock Exchange in
1987 as Sonic Technology Australia Ltd. The organization changed its name to Sonic Healthcare
Ltd in 1995. It is currently part of the S&P/ASX 50, and is one of the biggest clinical
organizations recorded on the ASX, CSL Limited, Cochlear and ResMed being the main other
recorded clinical organizations of equivalent size.
The organization procedure related to attaining development is by obtaining the ownership
of the abroad organizations. With numerous investigates contending that such a procedure can
prompt over enhancement, yet has apparently functioned admirably to extend its business. There
is restricted chance to grow further in the Australian commercial centre and income in Australia
is to depend over the great extent subject to government health financing through Medicare. The
firm has expanded its income base with moves offshore from Australia. Yearly Revenues for
Financial Year to June 30, 2019 surpassed A$6.2 billion. Dr Colin Goldschmidt is the CEO and
Managing Director (Buechner, 2018).
There is huge scope for this organisation to gain development within the market. The
existing operations of an organisation are good where they effectively able to provide the
services to all the numerous individuals of society. The management of an organisation has the
aim about bringing more competencies in their current services especially in laboratory,
pathology and radiology. In future, organisation has the desire to improve the market base and
revenue by more than 35 percent. In this regard, better for an organisation to analyse the market
and ascertain the influence of factors that have impact over demand and supply of services. This
help in development of favourable strategies through which an organisation able to accomplish
their desired targets.
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Industry Background
The Diagnostic Imaging Services industry has performed firmly in the course of recent
years. Analytic imaging gives social insurance specialists significant data about patients'
wellbeing. Industry administrations, for example, X-rays, ultrasounds and MRIs, are vital to
conveying top notch medicinal services. Interest for these administrations is more grounded
among more established individuals, and has flooded as Australia's populace has matured in the
course of recent years. Value rivalry and government strategies have bolstered mass charging
over the period, making symptomatic imaging increasingly reasonable and boosting
administration volumes. Industry income is required to ascend at an annualized 3.0% over the
five years through 2019-20, to $4.1 billion. This remembers foreseen development of 2.2% for
the present year (Udoh, 2017).
Income for the Diagnostic Imaging Services industry is anticipated to keep becoming
throughout the following five years. Australia's maturing populace and a more noteworthy
spotlight on the early recognition and counteraction of complaints are foreseen to help the
business' exhibition over the period. The continuous move from fundamental indicative
radiology towards further developed methods without radiation presentation, for example, MRI,
is foreseen to drive industry income development, as Medicare plan charges for these techniques
are a lot higher. The Federal Government has declared that it will start ordering Medicare
discounts for a few industry administrations including ultrasounds, X-rays and CT examines.
These progressions are foreseen to drive interest for industry in future where every single
association can get the enormous market base and higher measure of income (Choi, 2018).
Market structure of the industry
The market structure of this industry is very wide from the all perceptive i.e. number of
patients or needy persons that requires health care services, presence of numerous large and
small organisations and the different services delivered by these all to various number of
individuals lived in society.
The Australian in-vitro diagnostics advertise is accepted to observe a CAGR of around
5.36% over the estimate time frame. Certain elements driving the market are an expansion in the
frequencies of interminable and irresistible sicknesses, a developing geriatric populace,
innovative advances that are occurring in the analytic area, and the approach of purpose of care
diagnostics. As per the Australian Institute of Health and Welfare (AIHW), around 3.7 million
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Australians (15% of the populace) were matured 65 years or more in 2016. With an expanding
geriatric populace, there will be a development of the run of the mill age-related medical issues
(for instance, joint inflammation, dementia, and malignancy). According to the Australian Health
Survey (AHS) 2015, 1 of every 5 of the old populace individuals (22%) revealed being
influenced via cardiovascular infections, while 15% had diabetes, and 7% had disease. The
pattern of rising ceaseless ailments is expanding in the nation; with such increment in rates of
constant illnesses, there is a requirement for demonstrative tests that give basic experiences at
each phase of clinical consideration, including avoidance, recognition, finding, treatment, and
effective administration of wellbeing conditions. Accordingly, it is accepted that rising constant
rates of illnesses are driving the market of in-vitro diagnostics in Australia (Johansson and
Klaesson, 2017).
