ASIAN CASE RESEARCH JOURNAL, VOL.

15, ISSUE 1, 97–121 (2011)

ACRJ
Piramal Diagnostics
This case was prepared by
Dr. Neeraj Dwivedi, Faculty
of Strategic Management, INTRODUCTION
Indian Institute of Man-
agement Lucknow and Dr.
Arvinder Singh, Director and It was morning of November 18, 2008 and Mr. Rajat
Chief Pathologist, Amolak
Diagnostics Private Limited, Kapoor, the Vice President for Strategic Planning at Piramal
Udaipur, India. This case is Diagnostics was busy giving final touches to his presentation
intended to be used solely as
a basis for class discussion, for the board meeting scheduled in the afternoon. He had
rather than to illustrate effec- proposed an ambitious growth plan for the next five years,
tive or ineffective handling of
an administration or business which would have taken the company to Rs. 5 billion* in
situation. The case is based
on factual information; how- sales by 2013. The plan required substantial commitment
ever, some data and names of resources, but he was confident of getting the Board’s
of persons in the case have
been disguised to protect the approval for it. He had reasons to be confident. During the
competitive situation of the last 4 years of his term, the company had shown tremendous
company.
growth. It had surpassed the industry growth and had built a
Please address all correspon- strong brand in the industry.
dence to Dr. Neeraj Dwivedi,
Indian Institute of Manage- However, Mr. Kapoor anticipated some sharp questions
ment Lucknow, Prabandh about the viability of his ambitious plan and the possible
Nagar, Off Sitapur Road,
Lucknow – 226 013 (India). challenges it might face. He knew that he needed to build
E-mail: neerajd@iiml.ac
and present a strong case for his plan when so much was at
stake.

COMPANY BACKGROUND

Piramal Diagnostics (Piramal) was a wholly owned subsidiary

of Piramal Group, previously known as the Nicholas
Piramal Group. Founded in 1933 as Piramal Enterprises,
the group remained in the Textile Business until 1984. In
the mid eighties it acquired a small glass company named

*One Rupee was approximately equal to US$47.50 in 2008.

© 2011 by World Scientific Publishing Co. DOI: 10.1142/S0218927511001484

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Gujarat Glass. In 1988 it acquired Nicholas Laboratories and

subsequently changed its name to Nicholas Piramal India Ltd
(Nicholas Piramal). It was a public limited company headed
by Mr. Ajay Piramal and had its head office in Mumbai.
Piramal Diagnostics was earlier known as Wellspring
Diagnostics and was founded in 1999 with the acquisition of
Tribedi and Roy Diagnostic Center in Calcutta by Nicholas
Piramal. The medical diagnostics business was spun-off into
a wholly owned subsidiary of Nicholas Piramal and later
named as Wellspring diagnostics. Wellspring later acquired
Phadke diagnostics (Mumbai) in 2000 and Amolak Diagnostics
(Udaipur) in 2003. Between 2003 and 2008 Wellspring grew
exponentially. By 2008, the company had grown to 104
test centers spread across India. It was in this year that the
company was renamed as Piramal Diagnostics. (see Exhibit 1
for a map of India and location of the cities having branches
of Piramal Diagnostics and Exhibit 2 for its Vision and
Mission statements.)
The company also did well financially and grew from
modest revenue of Rs. 100 million in year 1999 to approxi-
mately Rs. 1500 million in 2007–08. The annual average
revenue growth for the last decade was almost 35%, which
was substantially higher than the industry growth during the
period (Unofficial estimates showed the industry grew at 20%
during 2001–2008). Piramal was expected to touch Rs. 2000
million in revenues by March 2009. (see Exhibit 3 for financial
performance data for Piramal.)
By 2008, Piramal was the largest chain of diagnostic
centers in India that provided complete range of Radiology
and Pathology services across the country. Its 104 test
centers located across 48 cities were supported by over 300
collection and pick-up centers. At the heart of the set-up were
the Centers of Excellence in Histopathology, Cytogenetics,
Molecular Biology and specialized Radiology located in
Mumbai, which provided specialized tests.
Over 3.6 million patients visited Piramal centers all
over India and together these centers performed close to 4
million pathology and radiology tests in a year. The company
employed over 150 qualified doctors, 1200 skilled technicians
and had total manpower strength of over 2200 employees.

