[STRATEGIC MANAGEMENT]

Environmental
analysis & Strategy
formulation of
Appolo Hospital

Submitted to :-Prof.Viral Pandya

Submitted by :- Bhavesh Thaker (0951)
Ajay Charles Saha(0940)
Prerna Kharti
Rajesh Prajapati
Final Year GLSMBA-Marketing
Health care Industry in India

In India, the Healthcare system is split into a public sector, a private sector and a wide
network of informal healthcare providers operating together in a large and
unregulated network. This irregularity has caused wide disparities in access,
especially in regional and rural distribution of healthcare infrastructure. Currently, the
Indian healthcare sector is valued at Rs.1, 360 (US $34) billion roughly 6 per cent of
GDP. The healthcare business is projected to grow to over Rs.1, 600 (US $40) billion
or 8.5 per cent of GDP by 2012, according to Price Waterhouse Coopers (PwC)
report, 'Healthcare in India: Emerging market report 2007'.

Some Facts about the Hospital Industry

 India’s healthcare industry is currently worth Rs. 73,000 crore which is

roughly 4 percent of the GDP. The industry is expected to grow at the rate of
13 percent for the next six years which amounts to an addition of Rs 9,000
crores each year.
 The national average of proportion of households in the middle and higher
middle income group has increased from 14% in 1990 to 20 % in 1999.
 The population to bed ratio in India is 1 bed per 1000, in relation to the WHO
norm of 1 bed per 300.
 In India, there exists space for 75000 to 100000 hospital beds.
 Private insurance will drive the healthcare revenues. Considering the rising
middle and higher middle income group we get a conservative estimate of 200
million insurable lives.
 Over the last five years, there has been an attitudinal change amongst a section
of Indians who are spending more on healthcare.
  Corporate hospitals mushroomed in the late eighties. The boom remained
short-lived and out of the 22 listed hospital scrips, most are being trading
below par.
 An increasingly fragmented market, lack of statistics, capital intensive
operations and a long gestation period are all wise reasons to shy away from
investing in the healthcare industry.
 Government and trust hospitals dominate the scene. Many of the trust
hospitals suffer from poor management. Good corporate hospitals are still too
few to amount to a critical mass.

Apollo Hospitals Enterprise Limited

 Apollo Hospitals Enterprise Limited (AHEL) is a leading private sector

healthcare provider in Asia. It was incorporated as a Public Limited Company
in the year 1979, a comprehensive 250-bed hospital with an emphasis on
speciality and super specialties in over fifty departments at Chennai. Dr.
Prathap C Reddy promoted it.
 Apollo Hospitals Enterprise Limited (AHEL) owns and operates a network of
leading primary, secondary and tertiary hospitals and clinics across India.
 The Company also has a pan India footprint of 873 standalone pharmacies.
The Apollo Hospitals group today includes over 7500 beds across 43 hospitals
in India and overseas,
 neighbourhood diagnostic clinics, an extensive chain of Apollo Pharmacies,
medical BPO and health insurance services and clinical research divisions that
are working on the cutting edge of medical science.
 In India, Apollo hospitals can be grouped into the following categories based
on their stage of maturity and occupancy levels: Mature hospitals at Chennai,
Hyderabad, Madurai, Bilaspur, Mysore, and Visakhapatnam have occupancy
levels exceeding 75%. New hospitals at Bangalore, Ahmedabad, have
occupancy levels of 60%.
 Two Hospitals were commissioned during the year, Apollo Loga Hospital at
Karur, Tamil Nadu, having 70 beds and a Hospital at Karim Nagar, Andhra
Pradesh with 120 beds.
 As per the Accounting Standard 17 issued by The Institute of Chartered
Accountants of India, AHEL has two reportable segments, healthcare services
and Standalone Pharmacies; Healthcare services segment comprises hospitals,
hospital-based pharmacies and Consultancy Division. The other segment
comprises standalone pharmacies.
The Apollo Group of Hospitals

