Hospital Industry Case Study: Apollo Hospitals
The hospital industry is one of the most important components of the value chain in the healthcare industry.
The industry is growing at the rate of 14% annually. The size of the Indian healthcare industry is estimated to grow at Rs. 1,717 billion in 2007. It is estimated to further grow by 3,163 billion at 13% compounded annual growth rate. The private sector accounts for 80% of the healthcare as compared to the public sector which is just 20%. According to surveys conducted by WHO, a country as populated as India needs to add 80,000 beds each year for the next five years to meets its ever growing population. The current rate of hospitals and beds stands at a bare 15,393 and 8,75,000 respectively. (Apollo, 2009)
The growing standard of living of many Indians is leading to spurring demand for high quality medical care and transforming the healthcare sector into a profitable industry. In addition to that, medical tourism is fast changing the face of the so called traditional healthcare industry. India's cost advantage and explosive growth makes it a favourable place for healthcare opportunities. (Apollo, 2009)
We can help you to write your essay!
The country has been well known around the world for spiritual healing and now with the boom in modern medicine, latest technology and skilled healthcare professionals it is soon becoming a preferred destination for medical tourism.
According to Ministry of Commerce and Industry, Indian medical tourism that was once valued at USD 350 million in 2006 is estimated to grow into USD 2 billion. (Apollo, 2009)
The dream for Apollo Hospitals was cultivated and developed within Dr. Prathap C Reddy, the founder Chairman of Apollo Hospitals. In 1983 the chain began its first hospital in Chennai bearing 150 beds. However, today the group comprises of diagnostic clinics, pharmacies and over overÂ 8065 beds acrossÂ 46 hospitals in India and overseas. The groups's efforts towards a better medical future in the country include clinical research, BPOs and health insurance services. (Apollo, 2009)
After 25 successful years of achievement and dream realisation today Apollo Hospitals is not just one of the country's premier healthcare providers but also a pioneer in helping India become a centre-of-excellence in global healthcare. Apollo group has been successful on a very large scale to take quality healthcare across India. They have been successful in touching 10 million lives and giving hope to the medically backward Indian population who had limited infrastructure. (Apollo, 2009)
Apollo has scripted the medical landscape in the country by continuous innovations and gone out to become a quality healthcare provider. It has been a major player in scripting the medical landscape of the nation. (Apollo, 2009)
By the beginning of the new millennium, Apollo Hospitals Group had become an integrated healthcare group with owned and administered hospitals, diagnostic clinics, dispensing pharmacies and consultancy services. In addition, the group offers visit to patient's doorstep, clinical & diagnostic services, medical business process outsourcing, third party administration services and health insurance. To boost performance and service to clients, the company also makes available the services to support the business of healthcare; telemedicine services, education and training programmes & research services and a host of not- for- profit projects. (Apollo, 2009)
Structural Industry analysis
The Healthcare industry incorporates several sectors that are dedicated to providing services and products dedicated to improving the health of individuals. According to market classifications the healthcare industry includes Healthcare equipment & services and pharmaceuticals, biotechnology & life sciences. The particular sectors associated with these groups are: biotechnology, diagnostic substances, drug delivery, drug manufacturers, hospitals, medical equipment and instruments etc. (Apollo, 2009)
The industry as a whole is less responsive to negative changes in the economy due to its relatively inelastic demand. People need healthcare regardless of their economic situation. (Apollo, 2009)
Porter's Five Forces -Healthcare Industry (Dobson et al. Pp 26)
Threat of New Entrants
Hospitals face a very high barrier to entry as they are heavily regulated by the government. The government often does not allow hospitals to get established in any given area specially if there is a hospital already existing in any given area. This is done to prevent the hospital to acquire healthcare technology thus preventing it from entering in the market. This very closely depends on the so called services provided by the hospitals. Many hospitals provide just basic function of clinical treatments to patients. (SWOT N PORTER 5 forces - indian pahrma)