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THE MEDICAL DIAGNOSTICS INDUSTRY

The medical diagnostics industry in India showed rapid

growth during the period 2000–2008 led primarily by the
overall economic growth. Indian economy grew at an average
rate of about 7.5% per annum during 2000–2008. The period
also saw significant improvement in the disposable income
of the population, which led to increased spending on
healthcare. India spent close to 5.6% of its GDP on healthcare.
However, majority of this was private spending. Government
spending on healthcare stood at just 0.9% of GDP.
Central and State Governments in India were expected
to bring a new policy on health insurance. Implementation
of this policy was expected to increase the affordability of
diagnostic tests, thus giving a boost to the healthcare and
diagnostic industry. Employee State Insurance Scheme (ESIS)
was made compulsory in private sector and it was made
mandatory that if the monthly salary of an employee was less
than Rs. 10,000 then her ESI contribution had to be deposited
by the employer. All these factors provided a strong future
stimulus to the diagnostic industry.
Proliferation of private hospitals and hospital chains in
India also led to the growth of the industry. Hospitals, unlike
general practioners, relied on correct diagnosis and clinical
management of patients. With invent of new technology and
development of sophisticated instruments, the accuracy of
diagnostic tests was increasing. The increased reliability of
tests also raised the faith of doctors on diagnostic tests, which
further led to growth of the industry.
Medical diagnostics industry in India, to a great extent,
remained unorganized. A large portion of the market was still
dominated by small, localized pathological labs, which lacked
capabilities of doing high-end sophisticated tests. According
to a rough estimate, there were about 40,000 independent labs
across the country. Very few players in the organized sector,
either hospitals or pharmaceutical companies, attempted to
enter this industry. However, during the last decade cor-
porate sector showed interest in this field. Some of the
new large entrants to the field included companies such as
Metropolis and Quest Diagnostics. These players, however,
were so far able to tap only about 10% of the total market.

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Diagnostic tests could be broadly divided into two

categories. The first category was of Pathological tests com-
prising of tests of blood, secretions of body (Urine, Stool,
Semen, Sputum, Body fluids), tissue diagnosis or histo-
pathology and specialized tests of genetics and molecular
biology. The second category was of Radiological tests or
imaging techniques comprising of X-Ray, Sonography, CAT-
Scan, MRI, Mammography etc. The prices of Radiology
tests were high, leading to higher volume built up in the
Radiology segment.
The industry was capital intensive and margins on
diagnostic tests were high. As per a McKinsey report in 2005,
the size of diagnostic industry was estimated to be about
Rs. 40 billion in size split into Radiology and Pathology
segments (see Exhibit 4). The industry had grown at the rate
of 20% per annum during the period 2000–08.
Apart from being capital intensive, the industry was
also characterized by frequent technology up-gradations.
Increasing sophistication and cost of the instruments was
making it increasingly difficult for small local players to
afford the state-of-the-art instruments. This was one of the
contributing factors for the increased interest of the corporate
sector in this industry. The main function of a diagnostic
center was to provide accurate and reliable reports of the
tests done. Local labs, many-a-times, were unable to convince
the doctors about the quality of their reports. Moreover, there
was no registration policy or requirement of government
approval to start and run a lab in many states (eg. Rajasthan).
Many Phlebotomists and technicians were running labs in
small towns. This had led to the proliferation of the small
localized players and had intensified competition. However,
given a choice, an increasing number of doctors preferred to
use the large corporate labs, particularly for high end tests.
Large diagnostic companies differentiated themselves
by focusing on quality of tests. They used state of the art
machines and endorsed their quality through third party
accreditations, like ISO certification, NABL accreditation
(National Accreditation Board of Testing and Calibrating
Laboratories) and CAP recognition (College of American
Pathologists).