 Driven by its line of being the “architect of healthcare” in India, the Apollo
Hospitals Group, comprising of one of the largest networks of 26 hospitals, 10
clinics and over 10,000 employees across the country, represents the changing
face of healthcare in India contemporary and corporative.
 It has been the first private company to administer health insurance in the
country and Indraprastha Apollo Hospital in Delhi is the fourth largest
corporate hospital in the world.
 The Apollo group is India’s first corporate hospital, the first to set-up hospital
outside the country and the first to attract foreign investment. With 2600 beds,
Apollo is one of Asia’s largest healthcare players.
 The recent merger between its 3 group companies, Indian Hospitals
Corporation Ltd., Deccan hospitals Corporation Limited and Om Sindoori
Hospitals Limited, will help the group raise money at a better rate and by
consolidating inventory; it will save around 10% of the material cost.
 The group is planning to invest Rs. 2000 crore, to build around 15 new
hospitals, in India, Sri Lanka, Nepal and Malaysia. Apollo claims to maintain
the best of medical standards with a record of over 7.4 million treated patients,
3,15,000 preventive health checks done, 98.5 percent success rate in 45,000
cardiac surgeries, etc. And helping the company maintain a balance between
the corporate culture and rigorous medical excellence is recognition of IT as
intrinsic to every process, whether it is day-to-day running of hospitals,
education or telemedicine.
 The application of IT in the day-to-day working of the largest hospital of the
group, Indraprastha Apollo, throws light on the extent of the automation drive
within the company. The management realised the fact that in order to have a
modern hospital in place all the work processes had to be related to IT.

 Hence, the need for an end-to-end integrated solution. This led to the
implementation of the Hospital Information System (HIS), which was an
integral part of the hospital inception project.
 The hospital today boasts of an integrated HIS, which provides for end-to-end
integration of the various processes and functional areas within the hospital to
make for a seamless workflow.
 The work processes of the hospital are primarily divided into two areas the
patient (comprising of in-patient and out-patient) and the non-patient all the
back-end departments like housekeeping, engineering, finance, materials,
purchase and HRD. The workflow process starts with the patient seeking an
appointment with the doctor.

 HIS contains all the information relating to appointment schedules of the

doctors. Depending on the availability of the doctor, the patient is given the
date and time of appointment. This information is then fed into the system and
the updated information is available to the doctor in real-time.
 On the date of his appointment, the patient registers himself at the counter by
filling up of a form, which contains all the basic information related to the
patient. This data is fed into the system with a Unique Hospital Identifier
(UHI) number allotted to the patient so that by the time the patient meets the
doctor, he already has all the required basic information.
 This is followed by 15 minutes of consultation with the doctor after which the
doctor gives his prescription, the data is again keyed into the system as a
patient record under his UHI and is accessible for quick reference. One of the
biggest advantages of HIS is that any medically relevant information related to
the patient is available at the click of a button, thereby saving precious time,
which means a lot when it comes to saving a life.
 HIS also acts as a kind of ERP for the hospital with its automation of various
back-end areas like financial, accounting and inventory, which are integrated
with the patient areas wherever required.
 The hospital has also developed a very effective mailing system for its
employees, which is based on Microsoft Exchange. The company’s Intranet is
being used to run mailing applications as well as information relating to
 company policies, leave information and basic information relating to the
company.

Other business units

Apollo Hospitals
 Apollo Hospitals Enterprise Limited has over 8065 beds across 46 hospitals in
India, rest of Asia and Africa. The hospitals are multi specialty tertiary care
facilities with centres-of-excellence in medical disciplines including
cardiology, cardio-thoracic surgery, gastroenterology, orthopaedics & joint
replacement surgery, neurology, critical care medicine, nephrology, oncology,
hand & micro surgery and reproductive medicine.

