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By placing a ceiling on the prices it can charge, substitute products or services limit the potential of an industry. Unless, it can upgrade the quality of the product or differentiate it somehow, the industry will suffer in earnings and possibly in growth. There is less of a threat of the placing of substitute products in the health care industry. Natural therapies and other natural treatments are gaining popularly but not expected to be a competitor for the industry.
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The potential rival’s expectations about the reaction of existing competitors will also influence its decision on whether to enter. The health care industry is facing serious threats from potential players entering into the industry. The above barriers may block small players. But a serious and player can easily overcome those barriers if having a financial strength and having a vision for a longer period in the industry. (more…)