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Few local labs were also able to obtain ISO certifications

to boost their credibility but were unable to obtain NABL
certifications and CAP accreditations* as these required high
recurring expenditure (in form of fee to agency and increased
reagent consumption), substantial changes in the quality of
instruments and working procedures. CAP accreditation was
an essential prerequisite for getting the outsourced work from
abroad for clinical research and drug trials. Many corporates
were eying this lucrative market also.

MARKET SEGMENTS

Apart from Pathology and Radiology segments, the industry

could further be classified into two subcategories of routine
and specialized tests. (see Exhibit 5 for the value and
percentage wise distribution of Routine and Specialized tests.)
Routine tests: Routine tests did not need much technical com-
petency for interpretation, were easy to perform and costed
Rs. 30 to Rs. 800 per test. Routine tests were there for both
Pathology and Radiology. Routine tests in Pathology included
simple blood tests, urine, stool, sputum, semen tests etc.,
while in Radiology included simple X-Rays, Sonography etc.
Specialized tests: Specialized tests were those which required
high technical competency for interpretation, needed high-
end equipments and usually were of high cost ranging from
Rs. 1000 to Rs. 15,000 per test. These tests were again clas-
sified as Pathological and Radiological tests. Specialized
Pathology tests included tests for genetics defects, molecular
biology, immunohistochemistry, flow cytometry etc. The
Radiological specialized tests included CT Scan, MRI, and
Mammography etc.
Routine segment was characterized by low product
differentiation, low initial capital requirements, and absence
*Accreditations by College of American Pathologists (CAP), a leading international
laboratory accrediting organization, and the National Accreditation Board for Testing
and Calibration Laboratories (NABL), the sole government-authorized laboratory
accreditation body in India, are widely regarded in the international diagnostic
industry as signifying that a laboratory performs diagnostic testing at the highest
quality standards.

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of effective government policies for restricting the entry of

newer players. This had led to the routine segment being
intensely competitive and low in profitability. Though econ-
omies of scales were present, none of the players was able
to reach high enough volumes so as to gain substantial cost
advantage over others. Average cost of opening a routine diag-
nostic center at a rented place ranged between Rs. 100,000 to
Rs. 500,000 depending on the city. A new entrant in a locality
still had to fight to get any referrals from the doctors and also
face retaliation from local labs.
It was much difficult to enter the specialized segment
because of the high initial capital requirement. In this
segment, the brand or reputation of the promoter company
also played an important role in getting referrals. Further,
this segment was characterized by presence of significant
economies of scale. For example, a diagnostic kit, which could
perform 100 tests, would get expired in 6 to 7 months and to
conduct these many tests was not possible at local level so
only large players could enter in this segment. Specialized
tests were often not prescribed because of their high price
and their being relevant in complicated diseases only. Due
to limited number of players and huge untapped profitable
market, the retaliation expected from competitors was not
evident in this segment.

SELF-DIAGNOSTIC EQUIPMENTS

Self-diagnostic equipments were those instruments which

could be bought for home use. Self-diagnostic tests available
in market performed tests for sugar, blood counts for
leukocytes, hemoglobin and urine analysis, but the number
of tests offered by these instruments was limited. Moreover,
many a times these tests also needed interpretation by
experts. Also, in most cases, further microscopic examination
of urine and blood was needed for confirmed reports. The
calibration and standardization of self-diagnostic instruments
was difficult and complex. The initial and running costs
of instruments were high and users also needed education

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and training to use them. Only the instruments for sugar

testing from Roche, Johnson and Johnson and Siemens were
able to get some popularity. Glucometer for estimation of
blood sugar at home had become quite popular. Other self-
diagnostic equipments available were urine analyzer and
blood analyzer for estimation of Hemoglobin and blood
counts.