Apollo Global Projects Consultancy

 Apollo offers project and operations management consultancy services with
the support of operational and functional specialists.
 The pre & post commissioning consultancy services include feasibility studies,
strategic planning, infrastructure consultation, human resource recruitment,
training and medical equipment consultancy, management contracts,
establishment of medical and administrative protocols etc.

Apollo Health and Lifestyle Limited

 Apollo Health and Lifestyle Limited, has established over 100 Apollo Clinics
across the country, is an integrated model and offers facilities for specialist
consultations, diagnostics, preventive health checks and 24-hour Pharmacy, all
under one roof.

Apollo Pharmacy
  Apollo Pharmacy is India's first and largest branded pharmacy network; with
over 750 retail outlets in key locations across the country. The group adds one
pharmacy every 23 hours.

Apollo Hospitals Education and Research Foundation

 AHERF was set up to establish, maintain and support educational institutions
in promoting medical, paramedical and hospital management courses.

 The Institute offers over 18 post graduate teaching programmes, including

ones certified by the Royal College of Edinburgh. MedVarsity Online Limited
is backed by two giants; Apollo in medicine and NIIT Limited in the field of
electronic-education.

 MedVarsity has developed in-house, over 1500 hours of medical content that
is accessible to the medical community, anytime and anywhere.

 The research division currently undertakes diverse projects from clinical trials
in multiple locations to molecular biology, stem cell transplants,
epidemiological studies, and in the future identification of genetic Biomarkers.

Apollo Telemedicine Networking Foundation

 In 1999, Apollo launched its first model Telemedicine Unit at Aragonda
village in the Chittoor district. Since then, Apollo has witnessed a steady
growth in terms of delivering quality healthcare and reaching out to the
masses.
  Telemedicine is a potent means of harnessing telecommunication technology
to deliver healthcare and education to patients in regions that are
geographically less accessible.
 It also saves time and the cost of travel to access quality care. Apollo has
pioneered the concept of telemedicine in India and Asia, and has over 100
telemedicine centres in India and overseas.

Apollo Insurance Company Limited

 Apollo DKV is a joint venture of the Apollo Hospitals Group and DKV AG,
Europe's largest private health insurer and a Munich Re Group company. The
company offers innovative health insurance, wellness solutions and disease
management to meet customer needs.

Apollo Wellness Plus

 Apollo Hospitals launched the first Wellness Centre at Apollo Hospitals
Chennai in Feb 2005. Wellness Plus is the perfect blend of modern and
complementary medicine like aromatherapy, pranic healing, yoga, and
meditation that fits the modern lifestyle.

Apollo Reach Hospitals

 An endeavour to bring world class healthcare to semi urban and rural India -
every Apollo Reach Hospitals will be a specialty hospital, designed to
complement existing private and public healthcare facilities in the proposed
towns and villages.
  Construction of hospitals, procurement of land and identification of cities are
underway to set up the first phase of 25 Apollo Reach Hospitals over the next
two years across India.
 With initial bed strength of 100 - 150 beds, each Apollo Reach Hospital can be
ramped up to a 200 bedded specialty hospital

Apollo Hospitals Group– Companies, besides Hospital

Apollo Health Street Incorporated

• Offers Business Process Outsourcing and IT solutions and services to global
clientele.
• Established in 1999t

Apollo Pharmacies
• Largest retail pharmacy chain in India and has round-the-clock operations-
maintains a stock of prescription drugs, OTC medicines and other health and
body-care related products
• Moving towards offering e-prescription based services.
•
MedVarsity Online Limited (MOL)
 • Acts as a catalyst for students and is contemporary to the existing education
system- over 1500 hours of medical content that is accessible to the medical
community.
• Established in 2000

Apollo Telemedicine Enterprise Limited (ATEL)

• Allows the participant sites to collaborate with institutions in India and abroad
and provides their clientele access to healthcare in areas not adequately served
by the medical community.
• Established in 1999

Family Health Plan Limited (FHP)

• It’s the largest Third Party Administrator (TPA) in Asia- affiliated to 1700
major Corporates and manages 4.7 million lives
• Initiated ‘managed care’ to control rises medical costs, and to make medical
facilities accessible for greater number of people.

