Market Analysis Essay:
Report indicates that there are 75, 573,082 (41%) people who are nearsighted and required for correction eye wares in the US (AAO, 2013). And further studies shows that 10 million American adults in the national survey are going to start wearing contact lenses (87% soft contacts, 13% rigid contact lenses). This might be a good opportunity for manufacturing soft contact lenses in order to create value for the society and generate value from the society in return. However, a success of business requires rational judgment based on analyzing both the micro – economics and macro- economic conditions. From this point of view, this essay analysis the process of our new soft lens. The essay contains two sections. The first section analyses the micro economic elements: features of soft lens market, supply and demand as well as substitutes and complements; the optimal scale of output which regarded to essential factors of this service production. Section two discusses macro-economic factors related to this product.
The market review
The soft contact lenses industry is generally regarded as an oligopoly market. Reasons are, first of all, there is a high entry requirement from the government. Secondly, people have to show prescriptions from eye care practitioners to purchase soft contact lenses. Soft contact lenses are classified type II (daily), or type III (extended wear) medical device, manufacturing companies need to experience a clinic trail for FDA safety certificates before product launching. Then, with the FAD approval, these companies usually hold competitive advantages of patents, which means they got a certain degree of market power. And, they are selling identical soft lenses based on functions (generally for myopic, astigmatic, bifocal). Lastly, large capital need for entering this market for both manufacturing and research & development for survival and business continuity.
Four giant firms are dominating this soft contact lens industry. The generated 96% in 2010 and 98% in 2009 of market share – Johnson &Johnson (44%, 2010; 41%, 2009), Ciba Vision (22% 2010 &2009), Blush and Lomb (14%2010, 13%2009) and Cooper Vision (16%2010; 22% 2009). Applying Herfindahl-Hirschman index by using the figures in 2010, the market index is over 1800 meaning that it is an oligopoly market (442 + 222 + 142 + 162 + 42 (other firms) = 2680. Data from Contact Lens Spectrum (2013) suggests that US shipments of contact lenses were valued at $1.67 billion in 2012, having risen by 4.5% from the previous year. Meanwhile, the revenue of soft contact lenses accounted for $1.2 billion. Data from GFK retail and technology shows that there were 38 million lens wearers in US, approximately 13 % of the total population (GGK 2013). According to the kinked demand curve, oligopoly firms are constantly monitoring their competitors’ actions (Griffiths and Wall, 2003), if one firm lowers its products price, others would response quickly. On the other hand, if that firm increase price, it loses the profit because consumers will buy its rivals product. Actions to increase or decrease their price might lose their profit (Contact Lens optimum, 2013).
Market Demand of the soft lens
According to the Statistic brain (2013) the corrective lenses statistics show a rapidly growing market for corrective lenses. The National Eye Institute (2012) defines corrective lens as a lens often worn in front of the eye mainly to correct prevalence eye conditions such as myopia, hyperopia, presbyopia and astigmatism. The wearing of the glasses is often a short distance from the front eye. On the other hand, contact lenses are often worn directly on the surface of the eye. Other lenses such as the intraocular lenses are implanted into the eye surgically and often occur with the removal of the cataract. However, there have been implants of intraocular lenses for refractive issues. The two common eye corrections namely myopia and hyperopia require two distinct treatments. While myopia is corrected with a divergent lens, hyperopia is corrected with the use of convergent lens. An optometrist or ophthalmologist recommends the appropriate corrective lenses to be used by an individual (National Eye Institute, 2013).
According to Contact Lenses Spectrum, several data sources are used in evaluating the prevailing trends in the contact lens market as well as the changes in market share. Jason (2013) argues that there is always a major challenge in coming up with an actual estimate of the number of people actually wearing contact lenses. For instance, the market for contact lenses in the United States has been described a somewhat flat for some time now. This has particularly been brought about by the fact that many people have discontinued the use of contact lenses while a similar number has entered the contact lens market. The Contact Lenses Spectrum believes that there are about 34 million to 36 million wearers of contact lenses in the US. The year 2013 is estimated to have 37 million to 38 million users of contact lenses (Contact Lenses Spectrum, 2013).