CUSTOMERS

Medical diagnostics industry was a typical industry where

the buyers or customers were different from the consumers.
The customers of the diagnostic centers were the referring
doctors or hospitals and consumers were patients on whom
the diagnostic tests were performed (see Exhibit 6 for a
schematic). Most patients visiting diagnostic centers were
referred by the doctors and very few patients directly came
to a diagnostic center for getting tests done. The referring
doctors enjoyed discretionary power to refer the patients
to any diagnostic center and patients mostly followed the
instructions given by the doctor.
The numbers of local diagnostic centers were many and
doctors referred the patients to the center where they had a
tie-up and one which would provide better commissions/
incentives. In this way doctors enjoyed high bargaining
power and negotiated for maximum incentives. But as the
local labs only performed routine tests, doctors had to refer
patients to high-end labs or corporate diagnostic centers for
specialized tests. The specialized test centers were few and
had significant bargaining power.
Many-a-times questions were raised on professional
ethics of doctors, who recommended patients to diagnostic
centers giving a higher commission. However, it was difficult
to prove that the doctors’ choice of diagnostic center was
just on the basis of the commission or incentive. In most
cases, doctors would defend their decision by maintaining
that the recommended diagnostic center had better quality

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and that the particular center would offer lower price to the
customer.

SUPPLIERS INDUSTRY

The suppliers of diagnostic industry mainly included equip-

ment suppliers, reagent suppliers and chemical suppliers.
Major players in these industries were:

Radiology equipments:

i)  Wipro-GE  ii)  Siemens  iii)  Toshiba  iv)  Phillips  v)  Fuji

Pathology equipments:

i)  Roche  ii)  Transasia  iii)  Merck  iv)  Sysmex

Reagent and Chemical suppliers:

i)  E-Merck  ii)  Roche  iii)  Dr. Reddy

There were other suppliers also, but since the quality of tests,
to a great extent, depended on the quality of reagent and
precision of the instrument, most large corporates did not
compromise on the quality of supplies. There were numerous
suppliers dealing with the equipments and reagents for
the routine tests because of the commodity nature of the
products. Labs often played one supplier against another to
obtain good bargain.
Suppliers wielded considerable power in the specialized
segment, as they were few in number. Quality of after sale
service was a big factor in choosing a supplier. Very few
suppliers in the industry had fine image of after sales service
like Wipro-GE, Siemens and Roche. Few suppliers like Roche
had exclusive rights to supply certain input in the area of
molecular biology and enjoyed monopolistic powers in these.
Most of the suppliers gave substantial discounts for
bulk purchases and hence larger diagnostics players with
high volume tended to have significant cost advantages
over the smaller players. Also, many national level players
resorted to centralized procurement of most supplies to take
advantage of the high volume procurement.

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GENERAL BUSINESS ENVIRONMENT IN INDIA

During 2000-2008, India enjoyed a period of controlled

inflation and political stability. Availability of easy and cheap
finance for medical and life saving equipments increased
the ability of investors to purchase medical and diagnostic
equipments. The period also saw continuous reduction
in import duty on diagnostic machines that helped the
diagnostic industry to import the latest machines. These
factors led to an overall technological up gradation of the
industry in India. However, due to significant increase in
labour costs, finding skilled manpower to perform special
tests was posing new challenge for the diagnostics industry.

Government Policies and Regulations

State Governments were outsourcing their labs to private

sector to serve in government hospitals at low price, so that
services and facilities could be improved for the patients.
Government hospitals charged low prices for diagnostic
tests but their volumes were high and hence could achieve
economies of scale. This had attracted various private players
to enter in government hospitals.
The Consumer Act was applicable to medical services.
This Act was a double-edged sword for diagnostics industry.
On the one hand, it gave a boost to the diagnostics industry
as doctors resorted to advising patients various tests or
investigations before starting any specific treatment. This led
to an increasing number of tests being prescribed. But on
the other hand, consumers exploited this Act to harass the
diagnostic centers and tried to extract money by lodging non-
specific complaints.
The government policies under PNDT Act (Prevention
of Antenatal Sex Determination) and Pollution Control Act
were strict. Diagnostic centers could be closed down and
criminal proceedings against owner of the centers could be
started for non-compliance to these Acts.

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Consumer Behaviour

Health awareness was on the rise in India and with people

becoming more health conscious, the scope of regular health
check-ups was increasing. Media played an important role
in promoting this awareness. Cinema acted as another factor
behind increasing health awareness. Film stars were the
role models for young population and fitness at par with
stars was becoming a craze and terms like zero-figure, six-
pack-abs etc. becoming buzz words. Increasing disposable
income and a higher willingness to pay for health gave a
fillip to the healthcare industry. Awareness about brand
names in healthcare was on the rise and it was a major
factor for growth of corporate sector in the healthcare, in the
form of hospital and diagnostic chains. To get investigated
and to go for proper health checkup in a branded hospital
was becoming a status symbol among affluent society in
metropolitan cities. This also created a demand pull as an
increasing number of patients had started requesting their
doctors to recommend them to a reputed and well-known
diagnostics center.