It is also assumed that reagent segment has the largest market share during the forecast
period. The same is understood from the figure presented below:
Figure 1Reagent Segment
The reagent portion of the market contemplated incorporates substance, natural, or
immunological parts, arrangements, or arrangements proposed by the maker to be utilized during
the in-vitro determination process. Reagent utilization for IVD units frequently conveys
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significant expenses. All things considered, an assortment of new measures to counter this issue
have risen, which incorporate, mass acquisition of reagents and neighbourhood improvement and
creation of examine frameworks. Being a created economy, Australia has set up neighbourhood
immunoassay reagent projects to produce ease, top notch immunoassay reagents. Units from
these activities are currently start opening up and are probably going to fuel the market
development (Li, Li and Li, 2019).
It is also ascertained from the market analysis that large number of competitors are present
in market that provides their services within the industry. This will be easily understood from the
figure presented below:
Figure 2Competitive Landscape
The Australian in-vitro diagnostics showcase is modestly competitive. A portion of the
significant players of this market are BioMerieux, F. Hoffmann-La Roche Ltd, Becton,
Dickinson and Company, Bio-Rad Laboratories, Inc., and Abbott. The significant players hold
the vast majority of the piece of the overall industry. With mechanical advances and item
developments, some little organizations are additionally entering the market, at present holding a
generous level of market share.
Factors that have impact over demand of an organisational service
There are many number of factors that have the impact over the demand of current
organisational services within the market. The impact will be of both type positive or negative
totally depends over the nature of factor. The study of this aspect is important because this will
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provide the opportunity in acceptance or removal of the aspects which are necessary towards the
positive growth of an organisation. The information about all these factors along with their
influence upon demand of an organisational service is presented below:
Number of competitors: It is ascertained from the analysed information that the
presence of competition is high in this industry where large number of players are present
towards delivering of various diversified services. This has the negative impact over the demand
over the current organisational services as an individual prefer to goes to the one which is near
and affordable in nature. So, finally this factor diminishes the current level of demand about the
services in market (Lopes and et al., 2019).
Availability of equipment’s and tests: There is huge impact of the service availability
and effective equipment over the demand for same within the market. The current organisation is
large organisation and having all diverse kind of equipment’s that are effective in deliverance of
all types of services. This has the positive impact over demand of the services of an organisation
in market where an individual prefers to went towards an organisation which id competent in all
services and having the experience of doing same from long time.
Technological presence: The presence of technology has effective impact over the
demand of services. In current period of time, presence of technology builds the trust among the
individuals about the viability of test results. In the current scenario, Sonic healthcare has good
presence of technology that work as positive factor towards creation of demand against their all
diversified services.
Timely service and their regular upgradation: The providence of timely service and
their upgradation is important. There are numerous factors that have the impact over the viability
of old techniques. This would be the reason their regular upgradation according to the time is
necessary. This not help to improve the service level but also saves the time of testing. In the
current scenario, Sonic healthcare is focused towards delivering timely services along with
availability of all current nature of technologies and equipment’s. This has the positive impact
over the demand of their services where it allows in attraction of large number potential
individuals (Mankiw, 2020).
Factors that have impact over supply of an organisational service
There are numerous factors that affect the aspect of supply of an organisational service.
The understanding of these is important for their removal and acceptance of the aspects which
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further aid in future about attaining higher amount of growth opportunities. All these different
factors and their influence upon supply can be understood from the description provided below:
Large competition: The presence of competition is large in diagnostic market. Here,
various large and small firms are ready to provide their own services. This has indirect negative
impact over the supply capacity of an organisation because not able to generate the adequate
amount of demands for their services. This would be the reason that technology and equipment is
not optimally utilised against to their supplying capacity.
High cost services: The high cost of service bound the individuals to focus over the use of
services which are cost effective in nature. Here, Sonic healthcare is large organisation that
deliver all kind of services and charge adequate amount for delivering of the service. This factor
simultaneously has indirect negative impact over point of supply where demand not generates
according to the supplying capacity (Marwala and Hurwitz, 2017).
