Finance Strategy Business Development for Apollo Hospitals Marketing Plan

Apollo Hospitals

India's Apollo Hospitals Group

India Overview

Company Overview

Porter's Five Forces

Threat of New Entrants

Supplier Power

Buyer Power

Threat of Substitutes

Competitive Rivalry

Strengths

Weaknesses

Opportunities

Threats

Strategic Alternative Identification & Fit Assessment

Competitive Position, Capabilities, and Deficiencies

Strategic Choice & Strategy Formation

Finance

Income

The Apollo group has an extraordinary success record and has proven that healthcare in India can compete with many first world organizations with third world resources. The company faces a number of challenges in the domestic market and must continue to leverage its success. The organization has a unique source of human capital that can offer many competitive advantages on an international level with regard to technology and education. This analysis will provide a background on India and the Apollo group as well as many perspectives on their opportunities and challenges.

India Overview

India is a diverse nation that is divided into twenty five states and seven territories (Maps of India, 2011). Among these various territories, there are sixteen major languages spoken while estimates of regional languages and local dialects exceed a thousand (Gomes, 2011). The assortment of languages spoken produces an obstacle for India to become more unified as a country and the government has taken steps towards language standardization. Often children in schools learn Hindi as a second language, with English becoming common place for use in primary and higher education which helps to build a level of standardization and an international competitive advantage.

Education has developed as one of strategies of advancing an economy and India has had rapid increases in schools and enrollment in these schools. While there is some struggle to provide educational infrastructure to meet the demands of the exponentially expanding population, however India has focused on education to drive growth and improve human capital. For example, it is estimated that India trains over four hundred thousand engineers a year while the U.S., for comparison, only trains about sixty thousand (Digital Learning, 2008). This strategy has led to a technologically competent segment and driven a large growth rate in market segments such as information technology.

Figure 1 - India Education Growth (Digital Learning, 2008)

India's economy is growing very rapidly and the gross domestic product (GDP) has steadily increased since 1997 by a rate of almost six percent per year (Trading Economics, 2014). India also possesses the second largest workforce in the world only behind China. However, China's total workforce and total population still have a commanding advantage by the numbers. Furthermore, these two countries are often placed in the same categories of economic growth even though the two countries have developed on very different trajectories and used substantially different strategies (Riley, 2008).

Figure 2 - India Growth (Trading Economics, 2014)

Company Overview

Dr. Prathap C. Reddy, Apollo's Executive Chairman stated "The first part of the game is over. I have shown the world that we can provide first-class health care in India." The Apollo group and the Indian Healthcare system in general have proven that they can be a competitive force in the global market. With a total staff of over ten thousand the organization has claimed world class results. Some of the stats include figures such as:

50,000 heart operations with a success rate of 98.5%

Cardiac surgeries using the beating heart technique with a 99.5% success rate

138 bone marrow transplants with a 87% success rate

6,000 kidney transplants with a 95% success rate

The company began operations over twenty five years ago with the dream of helping India become a premier healthcare provider. The first hospital was in Chennai and had one hundred and fifty beds. Now the organization spans over eight thousand beds across forty-six hospitals and has helped over ten million lives. The company has been innovative in many ways to achieve such an impressive growth trajectory. The company now represents an integrated healthcare provider that has expanded vertically as well as horizontally and focuses on patient centered care.

Figure 3 - Patient Centered Model (Apollo Hospitals, 2014)

Mission

Apollo Hospitals' Mission is "to bring healthcare of international standards within the reach of every individual. We are committed to the achievement and maintenance of excellence education, research, and healthcare for the benefit of humanity." (Apollo Hospitals, 2014)

Porter's Five Forces

There are many challenges for modern day healthcare organizations to meet the demands of the growing consumer base. Almost all healthcare organizations are to deliver broad access to health services while improving quality of care and controlling costs and greater competition has often been proposed as a solution that elegantly addresses each element of that challenge (Dash & Meredith, 2010).The level of competition in the market must be balanced with the healthcare needs of the population to promote access to high-quality; efficient care and strategies that are most effective in achieving this balance are open to debate. For example, too much competition for example can lead to duplication of services that create inefficiencies in the system as a whole on a macro level while too few services will not be able to meet the demand of health consumers.

On a micro level however understanding the competition is a vital part of creating a strategic strategy. Prof. Michael Porter's Five Forces Analysis of industry attractiveness is now being applied to healthcare and includes three forces from "horizontal" competition: the threat of substitute products or services, the threat of established rivals, and the threat of new entrants, as well as two forces from "vertical" competition: the bargaining power of suppliers and the bargaining power of customers (Meyers, 2014). When these forces are intense, it is argued that there is generally less room for profitability and the structure of the industry can drive profitability.

Porter stresses that the future will belong to those who create value and lays out his principles of value-based competition (Meyers, 2014):

The focus should be on value for patients, not just lowering costs. Competition must be based on results.

Competition should center on medical conditions over the full cycle of care.

High-quality care should be less costly.

Value must be driven by provider experience, scale and learning at the medical condition level.

Competition should be regional and national, not just local.

Information to support value-based competition must be widely available. Innovations that increase value must be strongly rewarded.

Threat of New Entrants

Hospitals face significant barriers to entering the market because they are heavily regulated and require a substantial amount of infrastructure. If there is already a hospital serving a local market it generally has a bit of monopoly power and it can be extremely difficult for another hospital to establish itself in that market through regulations or by creating market demand. This makes expansion through acquisition a popular growth model by many firms in this industry as they can quickly establish themselves in a market.

Supplier Power

The supply chains in healthcare are complex and dynamic and it can be difficult to make broad generalizations about the amount of supplier power that firm's may have in the hospital's downstream. Drug companies, insurance companies, and medical technology providers can have a considerable amount of power in negotiations with any hospital especially for proprietary-based products. However, the hospital will typically have various supply chain options that can balance negotiating power to some extent but this often must be considered on a case by case basis.

Buyer Power

The buyer's power in the healthcare market can be considered from many different perspectives. Often an individual will purchase healthcare on their own or they can purchase services collectively through insurance companies or sometimes government assistance. Individuals typically have few choices; especially in emergency situations and will have to visit the provider closest to them. Collective agencies have considerably more power but still are limited in providing options for the members that they represent.

Threat of Substitutes

Hospitals by in large have very few substitutes for providing care with a few exceptions. When someone is injured they typically do not have time to consider their options when seeking care. In some non-emergency procedures there is some ability to shop for substitutes such as a hospital in another region or country. However, for the most part, the treat of substitutes is low.

Competitive Rivalry

Competition in the healthcare industry generally is low on the local level because there is a low level of substitutes. However, healthcare providers can compete on various metrics and stronger firms sometimes have the opportunity to acquire other hospital locations. Furthermore, more competitive organizations can also attract the best resources such as healthcare workers. Therefore, although there is typically not much competition in a regional area, there are other levels in which hospitals can compete.

SWOT

Strengths

Broad product and service mix

High technological levels

Market Penetration

Quality Service and Brand Image

Weaknesses

Pharmacy growth issues

Low salaries for staff, international competition

Opportunities

Huge market potential

Growth in medical tourism niche

Develop high tech equipment manufacturing

Threats

Costs of medical equipment (overhead)

International competition

Healthcare staff immigration for….....