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Made By-

1. Avinash Thakur-1920983016
2. Kritika-1920983033
3. Parul Arora-1920983050
4. Rupesh Kumar-1920983066
5. Tarun Arora-1920983084
6. Nitin Madaan-1920983101

Submitted To-Prof.Kanwaljit Singh


Subject-Strategic Management
College-Chitkara Business
School,Rajpura(Punjab)-140401

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Acknowledgement

In performing our assignment,we had to take the help and


guideline of some respected Person,who deserve our
greatest gratitude.The completion of this assignment gives
us much pleasure.We would like to show our gratitude to
Prof.Kanwal jit Singh of Chitkara Business School for giving
us a good guideline for assignment throughout numerous
consultations.We would also like to expand our deepest
gratitude to all those who have directly and indirectly guided
us in writing this assignment.
In addition,a thank you to Prof.Keerti Bhusan Pradhan who
introduced us to the Methodology of work and whose
passion for teaching us the subject of “Strategic
Management”had lasting effect.We also thankful of
Chitkara University for consent to include copyrighted
pictures as a part of our paper.
Many people, especially our classmates and team members
itself, have made valuable comment suggestions on this
proposal which gave us an inspiration to improve our
assignment. We thank all the people for their help directly
and indirectly to complete our assignment.

Avinash Thakur
Kritika
Parul Arora
Rupesh Kumar
Tarun Arora
Nitin Madaan

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Contents
1)Introduction
2)Internal Analysis
3)External Analysis
4)Strategies
5)Recommendations
6)Shortcomings

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Introduction
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 hospitals are multi speciality having tertiary care facilities with centres-of-
excellence in medical disciplines including cardiology, cardio-thoracic surgery,
gastroenterology, orthopedics & joint replacement surgery, neurology, critical
care medicine, nephrology, oncology, hand & micro surgery and reproductive
medicine.

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Internal Analysis of Apollo Hospital

Method Used-SWOT Analysis

1)Strengths-
I. Trusted and Preferred Brand: The Company is well known as the
first corporate hospital network in the country. An impeccable
track record,several pioneering initiatives and the sheer number
of surgeries with high success rates have helped to establish
the“Apollo” brand as a premier brand in the healthcare sector in
India.
II. Integrated Healthcare Delivery Model:Their presence in various
initiatives across the healthcare services delivery chain gives up a
competitive advantage and they are able to benefit from the
following:
 Their pan-India presence in primary clinics, telemedicine,
retail healthcare and other healthcare programs provide
increased touch points for patient access.
 Captive market to cross sell businesses of pharmacies,
health insurance and self-branded products.
 Ability to participate in a wider spectrum of the patient
treatment cycle from diagnostics to hospitalisation to
insurance coverage up to ongoing medication
requirements post-hospitalisation.

III. Scale-The network of 50 hospitals,1,632 pharmacies and over 100 clinics and retail
healthcare centres provide them with the following benefits-

 Cost efficiencies through sharing of managerial and clinical resources


 Economies of scale and ability to obtain competitive prices from our suppliers
and service providers due to centralized purchasing.

2)Weaknesses-

I. Complex business model: The hospital business is not a ‘plug and play’ business by any
standard. Merely having all of the necessary resources is not a guarantee to success.
Due to the many moving parts, rigorous management overview is required for
sustaining clinical standards, balancing case mix, ensuring adequate volumes and
regularly upgrading technology. In addition, there is a high level of doctor interaction
combined with multiple operating metrics to monitor and analyse. The operating
environment is dynamic and the organization has to appropriately respond to the
ongoing challenges.

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II. Long gestation period: Apart from the significant upfront capital outlay on land,building
and medical equipment at the time of setting up a hospital, operating costs are also
high. Though there are exceptions, the average maturity time frame for a facility to turn
net income positive is approximately 4-5 years. Inability to scale up occupancy in new
facilities could adversely affect our operating efficiencies and our profitability.
III. High intensity of resources: The healthcare services delivery business requires
deployment of significant amount of resources which are either expensive or scarce or
both. The upfront investment to set up a hospital is high as the ‘per bed’ cost to set up a
tertiary hospital in an urban area can be upwards of ` 10 million per bed. This includes
costs of building, construction costs, interiors and costs of plants & machines and
medical equipment. Once operational, hospitals are also labour & skill intensive.Skilled
manpower includes doctors, nurses and paramedical staff comprising labtechnicians,
radiographers and therapists all of whom are in short supply in India. The overall
requirement for such scarce resources makes it challenging to set up and profitably run
a hospital in India.

3)Oppurtunities-

I. Increase in population and changing demographics: India is the second largest


populated country in the world and is expected to see its population expand from 1.2
billion people currently to 1.5 billion people in 2015.Further, with increasing longevity
the number of middle-aged and elderly people is expected to multiply. This will result in
an increase in demand for all kinds of healthcare services manifold.
II. Change in disease patterns: India is the cancer, diabetes and heart disease capital of the
world. This rising burden of non-communicable disease is a sad reality and a challenge
that Indian healthcare service providers will need to effectively address. The increase in
NCDs is an outcome of changing dietary patterns and alterations in lifestyle caused by
increasing incomes and improved affordability. The sheer volume of cases will mean
that a manifold increase in bed capacity will be required on a pan India basis to address
this challenge.
III. Increase in demand for elective surgeries: Steady increases in disposable incomes and
growing health awareness, there has been a manifold expansion in demand for elective
or planned surgeries. Patients are now willing to undergo discretionary treatments and
healthcare procedures where the goal is to enhance health and quality of life. These
procedures are known as electives as patient can ‘elect’ to undergo these treatments.
They intend to concentrate on this requirement and build a strong presence in this
segment.

4)Threats-

I. Heightened competitive intensity: The increasing propensity for entrepreneurs


and business houses to enter into the healthcare business has resulted in a spike
in setting up of greenfield facilities, JVs and acquisitions. There are even pockets
of overcapacity in some metros. In order to make these ventures remunerative

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after having invested significant funds, there is a chance that some of these
players may resort to unsustainable pricing in order to gain market share.
II. Increasing cost of resources: The emergence of several domestic hospital chains
combined with the entry of international players is leading to an increased
number of competitors chasing finite resources such as land, quality medical
professionals and potential acquisition targets.Demand growth is expected to
outpace improved supply of these resources. A failure to acquire resources at
fair and reasonable rates will impact the ability to suitably grow and expand our
operations.Further, increases in operating costs can impact the Company’s
operations and financial condition.
III. Discontinuation of leases: The lands on which their hospital buildings and their
standalone pharmacies are operating on are not owned by them.In case the
lease arrangements relating to these properties are not renewed in their favour
or on terms that are not favourable to them then their business operations may
suffer disruptions.
IV. Losing out on the Medical Tourism Opportunity: Several countries in the Asia-
Pacific region have woken up to the opportunity to attract Medical Tourists.
These countries are providing incentives to domestic service providers in the
form of subsidized capital,ease in permissions and tax benefits.Further,due to
enhanced infrastructure and simplified visa norms, they are poised to grab a
larger share of the opportunity. India will need to rapidly address issues and
improve its competitiveness in this arena.

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External Analysis of Apollo Hospital

I. Remote Environment-
 Economic Factors-
1. Foreign Exchange movement is also an indicator of
economic stability. Apollo Hospitals should closely
consider the forex inflow and outflow.A number of
Apollo Hospitals competitors have lost money in
countries such as Brazil, Argentina, and Venezuela due to
volatile forex market.
2. Apollo Hospitals should closely monitor consumer
disposable income level, household debt level, and level
of efficiency of local financial markets.
 Social Factors-
1. Leisure activities,social attitudes & power structures in
society - are needed to be analyzed by Apollo Hospitals
before launching any new products as they will impact
the demand of the products.
2. Demographic shifts in the economy are also a good
social indicator for Apollo Hospitals to predict not only
overall trend in market but also demand for Apollo
Hospitals product among its core customer segments.
 Political Factors-
1. Political consensus among various parties
regarding taxation rate and investment policies.
Over the years the country has progressively

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worked to lower the entry of barrier and
streamline the tax structure.
2. The political system seems stable and there is
consistency in both economic policies and foreign
policies.
 Technological Factors-
1. Proliferation of mobile phones has created a generation
whose primary tool of entertainment and information
consumption is mobile phone. Apollo Hospitals needs to
adjust its marketing strategy accordingly.
2. 5G has potential to transform the business environment
especially in terms of marketing and promotion for Apollo
Hospitals.
II. Industry Environment-
 Competitive rivalry within the industry: It is extremely high as if
someone raises prices, they’ll be quickly undercut. Intense
competition puts strong downward pressure on prices as
customers might switch to other service provider as there is not
very differentiated services provided by the existing companies.
 Bargaining power of suppliers: It is high as due to continuous
technological developments in the healthcare sector, the
supplier has the power to negotiate for its new developments. It
leads to increase in capital expenditure of the company but helps
in reducing operating costs.
 Bargaining power of buyers:It is moderate which puts downward
pressure on prices. It depends upon the nature of illness that the
buyer can bargain for service cost or go for alternative options.
 Threat of substitutes:There is some threat of substitution.Ex-
Telemedicine or shifting to other medicine like ayuraveda or
natural care.
 Threat of new entrants: It is quite high as this industry is making
profits from few years and government policies are attracting
new investors thus leading to reduced profitability of existing
companies.

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III. Operating Environment-

 Competitors-
1. Fortis Healthcare
Fortis is the late Ranbaxy’s Parvinder Singh’s privately owned company. The
company is a 250 crore,200 bed cardiac hospital, located in the town of Mohali.
The company also has 12 cardiac and information centers in and around the
town, to arrange travel and stay for patients and family. The company has plans
of increasing the capacity to around 375 beds and also plans to tie up with an
overseas partner.
2. Max India
After selling of his stake in Hutchison Max Telecom,Analjit Singh has
decided to invest around 200 crores,for setting up worldclass
healthcare services in India. Max India plans a three tier structure of
medical services – Max Consultation and Diagnostic Clinics, MaxMed, a
150 bed multispeciality hospital and Max General, a 400 bed hospital.
The company has already tied up with Harvard Medical International, to
undertake clinical trials for drugs, under research abroad and setting up
of Max University, for education and research.
3. Escorts
EHIRC located in New Delhi has more than 220 beds.The hospital has a
total 77 Critical Care beds to provide intensive care to patients after
surgery or angioplasty, emergency admissions or other patients
needing highly specialized management including Telecardiology (ECG
transmission through telephone). The EHIRC is unique in the field of
Preventive Cardiology with a fully developed programme of Monitored
Exercise,Yoga and Meditation for Life style management.

 Creditors-

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Strategies

They remain focused on capacity creation with the objective of simultaneously improving
operating efficiencies.They aim to achieve this through-

 Creation of new Healthcare Delivery Capacity in India: The primary focus will be the
delivery of healthcare services in India. The addressable market is large and is growing
each year. They believe that there are several regions which are under-served and
leading healthcare providers must strive to enhance their presence across the country.
Mergers and acquisitions are not ideal for capacity creation and providers must strive to
add new capacity or leverage unutilized facilities to ensure ‘incremental’ capacity is
introduced to address the shortfall of healthcare infrastructure in the country. The
expansion initiatives complement the plans for the core segment of delivery of
healthcare services.
 Leveraging multiple formats to touch more patients: In addition to the healthcare
services delivery business, our businesses of retail pharmacies, health insurance,
medical education, telemedicine, projects & consultancy, lifestyle birthing centres and
dental clinics provide us with multiple touch points to interact with patients. These
touch points enable the brand to improve the connect with patients and also help to
serve patients better near to their homes.
 Focus on high acuity cases: The healthcare services market is large and diverse with
multiple challenges which has to be addressed. However, since our resources are finite
we need to focus on specific areas where we can optimize efforts and value. They have
therefore identified cardiology, oncology, neurology, critical care, orthopaedics and
transplants as key focus areas for our tertiary care hospitals. We internally designate
these focus areas as “Centers of Excellence”. They have invested significant resources to
develop robotic surgery capabilities and have the largest solid organ transplant program
in the world. They believe that it is essential to increase volumes of high acuity cases at
their facilities to maximize their productivity in the healthcare services market.
 Multi-pronged expansion plan: Despite a wide presence across the country there are
many areas within the country where they wish to augment our presence.As branching
out is a gradual process requiring gestation of new facilities, they need to selectively
expand their presence across the country. They plan to augment our presence in major
urban centres such as Chennai,Hyderabad,Kolkata,Bangalore and New Delhi where we
already have a significant presence. They also wish to enter in cities like Mumbai, Patna
and state capitals. By setting up multiple facilities in each of these cities we plan to
develop ‘clusters’ of hospitals in several major urban centres in India which will help us
to diversify and strengthen our network in these key markets. Thirdly, they plan to

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simultaneously augment our presence in Tier 2 and 3 cities in India through the REACH
hospitals initiative.