Technological Advancements

The diagnostic industry was marked with rapid change

in technology and methods of diagnosis. For example, the
introduction of genome studies, molecular diagnostics,
Positron emission technology for detecting tissue architecture,
Immunohistochemistry for detection of cancers etc. were
some of the leading edge technologies being developed. The
methods of diagnosis were becoming more sensitive and
specific, leading to rapid obsolescence of old technology. This
posed challenge to the diagnostic centers as high cost of new
technology coupled with a need to replace equipments every
six months was not financially viable for most diagnostic
centers having limited resources. The role of big corporate
houses was increasing because of this factor too.
Medical diagnostic equipments could be classified as
Open-system and Closed-system equipments. Open-system

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equipments were those where kit (reagents or consumables)

of any other company could be used whereas Closed-system
equipments allowed using the kit of only the supplier
or manufacturer. With an increasing number of suppliers
resorting to Closed-system equipments, dependency for con-
sumables on equipment suppliers was increasing. However,
new technologies were beneficial and complete automation
helped to reduce human errors, thus increasing faith in
the industry. Developments in Internet and information
technology also led to emergence of Tele-Radiology and Tele-
Pathology and these were expected to emerge as dominant
segments in the industry.

COMPETITIVE SITUATION

Competing firms were stratified in local, regional and

national level. Labs or diagnostic centers at the local level
mostly limited themselves to routine tests. Most of the centers
used similar equipments, employed similar procedures and
similar technicians. There were hardly any factors that would
distinguish one center from the other. Also, there were
numerous labs because initial investment for such routine
tests was not high and the variable costs of tests were low.
This had lead to an intense rivalry at the local level. This
rivalry was manifested in players indulging in price wars and
offering incentives to referring doctors.
Rivalry among national players, who usually focused
on specialized tests, was moderate because of high resource
similarity but players rarely competed in same markets as
the untapped market potential was high. Competitors were
having reasonable level of awareness about the strengths and
weaknesses of one another. Major players in the diagnostic
field at the national level were SRL Ranbaxy, Piramal,
Lal Pathlab, Thyrocare, Vimta Lab, and Metropolis. The
characteristics of regional players were midway between
those of the local and the national players (see Exhibit 7 for
market share of major players in the industry at the national
level).

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SRL Ranbaxy

Mumbai based SRL Ranbaxy was the first large company to

enter the medical diagnostics business in an organized way.
It definitely enjoyed a first mover advantage. Also, the strong
brand reputation of Ranbaxy in the pharmaceuticals industry
gave it an added advantage right at the start. It had emerged
as a national level player owing to its strong network of
collection centers, a large field force network and quality
Credential (CAP Accreditation).
SRL Ranbaxy operated through 550 collection centers
spread across India along with seven franchisee labs. The
franchisee model, however, was not very successful and
the company was thinking of discontinuing it. Due to high
initial investment and franchisee fee, the franchisee model
was not attracting quality franchisees. In many places these
were owned by people with non-medical background, who
simply had access to capital to afford a franchise. Moreover,
maintenance of uniform quality across franchisee labs was
getting difficult for it. SRL Ranbaxy followed a unique
collection model, wherein samples were collected from
patient’s home, doctor’s clinic and lab of local pathologists.
All the samples were labeled and compiled at SRL collection
centers and then routed at head office/Central Lab at
Mumbai for processing. The report was dispatched from head
office to collection center and from collection center to end-
user (see Exhibit 8 for a schematic).
SRL Ranbaxy was able to provide a large range of
tests, and had centralized processes, which helped it maintain
uniform quality throughout its network. It was, however, not
a strong player in the routine test segment.