These types of Hospitals cater to patients who come in for treatments from either visiting doctors or resident doctors. A hospital by standards means an institution that provides medical, clinical, surgical or psychiatric testing and treatments for people who are ill, injured, pregnant etc. Thus an institution providing all the above said services can only be termed as a hospital. (SWOT N PORTER 5 forces - indian pahrma)
The Idea of supplier power is very interesting in the healthcare industry. There is such a large conglomeration of different companies in the sector that it acts in an interactive manner with each other. (SWOT N PORTER 5 forces - indian pahrma)
Drug or biotech companies cater to hospitals and pharmacies and hospitals supply patients to insurance companies. Hospitals have low bargaining power or relatively small power over suppliers. Hospitals are provided medicines and equipments by biotech and drug companies. These companies may choose not to supply their medicines at the hospitals and their pharmacies that supply them to patients directly. (SWOT N PORTER 5 forces - indian pahrma)
This essay is an example of a student's work
However, there is not such a large threat as any prescription drug that is sold has to be sold through a pharmacy only. Likewise in the case of Healthcare equipment, Companies could choose not to sell them their equipment but this is not a large threat as there are fairly large numbers of healthcare equipment companies. (SWOT N PORTER 5 forces - indian pahrma)
The supplier power pharmacies face also depends largely on the availability of generic medicines and their substitutes. If the substitutes of the medicine are available, then the pharmacies face less supplier power as there is more competition in the market, thereby making the pharmacies more powerful. (Apollo, 2009)
The pharmacies now have the power to drive down the price of the product. The only stiffness the pharmacies face is from companies that have patented products. They might not be willing to sell their products to the pharmacies at a lower cost and might charge a higher price. (SWOT N PORTER 5 forces - indian pahrma)
The healthcare industry comprises of all the companies that are involved in providing healthcare services, irrespective of the positive or negative economy. Whether the prices of medicines or price of services provided increases or decreases, it is hardly a matter of concern to people as people in today's day and age are spending relatively more on healthcare. Thus quoting that the healthcare industry is relatively unaffected by buyer power would not be inappropriate. Economy does not affect the health or the choice of healthcare option for people. If a person has to undergo an operation, he/she will not be affected by the economic crisis or inflation etc. However, this may not hold true in case of poor people or people below the poverty line as irrespective of the economic conditions they might still not be able to afford healthcare for themselves. Irrespective of economic conditions, poor people tend to be less healthy than wealthier people as the reach of healthcare amenities to them is limited. (SWOT N PORTER 5 forces - indian pahrma)
Availability of Substitutes
Overall, the healthcare industry has no substitutes, if a person needs healthcare, he/she will have to seek the services of the healthcare sector only. in the case of hospitals, Hospitals have no substitutes. (Apollo, 2009)
If a person needs to be medically attended to, he/she will have no choice other than to utilize it. There are other forms of treatments or medicine available but it is not vast enough to over shadow modern medicine. But within the industry the availability of substitutes varies. Within the industry, however, the companies face the power of substitutes when their patent expires. During the term of their patent the company can enjoy huge monopolistic benefits but as soon as their patents expire, with the production of generic medicines, they start to lose out on their monopolistic benefits and future prospects. Their competitors will charge less for the same medicine as they did not have to incur R&D costs. (SWOT N PORTER 5 forces - indian pahrma)
Hospitals are an essential utility for people. They face less competitive rivalry as they are low in number in any given area and even if there are a set of number of hospitals in any area, they cater to different needs of the customers. Rather than making them competitors, this way they act in conformity with each other, providing each business as well.