The past few years have raised concerns about possible defensive nature sales of contact lenses as the market has just recorded an annual growth rate of about 3% to 5% globally. The market growth in the United States has been estimated to be 4% to 7% annually from 2009 to 2011. According to data from GfK Retail and Technology (2012), there is a continuous increase in sales of soft lenses in the United States since 2012. Between January and September, soft lenses sales in the United States recorded an average growth of 4.5% in comparison to the previous period. There has been a healthy performance of contact lenses in the U.S market as from the third quarter of the fiscal year 2012 (Baird, 2012). The period was characterized with a growth in sales by about 9% in the US market while the global market recorded a 5% growth. Indeed, the growth in contact lenses sales since 2012 is regarded as the greatest since the Great Depression days. The industry has particularly been impacted positively by the increase in technology especially for certain types of contact lenses such as daily disposable, multifocal lens, silicone hydrogel and many other categories.
Substitutes and Complementary Analysis
At some point in time, people can get tired and bored of using contact lenses. The fact that contact lenses need to be changed every so often can also mean high cost implication on the part of the patient. On such circumstances, people may decide to search for other substitutes that can provide better service or ease the continuous expenditure on contact lenses. The most effective and permanent correction is the LASIK surgery. The LASIK surgery is procedure often undertaken on people above 21 years. The LASIK surgery is a permanent procedure that involves the removal and reshaping of the eye cornea tissue. This refractive surgery is a very common. However, there other forms of eye surgeries such as LASEK and PRK which also serve the same purpose as LASIK though some slight differences exist (Murphy, 2010). These surgeries can completely substitute the use of contact lenses in a permanent manner.
Indeed, the surgeries are expected to reduce the level of reliance on contact glasses and spectacles by the patients. LASIK surgeries have become successful especially with the advancements in technology leading to minimal or no complications. Refractive surgeries are permanent surgeries. However, they are not guaranteed of 100% success and may mean that a patient may still require reading glasses. GB contacts are another substitute to soft contacts. GP contacts have various advantages compared to soft lenses. For instance, GP contacts are made from special materials that allow better air circulation in the eyes while soft lenses do not have adequate space for air circulation (CLMA, 2013). GP contacts are also more durable than soft lenses. There are also complementary products that are used along with contact lenses such as products to care for the lens, sunglasses and back-up spectacles. Furthermore, contact lenses cannot be worn without the prescriptions from Optometrists (Optometrists Association Australia, 2013). Therefore, consultation is a complementary expenditure for patients requiring contact lenses.
Impacts of external forces on supply and demand
Market projections indicate that the eye care profession will face an increasing demand for eye care services in the coming years. Indeed, by the year 2020, Ophthalmologists and optometrists will be unable to meet the prevailing demand for eye care services. According to Richard Edlow (2013), the past 20 years can be attributed to a significant level of complacence in the eye care profession especially with the flat nature of the 65-and-older generation. However, this population is expected to increase by 36% by 2020. As a matter of fact, about 100 million eye exams will need to be done in the year 2020 with an additional 40 million from the Affordable Care Act (ACA). The demand for eye care services will increase by 10.8% by 2020 without putting into consideration the increase in utilization, change in the ethnicity of American population and modalities of new treatment.
He American Optometric Association Manpower Study forecasts an oversupply of optometrists up until 2017 which will then shrink. Although there are some areas exhibiting an oversupply of eye specialists, the oversupply will soon disappear owing to the increasing population, new modalities of treatment as well as the changing American ethnicity. There are other important factors that have a significant role to play in the demand and supply of contact lenses. To start with, consumer income is an important factor affecting demand and supply for contact lenses. The fact that contact lenses are more costly than glasses means that income is a major factor for consumers. For instance while ordinary glasses normally cost $200 annual maintenance costs, contact lenses may require a daily disposable cost of $480. Consumer preferences are another important factor that affects the demand and supply of contact lenses.
Contact Lens Manufacturers Association (CLMA) 2013. LASIK Eye Surgery Cost. Retrieved on Wednesday, November 13, 2013 from
Murphy, R 2010. 30-Day Contact Lenses: A Smart Alternative to LASIK? ALL ABOUT VISION. Retrieved on Wednesday, November 13, 2013 from
Optometrists Association Australia 2013. Fact: Contact Lens Wearers Spend More! Retrieved on Wednesday, November 13, 2013 from