Lal Pathlab

Delhi based Lal Pathlab was one of the strong players, which
enjoyed a goodwill of 50 years of operation in the pathology
field. It had a strong base in Delhi and North India. It also
had the capability of providing a wide test range and had
quality credentials.

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Over the years Lal Pathlab had also developed a good

numbers of collection centers, but it was predominantly
catering to Delhi and some areas in the north. Even after
being in the business for quite long, it had not been able to
grow beyond this area and was still perceived as a regional
lab. Lal Pathlab was operational through 13 labs along with
approximately 200 collection centers across India. More
recently, it was also attempting to grow through the inorganic
route and had acquired some small stand-alone labs in few
cities. Lal Pathlab mostly had company owned labs and
provided semi-specialized test range. It had a relatively weak
collection center and field force network.

Quest Diagnostics

Another strong player contemplating to enter this market was

Quest Diagnostics from US. Quest was the largest diagnostic
center in the world and was listed in the New York Stock
Exchange. Quest had world-class best practices and was
having excellence in specialized segment of Pathology. Quest
had entered in Indian market with head office in Delhi. It was
planning to bring its first center in operation by November
2008.

PIRAMAL’S POSITIONING AND STRATEGY

Offering Complete Solution Under One Roof

Usually when investigations were advised to any patient,

both Radiology and Pathology tests were needed. National
competitors like Ranbaxy and Lal Path Labs were offering
only Pathology tests so patient had to go to other centers
for tests of Radiology. Moreover, even for routine tests,
patient had to wait for two days because tests were per-
formed at head office. In contrast, each center of Piramal
offered a comprehensive range of routine tests in Pathology
and Radiology at local level so patients could get the

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report of routine tests on the same day under one roof.

Specialized or esoteric tests in the areas of Histopathology,
Immunohistochemistry, Cytogenetics, Flow Cytometry and
Molecular Biology were sent to Centers of Excellence in
Mumbai and report for these tests were delivered the
following day. Combination of Pathology and Radiology in
the local city served the purpose of providing all facilities
under one roof and gave it a competitive edge over other
competitors who were not providing Radiology testing at
local labs.

Collection Centers Networking

The modus operandi of Piramal was different from the

competitors. It primarily operated through its own center in
a city, which was connected to nearby areas through a hub-
and-spokes model. Piramal was opening collection centers
where it could not reach with its own setup. The collection
center fed to the nearest local branch, where the routine tests
were performed, while specialized tests were outsourced
to center of excellence at Mumbai. Around 300 collection
centers were operational as of 2008 and company targeted
to increase the number to 1000 by end of 2009. Due to local
presence of processing labs, the adaptability to local needs
was high and the labs could perform routine tests at higher
speed than other centralized processing labs of corporate
competitors. Last but not the least, the ability to invest for the
deployment of latest automated equipments, responsible for
better operational efficiency and good quality, gave Piramal
Diagnostics an edge.

Customer Focus

The Company operated through Business to customer (B2C),

Doctor to Customer (D2C) and Business-to-Business (B2B)
modes. The B2C strategy concentrated around satisfying
the referring doctors through quality reports and incentives.

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The D2C approach was devised to reduce dependence on

referring doctors and focused on directly dealing with end
consumer (Patients). In this strategy company appointed its
own clinicians or invited renowned clinicians of the city to
practice by providing them rent-free space at central location
of the city. The clinicians kept consultation with them and for
investigations referred patients to Piramal. In B2B strategy,
pre-employment health checkup contracts were taken and
insurance business was also targeted to refer their clients for
diagnostics tests. The company had also devised tailor-made
health packages, which included a multitude of health and
diagnostic checkups, targeted towards customers with specific
lifestyle needs (see Exhibit 9 for two such sample tailor-made
packages).

