Apollo Hospitals Group in India is the acknowledged leader in bringing super speciality world class healthcare to India. It is presently the largest integrated healthcare company in Asia, holding 35% share in the market for private tertiary care and the first to attract foreign investment. 1, pg. 3 According to the authors of the case, Health Care is fundamentally a local business. Most other industries have already gone global, yet health care seems to remain outside this globalization spectrum, with no global health care player yet in play, or is there?
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Dr. Reddy’s dream is to bring health care to the majority of the Indian population as well as the rest of the world. Apollo has constantly proved its ability at tackling new business opportunities in local and international markets. They proved their local worthiness with feats such as the development of new hospitals in Delhi and Hyderabad. Even though Apollo enjoyed a good brand in Chennai, they had to develop it again in Hyderabad and that too with a new team of managers.
The facility was far from the city as compared to Chennai which was extremely accessible and in overall, the cities were very different. Internationally the hospital in Colombo, Sri Lanka was a major success reaching market dominance in a short period. 1, pg. 4 The development of these hospitals and the advent of medical tourism has proved worthy for lot of people who normally would have to wait in pain for 8 months for a hip replacement, people who need a kidney transplant or people with excruciating dental pain who can now receive care, at a much lower expense, and much faster.
Apollo has already proved itself worthy testing on the IDN area which although proved disastrous in the US health care industry, in India the inclusion of pharmacies and primary care clinics have already begun to reap their benefits. 1, pg. 2 Due to its success, Apollo should continue to expand its primary and secondary care hospitals and provide end-to-end healthcare solutions to consumers, including insurance products, HMO’s, spas and health and wellness centers. One way to do address expansion is through franchising.
When talking about expansion Apollo had to choose whether to start its own chain of subsidiary hospitals or whether to franchise the brand name. For the expansion of their primary care clinics they chose the franchise model. 1, pg. 6 The benefits of franchising are faster expansion and faster break even. The hospital can make strategic alliances with partners and make sure that the partners deliver the same quality of service; otherwise Apollo’s brand will get affected.
Another advantage of licensing is faster visibility and brand building. Having partners will make the administration process easier but Apollo will not be completely control the partner hospitals. In this scenario, long term profits will be sacrificed for short term gains. These partner hospitals might already possess a brand name, so it is imperative that Apollo does not have de-centralized operations, where the core values of the company are lost.
Since Apollo franchises their expertise and brand name to these hospitals or doctors, conflicts may arise so they would need to maintain standard across the hospitals. With subsidiaries, this threat would much lower since the Apollo culture would be maintained, but on the other hand capital expenditure would be very high and break even would take longer. Furthermore, managing multiple sites with the same standard and quality will be a challenge.
Apollo’s expertise in layout designing, infrastructure and technology is an advantage in building their own hospitals, but this process takes time and slows down expansion plans. Also, since the cost of acquiring land in accessible locations is a major obstacle, subsidiaries are riskier than franchises. However, Apollo can expect higher long term returns and better control over the hospitals if they invest in their own subsidiaries. Affiliating with a medical school or clinic internationally is another expansion option.
These partnerships may provide solutions where one partner has a specialty over the other, for example treatment of tropical diseases in Southeast Asia and Africa. It would also prove beneficial in sharing links to other companies, research institutes, and hospitals in different parts of the world. 2 An innovative idea is the creation of MEDICITIES. Just as the software industry is the establishment of Export Oriented Software Technology Parks, this same approach can be successfully replicated in the medical tourism industry by means of MEDICITIES.
Each MEDICITY could be a self-sustained healthcare hub with super specialty Apollo hospitals, ancillary facilities, research institutions, health resort, rehabilitation centers and residential apartments. This model could be created through a public-private partnership, where the government could provide land and ancillary services while Apollo could provide infrastructure and services. MEDICITIES would offer superior value at affordable prices. From industry’s point of view, this will offer significant competitive advantage for Apollo Hospitals.