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Essay/Term paper: Operating strategy

Essay, term paper, research paper:  Economics

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Operating Strategy

Apollo Hospitals, India

Considering the elements of a strategic service vision, the following are the
factors applicable to the Apollo Hospitals of India. The service vision
framework are according to an exhibit from "Lessons in the Service Sector" by
James L. Heskett, Harvard Business Review, March/April 1987, p. 120.

1. Target Market segments

· Population Statistics : Population above 920 mill. people with wide variety
of economic levels, social statuses, and cultures. Lowest per capita GNP $255,
population growth 2% p.a. Growth real GNP 4.5%. Middle class 270 mill. Wealthy
30 million people.

· Target Market Segment : Upper middle class, the wealthy, and company
employees with health insurance (108 million in 1994 ). Half of the middle class
able to pay for private health care.

· Current Market Status : Most hospitals are state run at very low cost, low
tech, and low quality. Private medical facilities are available - highly
specialized, charging market rate (not latest technology but provides privacy
and intimacy). Treatment of a complex ailment in a private institution is more
time consuming and expensive.

· Economic liberalization : domestic and multinational companies - more

· Demography : urban, high income as dictated by upper middle class and elite
class, neighboring countries.

· Psychography : Targeting people who can afford comprehensive high quality
service; who are ready to pay more money for the comfort and treatment by more
reputed doctors.

· Market Growth (income + segments growth) : Sizable market of 30 million
(wealthy ) and 135 million upper middle class person.

· Proposed Plan : Comprehensive hospital emphasizing on tertiary care --
advance therapy and surgery, complicated medical problems. Primary care is
stressed mainly through preventive measures. High quality medical care through
the latest medical technology and the best qualified staff.

2. Service Concept

· The aim is to provide outstanding value to patient through superior medical
results, quick treatment, and a low total cost of care relative to competitors.
This can be achieved through the Five stars management philosophy : medical
personnel, medical technology, employees, value and hospitality.

· Customers' perception : high quality, comprehensive service at 10-15% below
than the top hospitals in Bombay and Delhi in a shorter time period (on average
7 days versus industry's average of 9-12 days).

· Superior medical treatment: success rate at par with highest international
standard, competitive total cost of care.

3. Operating Strategy

· Hospital operates under the Five Stars philosophy.

1. Medical personnel : Highly skilled and experienced doctors mostly returning
from western countries (well known both academically and clinically). Well
trained and motivated junior doctors, technicians, nurses, and other supporting

2. Medical technology: Latest available technology, constant and quick update,
high utilization and availability. Large capital investment emphasis in this

3. Employees: Constant interaction between all levels. The environment promotes
a sense of family/community. Upper management recognizes attendance, punctuality,
achievements in sport, and honesty through awards. A 10-20% higher wage for the
employees than local, private hospitals. Flexible atmosphere, free medical care,
and other economic benefits (loan, wedding gift, subsidize meals) attract
competent employees.

4. Hospitality : Customer oriented/centered service, 30 hrs/year training, well
established guidelines (Induction manual).

5. Value : Care/contact after even being released from the hospital. Guest
relations department improves quality of service and maintains relationship with

· Emphasis on continuous improvements (CHANGE), avoiding a stagnation.

· Operation: Symbiotic relationship between doctors and the hospital: Doctors
pay only rents for the room, but set their own rate (within set boundaries from
hospital management.) and keep all of the fees received. The hospital earns
revenues from running the supporting facilities (room, board, x-rays etc.)

· Additional services to doctors: excellent and most recent library system (on-
line system), hospital supported technical conferences in and out house, weekly
research colloquiums, newsletter (Apollo Heartbeat), arrange visits/training
session of recognized doctors from abroad.

· Continuous improvements effort at all levels

· Employee training and compensations and other benefits

· Finance : Initially from own money and stocks, Expansion and operation from
revenue generated from existing facilities, licensing, and insurance package.

· Marketing: major efforts focused on women in individual consumer market (Well
Women Clubs), outreach programs for schools, low price preventive check-up
packages for families.

· Different categories of rooms to accommodate different economic level of
patients. There is a long term trusting relationship with patients.

· Referring doctors : There is a strong effort to keep referring doctors aware
of the hospital's advances. Advertisements of the hospital's capabilities and
facilities exists. Organizing medical conferences and publications like Apollo
Heartbeat (distributed free of cost to referrals) keep referring doctors
attached to the hospital. And allowing referrals to maintain close contact with
own patients in the hospitals promotes the notion that Apollo does not attempt
to compete with them.

· Contracts with 150 companies for providing preventive care and advanced
treatment (Master Health Check).

· Organization Structure of Apollo Hospitals :

· Apollo Madras, Hyderabad

· Training wing/division (Apollo Institute of Hospital management)

· IHC (Indian Hospitals Corporations) consulting services

· Within each hospital :

· consulting doctors (independent)

· administrative and supporting staffs, different departments (Guest
relationship) commensurate with normal hospital practices.

· Human Resources: good compensation, good training.

· Control: CHANGE committees, guest relation department, employee empowerment.

· Measurement: Patients' health most important yardstick for success.

4. Service Delivery System

· The people from all levels due to their high skills, training and motivation
contribute towards the hospital's vision of providing high quality service and
care at competitive price.

· Most updated technology and equipment with standardize procedures for
operations high quality contribute to high quality service.

· Differentiation based on multidimensional strategy which are high quality,
reliable and quick treatment at competitive price.

· Barrier to entry to the industry is high, mainly because of high capital
investment, brand name, well established marketing, referral network, presence
in almost all aspects of business within the health care industry, and contracts
with highly recognized doctors.

· Expansion vehicle promises most effectively to enhance Apollo Hospitals'
profits while expanding recognition of the Apollo name. Some the expansion

· Building more hospitals and control over entire operation

· Limited growth, high capital intensive, no risk sharing by others, no
advantage of experience of local channels.

· Consulting service: Indian Hospital Corporation (IHC) which share experience
in hospital management, license Apollo trade name to doctors and entrepreneurs
and quicker expansion.

· Health maintenance organization (Insurance and medicare HMO) which promote
high quality health care through a large network of doctors and hospitals.

General information about Apollo Hospital:

· Fonder Dr. Pratap Reddy in 1983 in Madras

· First corporate hospital in India

· Offers : sophisticated treatment in comprehensive range of medical specialties
and state of the Art medical technology, skilled and motivated and dedicated
technicians, superior highly skilled/ foreign trained and famous in their fields
doctors, supporting staff.

· Providing top quality medical care


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