Branding and Promotion

One of the strong points in the strategy of Piramal Diag-

nostics was to leverage the strong brand reputation enjoyed
by the parent company Nicholas Piramal. Piramal was a
well-known name in pharmacology and had high recognition
among the medical community. The brand helped Piramal
diagnostics attract patients and get referrals from large
hospitals. Apart from the brand, the parent company was also
a source of financial support it needed to invest in diagnostic
centers, considering the long gestation periods.
The positioning statement of Piramal was being
‘Largest Diagnostic Network in India with state-of-the-art total
diagnostic solutions in both Pathology & Radiology’. Piramal
focused on both doctors and patients to promote its business.
It focused less on media advertising but mainly dealt with
activities for doctors, patients and corporate. Its promotional
strategies targeted towards doctors included use of Visual
Aid, Conferences, Center of Excellence booklet, Quarterly
newsletter and Journal advertisements. Piramal also used
Continuing Medical Education (CME) to impart education
to doctors and pathologists, as a way to build its brand and
develop close linkages with them. Piramal selected following

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journals for advertising keeping different target customers in

mind:
Indian Journal of Radiology and Imaging (IJRI): Target
customer — Radiologists
Indian Journal of Transfusion Science (IJTS): Target
customer — Hematologist and Pathologist
Indian Journal of Community Medicine (IJCM): Target
customer — Family physician
The promotional activities targeted directly towards the
patients or consumer included organizing free consultation
camps, distribution of patient information leaflets, use of
loyalty program, workshops and yellow page advertisement
etc. Corporate activity included use of separate corporate
brochure, details of clinical trial and insurance business.
NABL, CAP and ISO certifications had third party
endorsement values and increased the credibility of centers.
Piramal Diagnostics tied up with famous and experienced
doctors at local and national level and this strategy further
enhanced its image and perceived quality of centers.

GROWTH STRATEGY

Piramal was able to achieve a fast growth and build a

nationwide presence owing to its strategy of growth through
the inorganic route. It established its center in a new city
usually through acquisition of the best diagnostic center in
that city. In case of non-acceptance of the offer, it went for
the second best. In case of non-acceptance of offer by the
second player too, the company either dropped the idea or if
presence in the city was strategically very important, opted
for Greenfield venture. Out of the 104 cities the company was
present in 2008, only three, in Delhi, Bangalore and Jaipur,
were Greenfield ventures. This strategy was proving to be
quite beneficial because it helped Piramal in understanding
the local market, exploiting relationships with referring
doctors as well as acquiring capabilities for doing specialized
tests.

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CHALLENGES AHEAD

As Mr. Kapoor was getting ready for his meeting, he was

contemplating how he would address the future challenges
that question his strategic plan. He was particularly worried
about the increasing competition. On the one hand there
were small local labs that were a great threat to the low-
end routine diagnostic business, while on the other hand
there were competitive moves from large corporates like
Thyrocare and Vimta Lab. The demand in the industry
was also promoting entry of new strong players like Quest,
who had strength in specialized tests and had worldwide
reputation for their best practices. Piramal had to rethink on
its positioning. Mr. Kapoor quipped:
Competing on cost is the only way out if one has to
compete with local players, while at the same time the
company needs to leverage its strong brand, reputation for
quality and nationwide presence to compete on the high
end.
His plan was based on leveraging the strong network of labs
and collection centers, developed over a period of 4 years to
increase the market share. However, with the network getting
larger, it was a big challenge maintaining uniform quality all
across. According to him, regular quality audits, maintenance
of uniform quality through Standard Operating Procedures
(SOP), deploying same type and quality of instruments from
single vendor would increase the uniformity and bargaining
power of Piramal. But at the same time he was concerned
that over dependence on a single vendor might harm the
chain in the long run. Backward integration or alliances with
suppliers were other options to establish uniform quality.
Another related challenge was maintaining uniform human
resources practices across the centers. Due to acquisitions
strategy, the human resources function was delegated at the
local level and lack of uniform policies often led to discontent
among employees.
Finally Mr. Kapoor was also concerned about the rapid
pace of technological development in the diagnostics field.
He was thorough, looking at this more as an opportunity

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 114  ACRJ

than a challenge. With rapid pace of changes Piramal had

to ensure that new technology was acquired as soon as it
was introduced. He was confident that Piramal had strong
financial muscle and talent pool required to handle and
interpret new knowledge. With rapid evolution of medical
science, the way medicine was practiced was going to change
soon. Human genome mapping, gene therapy, diagnosis
at molecular level was gaining importance. Piramal must
be well equipped with the changes medical industry was
expecting.