Also, most hospitals cost the same and usually this price is covered by insurance companies so there is no price competition therefore very little competitive rivalry. (SWOT N PORTER 5 forces - indian pahrma)
SWOT ANALYSIS (Dobson et al. Pp 26)
Integrated healthcare company: Apollo hospitals provide end -to-end services to the patients. Equipped with a well maintained in house pharmacy as well as standalone pharmacies, where it has got unique advantage compared to its competitors. These pharmacies are open round the clock and provide for not only in house patients but other customers too. (Apollo, 2009)
Best technology & resources to deliver quality services: Apollo Hospitals have been reputed to acquire state of the art technology and optimum infrastructure to serve to its clients. Apollo hospitals serve its customers a world class service to its customers. The hospital giant has recently acquired state of the art technology for in neurology and liver transplant. They provide quality resources which provide a world class service to the patients. (Apollo, 2009)
Earn money as a Freelance Writer!
We’re looking for qualified experts
As we are always expanding we are looking to grow our team of freelance writers. To find out more about writing with us then please check our freelance writing jobs page.
Penetration: Indian Healthcare market is one of the least penetrated markets thereby facilitating to existing players. (SWOT N PORTER 5 forces - indian pahrma)
Impact of the Health Insurance sector: opening of the health insurance sector and the expected growth in the per capita income are key growth drivers from a long term perspective. This leads to growth in the health care sector. (SWOT N PORTER 5 forces - indian pahrma)
Positive advancement : growth of the sector in the country is directly proportional to good health care and better health treatments to the people of the country. With the growing standard of living of the people. They prefer to obtain best medical attention. (Apollo, 2009)
Largest private sector healthcare provider in India. (SWOT N PORTER 5 forces - indian pahrma)
Consistent revenue growth across business segments. (SWOT N PORTER 5 forces - indian pahrma)
Since more than 300 Stand-alone pharmacies have been added during the year and most the pharmacies are in the incubation stage, this can depress the margins. The incubation stage of the pharmacies has had a draining effect on the few set running pharmacies. (Apollo, 2009)
There is a very high attrition rate amongst nursing staff due to competition from the Western countries. High salaries and employee options are provided in the west, better training facilities. (Apollo, 2009)
There is a growing opportunity for the healthcare sector in India as for every 1000 people there are only 1.11 beds available. To make this ratio rise to 1.85 by 2012, an investment of Rs. 3480 billion is required. Such a huge investment is beyond the control of the public sector.
Booming Medical Tourism and options : India has an increasing number of medical tourists and courses every year. The market for Medical tourism is expected to reach $40 Billion by 2010. Apollo hospitals, already a major player inthe market is very well positioned to maximise its share. (Apollo, 2009)
Lack of qualtity resources : Growing opportunities means growth of the number of doctors and nurses per 1000 patients. In India for every 1000 people there are 0.3 doctors and 0.8 nurses available while comparably in the western countries the figure stands at 1.23 doctors and 2.56 nurses respectively. (Apollo, 2009)
The Indian Healthcare market is expected to quadruple to $150 Billion by 2017 from the current market size of $35 Biilion. Apollo Hospitals is very well positioned in the market to capitalize on this growth opportunity. (SWOT N PORTER 5 forces - indian pahrma)
There seems to be high competition prevailing amongst existing players in the industry. (Apollo, 2009)
Cost of the medical equipment accounts for 40% to 45% of the total expenditure in the hospitals. As the industry is majorly based on new and latest equipment thus the industry requires constant investment in
the new healthcare devices i.e. upgrading technology. Failure in doing so may lead to loss of patients. (Apollo, 2009)
Any change in technology will make the existing medical equipments obsolete. (Apollo, 2009)
A large amount of revenue is generated from foreign citizens who come for medical treatments to India. A large portion of these people comes from US. As US is trying to provide quality healthcare services at low costs as per their new presidential plan, this may reduce the revenue. (Apollo, 2009)
This type of business is capital intensive. (SWOT N PORTER 5 forces - indian pahrma)
Attrition rate in the healthcare sector is expected to increase with the surge in demand for medical professionals. (Apollo, 2009)
If you are the original writer of this essay and no longer wish to have the essay published on the UK Essays website then please click on the link below to request removal: