Does Apollo Hospital Madras provide superior value to its customers, shareholders, and employees through a well designed service system – in other words is it a breakthrough service organization?
Yes Apollo Madras provide superior value to its customers, share holders and employees.Apollo has well designed service system and it is a breakthrough organization. Apollo’s greatest strength is the first mover advantage. They were among the pioneers in setting up quality private hospitals in India. Since they were able to provide world class medical service at affordable rates, this became a value for customers.
Government also helped them eventually by getting rid of many financial and regulatory obstacles. Liberalization of private sector was a boon. Apollo were good pay masters as far India was concerned and this enabled them to attract talent. Doctors who wanted to come back to their country of origin were more than happy to join Apollo. The hospital imported latest equipments and had a good success rate. By using sound marketing, they were able to build a brand name very quickly. The successful surgery of Vice-President of India was a major break through for them in brand building. India’s growing middle class were the target segment for Apollo Hospitals. The patients were ready to pay for quality treatment and this segment was growing at more than 8%. Also they had little or no competition in Chennai especially from the poorly managed Government hospitals.

Apollo was started by a visionary and entrepreneur. The management had a very good leadership team and this was also an advantage for the group.

1. What are the key elements (Basic and Integrative) of Apollo Hospitals Madras Strategic Service Vision?

One of the key reasons for Apollo’s growth was the five star philosophy, a concept which was nurtured by the founder.
Apollo hired top quality doctors and provided them with the training and technology. This right environment was essential for the success of the hospital. Employees and Staff were also as important as the doctors. Above all, Apollo made sure that they deliver value to the customer. Patients were given the hospitality they expected from a premium hospital.

2. What accounts for Hyderabad Apollo Hospital’s disappointing performance and what are its future prospects?

There were major reasons for the slow development of Hyderabad facility compared to Chennai.
Chennai was started by the founder and the expectations were low. There was little or no competition and there they were able to get the required talent of doctors and consultants. But with the case of Hyderabad it was different. 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. Hyderabad facility also lacked some key equipment like MRI scanners initially. So major operations were not possible and patients were not confident with the new system. Probably the referrals were also low due to this.

3. What expansion vehicle promises most effective to enhance Apollo Hospitals’ profits while expanding recognition of the Apollo name?

Some of the problems Apollo faced in general was lack of talent pool especially due to brain drain to developed countries.
Apollo is planning to expand and they are in a dilemma as to whether to start their own chain of subsidiary hospitals or whether to license the brand name. Cost of capital ie land and equipment was very high and it took them 2-3 years to break even with each equipment. Quality of non-medical operations were deteriorating. Cleanliness and sanitation was a major problem.

The benefits of licensing are faster expansion and faster break even. The hospital will have to strategically ally with partners and make sure that the partners can also deliver the same quality of service. If they mess up, 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. Long term profits will be sacrificed for short term gains.

The partnering hospitals might be themselves a brand in a city. In such a case, a cultural conflict can arise if Apollo license their expertise and brand name to these hospitals or doctors. Apollo cannot afford to have de-centralized operations, where the core values of the company are lost. So special care has to be taken in inculcating a standard across the hospitals.

In the case of subsidiaries, the Apollo culture will be maintained but the capital expenditure is very high and break even will take longer. Apollo will have tough time getting the initial capital from investors because it will take 3-4 years on an average to break-even in any city. Moreover managing multiple sites with the same standard and quality will a challenge.
Apollo can utilize its expertise in layout designing, infrastructure and technology if they build their own hospitals but the process will take time and might hamper their expansion plans. Also the proposition is more riskier compared to licensing. Cost of acquiring land in accessible locations is also a major hurdle. But eventually Apollo can expect higher long term returns and better control over the hospitals if they go for own subsidiaries.

By leveraging on both licensing and subsidiaries, Apollo can have very good strategy for their expansion. The short-term cash generated via licensing can be ploughed back into the construction of more subsidiary hospitals. Managing the system will be tough but weighing the advantages, the plan can give them a faster growth and visibility. Initially Apollo can target the major Indian cities like Delhi, Bombay, Calcutta, Bangalore etc. Later they can even expand to international territory.