The industry appears unable to support large companies
Melbourne, Australia (PRWEB) October 05, 2012
Although healthcare providers are predominantly run or funded by the government, community services rely on private philanthropy and entrepreneurship, and government funding to generate revenue. The Community Services subdivision generates only one-quarter of the money dedicated to the Heath and Community Services division, and comprises activities like crisis care, aged care, childcare services, welfare services and fundraising. These industries receive significant funding boosts during hard times, as government spending increases to stimulate a flagging economy and ensure the provision of services to the community. The combination of the subdivision's counter-cyclical nature and its close association with health care (which has steadily increasing revenue) means that community service providers were able to ride out the national downturn comfortably. According to IBISWorld Industry analyst Ee Jen Lee, “Over the five years through 2012-13, subdivision revenue is expected to grow an annualised 7.6% to generate $38.7 billion”. With business confidence expected to remain low over 2012-13, the result is philanthropic activities will grow modestly in 2012-13. Consequently, subdivision revenue is forecast to grow by 6.2% this year.
An ageing population, a surging Child Care Services industry (an important part of this subdivision) and more private money finding its way into the subdivision are all responsible for this resilience, as is a consistent stream of government money. The trends currently boosting growth show little signs of subsiding over the next five years. “Australia's demographic movements means greater demand for childcare and aged care over the next five years”, says Lee. Further, society expectations and varying preferences means that there is greater scope to expand services. For these reasons, IBISWorld forecasts sustained buoyant growth over the next five years through 2017-18.
All industries in the Community Services subdivision exhibit a low level of market share concentration. The Child Care Services industry was one exception for a brief period, as ABC Learning rapidly established dominance. However, the collapse of that company, and revelations that its announced profits were possibly fraudulent, has led to the conclusion that the industry cannot support large companies. Indeed, there are few economies of scale involved in operating numerous locations, while franchise fees appear to be insufficient to make up for operating costs. Much like childcare, aged care exhibits no obvious benefits from operating multiple centres and it is increasingly common for property developers to manage a small number of retirement communities within a specific regional area. Welfare providers and fundraising groups are often small not-for-profit operations, where the majority of funding comes from the Federal Government.
For more information, visit IBISWorld’s Community Services report in Australia industry page.
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IBISWorld industry Report Key Topics
Community services providers offer largely ancillary services to health provision, such as homes for the mentally ill or victims of substance abuse. Largely, these services provide greater opportunity for Australians to contribute to the economy or care for those who cannot. For example, childcare providers allow parents to remain in the workforce. The bulk of these services are offered by a combination of government and private money.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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