Online Hospital Equipment Services Private Limited

• An electronic equipment exchange for medical devices and high-end
technology products used in the delivery of medical care
• It provides expert advice and services on technology, techno-commercial
issues

Apollo Health & Lifestyle Ltd (AHLL)

• Delivers family focused primary healthcare services through branded Apollo
clinics across India and its neighbouring countries.

Keimed.com Limited
• Used information Technology to create an e-marketplace that would service
Apollo and others through an end-to-end, logistic solutions partnerships for
effective inventory management and control.
SWOT analysis of Apollo Hospital

Opportunities in hospital
 With global revenues of approximately US$ 2.8 trillion, the healthcare
industry is the world’s largest industry and India is emerging as a major player
in this industry, because of its high population.
 As per the Insurance Regulatory and Development Authority (IRDA), the
Indian healthcare industry has the potential to show the same exponential
growth that the software and pharmaceutical industries have shown in the past
decade.
 Further, as per the IRDA, only 10 percent of the market potential has been
tapped till date and market studies indicate a 35 percent growth in the coming
years. A big opportunity for the industry emerges from the privatization of the
insurance segment, which would extrapolate into a new delivery system in
India.
 There is a vast insurable population in India, given that only 2 million people
i.e. 0.2 percent of the total population are covered under Med claim.

 According to a recent study, there are 315 million potentially insurable lives in
the country. First, there are economic factors that make India an exciting
market. Since healthcare is dependent on the people served, India’s huge
population of a billion people represents a big opportunity.
 Today, people are spending more on healthcare and are preferring private
services to government ones. Hospitals in India are running at 80-90%
occupancy. With the demand for healthcare far exceeding supply, India’s
health care industry is expected to grow by around 15% a year for the next six
years.
  Hospitals in India conduct the latest surgeries at very low cost. Corporate
entities entering the healthcare sector, introducing managerial practices and
tools are showing a marked preference for professionals, leading to the
expansion of the hospital management education industry.

Threats
 The cost burden is set to increase due to the limited resources, and rising
incomes will translate to higher wages, supply and capital costs. Real estate
prices have become prohibitively high and a deterrent to take on new projects.
 This will add to higher costs of Healthcare delivery which has to be borne by
the consumer. Medical equipment accounts for 40-45% of the total
expenditure in hospitals. Any change in technology will make existing
medical equipments obsolete. High rate of advancement in medical technology
is leading to shorter lifespan, obsolescence of medical equipment, requiring
medical professionals to upgrade their skills on a constant basis.
 The density of doctors per 10,000 population in India is 6 while the world
average is 13. There could be a shortfall of over 450,000 doctors in the year
2012.Density of nurses per 10,000 population is 13 in India while world
average is 28.
 The migration of skilled technicians and nursing personnel to developed
countries due to higher compensation levels leaves behind a void in quality of
personnel at the disposal of hospitals. Apollo is one of the strongest brands
with minimal threats in the near time.
 This means, easier access to capital, continuing with the current leadership
position in the market and comprehensive services with relatively greater
margin.
 Apollo’s success has been drawn from the fact that it has added a number of
synergic revenue streams to its business. As a result, its multi-income inflow
has helped it cover its fixed investments faster than the other companies in the
sector.
Strengths