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Recommendations

Some Suggestions for improving the position of the Apollo hospitals are-

1.The general perception that large hospitals,with high bed-occupancy rate,are


profitable, is misleading. Global experience shows that hospital with more than 250
beds don’t do well.Many Indian hospitals are following the US healthcare industry, by
decreasing the average length of stay of patients and increasing patient turnover. US
research shows that 80% of the revenues form a patient comes in the first 72 hours
post- admission. Hospitals generate a lot of revenues from General Inspection, because
the patient turnover is very high. A large percent of revenues come from specialized
services like operations and surgeries. It is because of these reasons that many
corporates are planning for a small 100 beds specialized hospitals, which caters to
specific diseases like cardiac, cosmetic surgery, neurology etc. Research shows that
there exist a lot of space for superspecialized hospitals with 100-150 beds, which
generate revenues equivalent to large 500 bed general hospital. Typically large hospitals
with approximately 500 bed capacity takes about 9-10 years to break even whereas
super-specialty hospitals with about 100 beds take about 6-7 years to break even.
Therefore, going in for superspeciality hospitals seems to be a more viable option today.

2. Hospitals could also generate revenues from medicines if they are supplying them in-
house. Some hospitals make it mandatory for the patients to buy medicines from the
hospital‟s chemist shop. A margin of 15-20% can be charged for such medicinal supplies.
Though many hospitals run by Trusts do not earn this way, but new entrants or
corporates for whom private healthcare sector is a direct extension of their line of
business (eg-Pharma companies), can generate good returns from medicine supply.

3. Health Plan packages can be provided by hospitals to family and corporate. For
example Family Health Plan Services (FHP), a subsidiary of Apollo Hospitals does health
management of employees of its clients.With a wide network of Hospitals and
Healthcare providers countrywide, and a tie -up with General Insurance Corporation of
India, FHP offers a range of services to employees and dependants,such as Preventive
Healthcare, Corporate Counseling, welfare Programmes,Claims Administration, Patient-
care Coordination and so on. So FHP's healthcare packages, optimize the benefits while
keeping the cost under control.

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4. Apart from preventive healthcare, stress management programs could be provided.
For example Effective Stress Management Programmes offered by Wockhardt
Hospital.This programme provides a medical perspective of stress and is conducted by a
medical professional.The programme includes a series of one-to-one sessions, with a
clinical Psychologist highlighting the factors responsible for inducing stress, and the
methodologies, which can be adopted to cope with this phenomenon practically.
5. Hospitals can become integrated healthcare systems i.e. when medicines, food
services, laundry and linen etc will become "purchased" services.These third-party
operations will increase the profit margins.

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Shortcomings

 Delay in EBITDA break-even of new hospitals- While we have assumed new hospitals (900 beds
to be operational over the next two years) to achieve EBITDA break-even in 18-24 months,
more-than-expected delays in achieving EBITDA break-even would adversely impact margins.
Based on our analysis,if the EBITDA break-even is delayed by a year for the new hospitals, the
overall EBITDA margin is likely to be affected by 20-30 bps.
 Execution delays in new hospitals-We expect Apollo to add 2,300 beds at various locations over
the next three years. Some of the projects, such as in Byculla (Mumbai) and Nashik
(Maharashtra), are behind schedule due to delays in approvals and hurdles in site acquisitions.
Although we have adequately factored in these delays in our projections, unprecedented delays
or cost overruns may impact financials and consequently, the valuations.
 Unavailability of skilled professionals might impact prospects-The company’s performance and
execution of future growth strategy are dependent on its ability to attract and retain healthcare
professionals given the plans to add 2,300 beds over the next three years.Unavailability of
skilled professionals or the inability to retain key doctors could impact future prospects.
 Rising real estate prices-Land and buildings together account for 50-55% of the total capital
costs in setting up a hospital. Rising real estate prices, especially in metros and tier I cities, are
making it difficult to put up commercially viable hospitals.

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Biblography

1) Healthcare Radius Magazine

2)www.moneycontrol.com

3)www.economictimes.com

4)Annual Report of Apollo Hospital,2018-19

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