Case Analysis: Apollo Health and Lifestyle Limited: Retail

Franchising in the
Healthcare Industry

Case Analysis 1: Dr. Piyush Sinha

This case deals with the concepts and issues that the franchisees
are facing. The
main difference between the franchisee and dealership lies in focus
of process
against product. The first issue of decision of entry in a
franchisee is
characterized by the thumb rule of 2 + 3. In the
beginning, the company must run
2 of the outlets on its own before franchising 3 of
its new outlets to demonstrate
a good quality service delivery. Another issue comes when we
determine the
market potential and size. However, there are so many potholes
when it comes
to estimate potential using classical methods. The unprecedented
growth rate of
Indian market as well as level of detailed information
available for trading areas
is always miscalculated. Several attitudinal, both affective
and cognitive, factors
create a gap between intention and actual purchase. It
is commonly perceived
that in highly potent markets, companies tend to take a
leap based on only
demographic information and ignore the lifestyle and attitudinal
factors. Issue
that the company will sustain or not in the long run can
be sorted out with timely
and consistent deliveries of the promises made in the clinics.
After market
estimation, it needs to have the proper resources, processes and
systems for
harnessing the potential. In the case study, Apollo doesn’t
have finance related
issues, but the knowledge of running a hospital maybe tricky
in running a clinic
as the target customer base is entirely different. In such
a case, Apollo should
understand that franchising is a bottom up business and macro
strategy may not
work here. They should rather focus on clinic per clinic
operations and
determine customer value-based market segments and then devise
delivery
mechanism accordingly.
Case Analysis 2: R C Natarajan
Mr Natarajan analyses the case on the basis of feasibility of
Apollo’s foray into
the primary and preventive healthcare. As Apollo is a chain
of super specialty
hospitals, the cost of expansion is quite high. There is a need
in the country for
more outlets for primary and preventive healthcare, which will
enhance the life
expectancy as well as lessen the burden off the tertiary
healthcare sector. This
will also enhance the brand image of Apollo and make it the
first choice in the
secondary and tertiary sectors. Although there will be a little
cannibalization of
OPD patients of Apollo hospitals, other players wont match with
AHLL due to its
economies of scale and economics of scope, in the long run.
The growth model is
AHLL is through the increased volumes (customers), rather
than increased
margins and thus it is getting difficult for it to
breakeven early. The gestation
period of 4 years is huge for a franchisee. It has to
assume its initial losses as
investment for popularizing AHLL in the local market and keep
its focus on longterm returns. Two more aspects affection
the franchisee agreement is the initial
license fee and the royalty. The license fee of Rs 20
lakh seems to be on a much
higher side while the royalty of 55 irrespective of the
profitability of the firm
seems to spoil the relationship. The technical support by visits
of doctors from
Apollo Hospitals seems more of a monitoring work rather than
a support in
functioning. On a similar note, the marketing communication
front is equally
non-effective so far. AHLL strives to position itself as
a one stop value-for-money
primary healthcare facility. But, both its core ad campaigns, “Life
must be good”
and “And you thought we’re expensive” fail to enhance the core
message of the
company and seem pretty ordinary amidst the plethora of
advertisements of
lifestyle products. Right now, a number of things need to
be modified. The initial
license fee should be reduced to Rs 10 lakh and the
royalty should be pegged to
PBT and not to the gross income, and it should be in
the range of 20-30 per cent.
It should also depute their doctors to the clinics for
timely checkup.
Case Analysis 3: M N Tripathy
Here, the problem is of misinterpretation of the meaning of
the word
“franchisee”, which led to a executable business idea failing
miserably. Those
disappointment of the franchisee plan stems starting with the center
Comprehension from claiming ‘branding’ Also ‘brand quality. ’
Some place An
befuddle about desires between AHLL and the franchisees over upon
what
amount of the brand is worth will be irritating the cost-benefit
mathematical
statement to both of them. AHLL clearly supposes that those Apollo
facility mark
may be worth Rs 20 lakh Similarly as An one-time authorizing
expense and
acknowledges the 5 % charge ahead income Likewise an
twelve-month fee,
payable quarterly, Similarly as reasonable. The franchisees hope that
the Apollo
brand name might naturally get those patients in Furthermore they might
have
the capacity with run a profitable operation good from the begin.
Unfortunately,
in the administration industry, a greater amount along these
lines in the social
insurance industry, it may be not enough should need a
highest point class
product; it must a chance to be dependably supported by
a highest point
population administration. A more sensible picture could be given
with
somewhat more preservationist evaluations of revenue and a
projection of a
misfortune for the initial two years before benefits are made.
This would temper
down the desires of the franchisee and maybe additionally
diminish the quantity
of utilizations for establishments, with concomitant sparing of
time for shortposting the imminent candidates. Therefore, some
transforms require with be
constructed. Secure another mark to those ‘Apollo Clinic,’
disassociating itself
starting with those Apollo lineage, yet maintaining the aggregation
character
furthermore its proposition should be An ‘value’ mark for
yearning white collar
class clients.
Case Analysis 4: Narsimhan Rajkumar
Mr Rajkumar asserts that service management entails three
intricately linked
issues: service operations management; service marketing management,
and
service provider management. The core of all these issues is
the heterogeneity
which means both the employees and the customers are involved in
the service
quality. On one hand, variability in the service will lead to
high customer
satisfaction, on the other hand this will brand the franchisee in
its own unique
way making it somewhat bigger than the brand itself. The
problem Apollo faces
is in giving a different brand image to both Apollo
Hospitals and AHLL. Any
service can be seen on two parameters—Divergence (the amount
of freedom
allowed to the service provider) and Complexity (the number
of predefined steps
taken to provide the service). Therefore, one way to resolve
its current issues
would be to reduce the number of fronts it is
focusing on like consultancy. One
more would be to invest heavily in IT infrastructure, which
would help the
providing value to patients as well as in process
standardarisation.
Case Analysis 5: Sanal Kumar Velayudhan
The revenue from royalty for AHLL is 48 per cent of the
projected revenue of Rs
7.89 crore. As royalty paid is a fixed percentage of
franchisee revenue, the
revenue of the franchisee also diminishes and so do the
interest level of existing
franchisees and the willingness to invest by businessmen. Thus,
educating
customers is necessary for these franchisees to make more profit.
Communication should rely on somewhat paid advertising also, apart
from the
word of mouth publicity. The reach in tier 2 and 3 cities
and towns should be
increased leveraging the franchisee model. Personal selling effort
is required
particularly in the initial stage. AHLL needs to put
resources into brand building
for picking up con-fidence of the franchisees. The franchisee
on build up ing the
business has faithful clients fulfilled by the nature of
administration. He might
then understand that the franchisor is not giving quality to
the eminence paid on
a repeat ring premise.