 Apollo is an integrated healthcare organization with a comprehensive span of

healthcare capabilities, enabling us to provide end-to-end services to patients.
It provides seamless delivery of services at every level of care – primary,
secondary and tertiary.
 Being the largest purchaser and consumer of medical consumables in the
private sector, they are able to leverage on cost and benefit from the group
bargaining position to obtain better terms from suppliers and service
providers.
 Their quality consciousness and patient-centric approach has improved the
operational and clinical efficiency, and led to numerous accolades in the
medical arena in India.
 They have implemented clinical governance measures that have gone a long
way in ensuring and improving the quality of clinical care at all levels of
healthcare provision in Apollo Hospitals.
 They have obtained 4 JCI accreditations across all specialties, the first in the
country to do so. Also, their quality programmes are registered by the Indian
Council of Medical Research, ISO 9002, from Bureau of Indian Standards &
British Standards of India. They have focused on the provision of high-quality
healthcare at affordable rates.

 They have consistently invested in medical technology and equipment so as to

offer the highest quality healthcare services to their patients. The availability
 of sophisticated medical equipment, such as the PET-CT scan, 320 Slice CT
Scanner, Cyber knife ensures that we are among the few healthcare providers
in India capable of offering advanced healthcare procedures such as stereo
tactic radio surgery and bone marrow transplants to our patients.

 Their brand name has helped us to expand operations in India and overseas,
besides extending their range of services. High-quality medical facilities and
services are offered at cost competitive rates when compared to the Western
and European regions making India the preferred choice for medical travel.

 The major strength contribution to the success of Apollo Hospitals has been
the clinical excellence governed by strong medical value system and ethics.
Their Medical success rates have been world class.

 Apollo stands unique among the few providers of quaternary care for
complicated medical conditions, and is saving more and more lives every day.
 They have a professional management team with a strong performance
culture. They maintain strong, enduring relationships with doctors and medical
professionals. This has attracted medical professionals returning from abroad
to work with us.
 Apollo believes one of the pillars of their success is their huge talent of
approximately 811 doctors across 50 specialties. They are among the largest
networks of doctors in India, and have approximately 3,130 nurses, 1,104
paramedical personnel and 513 executives.
Weakness
 They have added 297 Stand-alone pharmacies during the year, since most of
the pharmacies are in the incubation stage which can depress the margins.
 High attrition rates among the nursing workforce to Western countries and
competitors due to higher salaries and perks being offered necessitates higher
investment in training to ensure that the clinical staff is equipped with the right
skills, competencies and expertise needed to deliver quality healthcare.
 The rising costs of healthcare delivery makes majority of the private hospitals
expensive for a normal middle-class family.
 Internal control systems and their adequacy The company deploys a robust
system of internal controls to allow optimal use and protection of assets,
facilitate accurate and timely compilation of financial statements and
management reports, and ensure compliance with statutory laws.

Drivers for International Strategy

• Huge Opportunity
• Large unmet need for higher quality and medical care
1. High unmet demand, specially amongst people who could not afford to
travel abroad for treatment
 2. Major procedures like open-heart surgery were available
3. The medical treatment in many Asian and Gulf countries was
conducted sloppily, using low quality equipment.

• Greater ROI
1. Certain foreign markets such as Gulf countries were lucrative as they
could generate higher ROI.

Apollo used the OLI Paradigm effectively for International expansion

Ownership Advantages
 While the hospital group has maintained its ownership it has found that in
order to remain competitive and achieve scalability it needs to relinquish some
of power and has adopted the franchising model in order to expand.

Location Advantages
 Apollo has firmly reaffirmed in its strategy the belief that “more is sure”. The
chain apart from setting up multiple hospitals and clinics in each city has now
set it footprints in tier 1, 2 cities alike. It has aimed to become a global brand
by setting up centres in Dubai and other Asian countries and is continually
looking to expand.

Internalization Advantages
 Used an internal strategy of leadership, quality and network. The chain has
spun of subsidiaries under its main brand which include Apollo Clinics,
Apollo Pharmacy etc.
  Apollo is continually characterized by change and innovation. Strategic
inorganic and inorganic expansion in order to rapidly ramp up and help keep
the company abreast with the dynamic business environment.

