CAD/CAM - international magazine of digital dentistry

I 33 business _ digital dentistry market I CAD/CAM 1_2014 According to leading dental manufacturers, product and service innovations in core competen- cies and related product areas (synergies) will also play a critical role in achieving sustainable business growth. Ongoing digitalisation in areas such as prosthetics, IT solutions to enhance process effi- ciency, and new materials are among the main areas of growth and innovation (Table I). _Increasing competition and constant price pressure Despite solid market growth, businesses are ex- pecting slightly stronger competition saddled with constant price pressure over the next three years. In particular, many regard the competitive pressure from wholesalers that develop and market their own brand and, to some extent, practise vertical integration as a crucial factor of the competitive dynamics in the dental industry. Wholesalers with their own brands have con- tinuously improved their position in the European dental materials market over the last few years. While they may have considerably lower market share compared with that of manufacturers of dentalproducts,theirgrowthratesaresignificantly higher than those of the rest of the industry. Low-cost providers are another source of competitive pressure, especially those from non- European markets such as Asia. Their influence however will remain marginal for the time being owing to their inability to guarantee short turn- around order processing times and to their some- times suboptimal product quality. As low-cost providers continuously improve their quality, man- ufacturers assume that the price level, especially for standard segments, will drop further. Ongoing market price pressure will also be in- fluenced by increased customer price sensitivity. Manufacturers expect stronger price pressure in market segments in which wholesalers offer their own brands than in other segments. _Supply and demand challenges The market developments yield four primary challenges for manufacturers of dental products (Fig.1),whichrequireadaptationsintheirportfolio, as well as in their marketing and sales approaches. On the supply side, the rising competition from wholesalers at product and service levels presents a considerable challenge. With regard to products, theyoffertheirownbrands,aswellasanexpanding product spectrum. They are also increasingly in- vesting in developing integrated process solutions (IT/workflow integration), and offer sophisticated consulting services and training seminars, placing them in direct competition with manufacturers. Whilemanufacturersaredependentonwholesalers as their main sales channel, they also want to distinguishthemselvesfromthemasfaraspossible. It comes down to creating a balance between efficient wholesaler management and the highest possible level of differentiation. On the demand side, consolidation and inte- gration of dental practices and laboratories (e.g. dentists joining laboratory chains or practice lab- oratories) pose new challenges for manufacturers. End-customers’ escalating cost pressure and mar- ket competition, but also their increasing levels of digital and international integration are undoubt- edly responsible for these developments. In this context, manufacturers will have to deal with the growing negotiating power of providers and their increasing price sensitivity, making the battle over customers increasingly tougher. _Need for action In order to compete successfully in a changing market environment, manufacturers of dental products have identified the need for action in four main areas (Fig. 2). Rethinksalesstructuresand pushforwardintegration Manufacturers of complex products and solu- tions (e.g. CAD/CAM and imaging) particularly are planning on introducing or strengthening direct sales structures to better meet the demand and supply-side challenges in the dental market. For- ward integration, for example taking over labora- tory or manufacturing services for dental practices, is another option for manufacturers in innova- tive product areas to address these challenges. Fig. 1_Challenges in marketing and sales facing the dental industry. Fig. 1 ory CAD0114_32-34_Laupheiner 14.04.14 11:50 Seite 2