Unsupportive staff behaviour: The support of staff is important for effective delivering
of the service. In the current scenario, Sonic healthcare is large organisation where numerous
number of staff is working for the handling of different services. Due to the vast nature, staff is
not supportive. Also, they all worked in hectic routine. This has the direct negative impact over
the demand and simultaneously the supplying capacity. Here, not only the point of less demand
impacts the supply adversely but also the hectic schedule impacts negatively where staff was
unable to optimally utilise available resources.
Demand elasticity of the organisational service
Demand Elasticity
It is an important concept towards understanding the impact of demand upon price of the
particular product or service. In simple terms, demand elasticity helps in measuring sensitivity of
demand for a product or service that further contributes in the change of price regarding a
product or service. The formula which is helpful in the collection of demand elasticity is
percentage change in quantity divided by percent change in price (Demand elasticity, 2020).
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Figure 3Demand Elasticity
In the current scenario, Sonic healthcare is large organisation and having sufficient amount
of demand for their all existing services. This clearly depicts that the price charge by an
organisation for delivering their service is quite significant and under the control of management.
Here, this will be easily manipulated in future towards capturing large market share along with
improving current demand of existing services (Takemura, 2020).
Impact of the event on industry
The recent event of Covid-19 will have great impact in future over this industry where
presence of testing devices is much needed in all diagnostic organisations and centres. Currently,
this is not in the hands of private organisation but in future involvement of these will be must
towards the handling of situation effectively. This is the disease that spread human to human and
the only way to control is increased rate of testing’s. Here, in this situation the involvement of
diagnostic centres is must where they begin testing in the local areas at their own level for
providence of effective healthcare services to all individuals of society. The integrated
combination of all is the way that help the large nation like Australia to effectively combat
against the disease of Covid-19 because in this situation the testing service will be easily
accessible to all. In future, this improves the demand of diagnostic centre services within the
particular industry for the purpose of delivering the effective care services to diverse population
of a nation (Tanzi, 2018).
CONCLUSION
It has been concluded from the above report that there is huge need for analysing effective
demand and supply aspects because it aids in development of the organisational support
strategies. This further provide the opportunity to get the knowledge about the factors which are
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in support and against to the business activities. The support strategies will help here to remove
the negative factors along with ascertaining strength in core business activities.
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REFERENCES
Books and Journals
Bartenev, V., 2019. Physical Macroeconomics: Part VII-Demand Function and Its
Applicability. Available at SSRN 3451731.
Buechner, M. N., 2018. A comment on the law of supply and demand. Journal of Philosophical
Economics. 11(2). pp.67-80.
Choi, H., 2018. Disproving Market Demand and Market Supply. Available at SSRN 3203158.
Johansson, B. and Klaesson, J., 2017. Distance decay for supply and demand potentials. Letters
in spatial and resource sciences. 10(1). pp.87-108.
Li, L., Li, Y. and Li, X., 2019. Environment Production Factor's Demand and Supply. Ekoloji
Dergisi. (107).
Lopes, D.F. and et al., 2019, August. Healthcare demand modelling: a systematic review.
In Conferência-Investigação e Intervenção em Recursos Humanos (No. 9).
Mankiw, N. G., 2020. Principles of economics. Cengage Learning.
Marwala, T. and Hurwitz, E., 2017. Supply and Demand. In Artificial Intelligence and Economic
Theory: Skynet in the Market (pp. 15-25). Springer, Cham.
Takemura, R., 2020. Economic reasoning with demand and supply graphs. Mathematical Social
Sciences. 103. pp.25-35.
Tanzi, V., 2018. The supply-side revolution and challenges in taxing the rich: Factors that Shape
the Demand and Supply of Taxes. In The Ecology of Tax Systems. Edward Elgar
Publishing.
Udoh, E., 2017. Money Demand and Supply under Market Disequilibrium: Evidence from
Nigeria. Asian Journal of Economics, Business and Accounting. pp.1-7.
Online
Demand elasticity. 2020. [Online]. Available Through: <
https://investinganswers.com/dictionary/d/demand-elasticity >
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