Apollo’s branding and demand generation initiatives focused on individuals,

referring doctors and corporations

General Public and individuals

 Awareness of high quality medical care and stress illness prevention
 Targeted mailings to promote Apollo clinics for various therapies such as
diabetes, asthma, back pain, cancer and cardiology
 Introductory discounts to attract first time users
 Developing an internal system to respond to all consumer queries promptly
 Regular advertising in a variety of media to target urban consumers
 Screening programs for illness such as cancer and tuberculosis in rural areas

Local Doctors
 Individual visits by Apollo sales force, to local doctors to build relationships
 Frequent mailing by Apollo to the doctors, to keep them informed about the
hospital's services and procedures
 Track number of referrals made by individual doctors in a computerized
database
  Inform and update referring doctors about the progress made with the patients
 Encourage Apollo doctors to participate in national Medical Association
meetings to increase the Hospital’s familiarity to doctors across the nation

Corporations
 Corporate and government employers – Less price sensitive than those who
paid out of pocket
 Target key decision makers such as top executives, human resource managers,
trade union leaders and company medical advisors
 Mailings and individual visits
 Conduct programs at the companies to increase awareness and teach skills
such as first aid

Apollo has undertaken various key initiatives to increase international presence

and operational efficiency

Increased emphasis on Managed Hospitals

 Apollo built the first HMO (Health Maintenance Organization) in 1995, on the
lines of HMOs in the USA. It provides all medical care as needed to its
members in return for a fixed annual premium. The HMO combines two
methods of expansion – building wholly owned facilities and licensing.
 Increased emphasis on Managed Hospitals in order to reduce risk cost and to
increase geographical reach
 Licensing will help spread Apollo’s influence and recognition more quickly
than building wholly owned facilities.

Improvement in efficiency and cost reduction

 Improvement in efficiency through better asset utilization of all existing

facilities
 Cost Reduction through simplification of processes in the areas of materials,
manpower and financing.
Aggressive marketing
 Aggressive marketing to access overseas markets – measures such as
publicizing successful surgeries, awards, accreditations, alliances/ partnerships
and accolades
 Has established an AIC (Apollo Information Centre) network, establishing
government-private 'Treatment Abroad Committees ' referring partnership for
patients to be sent by the respective Committees, private patients through
health insurance HMOs and TPAs and through local doctor referrals
Backward Integration
 There is increasing focus on providing wholesome health solutions, integrating
to the Indian methods of wellness.

Apollo Hospitals has also taken other steps to expand its reach and penetration
globally

International Affiliation and Accreditation

 The only international training organization for the American Heart

Association Technical support from Texas Heart Institute and Minneapolis
Heart Institute for Cardiology and Cardio - Thoracic surgery
 Exchange programs with hospitals in the U.S. and Europe
 Association with the Mayo Clinic and the Cleveland Heart Institute, USA
 Associate of the Johns Hopkins University, USA

International Research Alliances

Apollo Hospitals has entered into various alliances to broad base its value proposition
  Stem Cell Research and Therapy
o July 2005 - Tied up with Histostem, part of the Delaware Corporation,
for the development of a sustaining and mutually-beneficial
relationship in Cord Blood Stem Cell Research and Therapy in India
 Medical and Business Collaborations
o July 2005 – Collaboration with Johns Hopkins to jointly develop state-
of-the-art concepts, technology, partnerships with clinical departments
especially in Oncology, Neuroscience and Cardiology, nurse
education, telemedicine, clinical research and medical education

Local Partnerships/JVs
The local partnership approach has worked very well for Apollo

 Local Partner
o Local partner usually deals with many local issues, besides providing
capital, such as provision of land and dealing with local authorities,
doctors and other interest parties
o Help in creating a sound clientele base
 Apollo – partial capital investment and management
o Example - Apollo Hospitals Group in a joint venture with its
Bangladeshi partner STS Holdings, Dhaka