EXPLORING OPTIONS

As Mr. Kapoor was pondering over the issues and the

concerns, the Board might raise, he also got himself prepared
for few of the questions that might arise. He thought of
addressing the question of maintaining quality across the
network through the use of information technology. All
the 104 locations could be connected to head office and to
each other for transfer of knowledge and solving of queries.
He also thought of using this for improving the customer
interfaces through use of information technology:
Patients would be benefited by knowing the status of their
samples and could see and print their reports through
Internet by sitting at home. The short reports could be
communicated through e-mails and messages on mobile
as soon as these were ready. The use of information
technology will serve as competitive advantage.
As his plan relied on retaining the existing customer base
and entering new markets with targeted offerings, he was
contemplating on new markets that would have potential. He
thought of rural market as one such option as it was more
or less untouched by big players and incidence of infectious
diseases was highest in this segment. Opening of collection
centers or tying up with small labs in rural areas could build
large volume of business. Other potential market he thought
exploring was the Lifestyle Diseases segment. With increased
life expectancy, stress and unhealthy food habits the incidence

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 PIRAMAL DIAGNOSTICS  115

of obesity, diabetes and hypertension was increasing.

Designing of special packages for this niche segment would
be of great help, he thought. He elaborated on his idea:
We could create membership-based clubs, which provide
regular updates about various diseases along with new
diagnostic tests and treatment modalities to create a loyal
and profitable segment.
He also wondered if he could tap the nearby countries like
Pakistan, Bangladesh, and Sri Lanka etc., which were lacking
in good healthcare system. The facilities for specialized tests
were absent. The samples from these countries could be
outsourced to India with maintenance of cold chain. Ranbaxy
was already doing it. The sample collection could be done
by operating franchisee, collection center or tying up with
existing collection centers.
He also thought of diversifying into the emerging
Clinical Trial Business. This business had the potential to
build huge volumes at one go and one contract amount may
range from Rs. 100 million to Rs. 2000 million. Making a
separate wing of marketing and research to tap this segment,
he thought, would benefit the company.

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 116  ACRJ

Exhibit 1

Location of Piramal Diagnostics Branches in India

S0218927511001484.indd 116 7/20/2011 11:57:21 AM

 PIRAMAL DIAGNOSTICS  117

Exhibit 2

Piramal Diagnostics’ Vision and Mission

Vision

To become the preferred choice of the medical fraternity and the end-consumer in clinical
diagnostic services by setting the highest benchmarks in quality, expertise and services.

Mission

To build a network of diagnostic centers offering end-to-end solutions on state-of-the-art

machines manned by skilled workforce having a pan India and international presence.

Exhibit 3

Piramal Diagnostics Sales

Piramal Diagnostics Growth: 1999-2007

1600

1400

1200
Sales Rs. Million

1000

800

600

400

200

0
1999 2000 2001 2002 2003 2004 2005 2006 2007

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 118  ACRJ

Exhibit 4

Radiology and Pathology Segments in Indian Diagnostics Industry

Market Size

Pathology
43%
Rs.1700
million
Rs.2300
million Radiology
57%

Exhibit 5

Routine and Specialized Test Segments in Indian Diagnostic Industry

M arket Size: Specialized and Routine Tests

Specialized
Tests
39% Rs.1550
million
Rs.2450
million
Routine
Tests
61%

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 PIRAMAL DIAGNOSTICS  119

Exhibit 6

Typical Patient Flow to the Diagnostic Centers

Exhibit 7

Market Share of Major Players in the Organized Medical Diagnostics Industry

Market Share of Major Players

Metropolis
Vimta Labs
10%
3%
Piramal
Lal Pathlab 37%
18%

Thyrocare
5%
SRL-Ranbaxy
27%

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 120  ACRJ

Exhibit 8

SRL-Ranbaxy’s Unique Customer Acquisition Model*

*Source: Authors’ observation based on discussion with industry experts.

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 PIRAMAL DIAGNOSTICS  121

Exhibit 9

Sample Health Packages Offered by Piramal Diagnostics†

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†Source: Company website www.piramaldiagnostics.com as on April 2008.

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