Analysis of Apollo Hospitals in India
Hospital at Hyderabad Vs Chennai
After the success of the hospital at Chennai, Dr. Reddy expanded to Hyderabad. After a slow pickup which included losses for the first four years, the hospital finally seemed to have picked up by making a profit of Rs. 100,478,000 in the year 1994. But on closer examination of the financial statements, we can see that the apparent profit is actually due to interest waiver given by the financial institutions, as well as a result of profit from sale of assets. Thus to find actual profit as a result of hospital medical operations, we subtract these two components from the net profit and find that there is actually a net loss of Rs. 14,864,000 for this year as well. Thus, before deciding to further expand its operations, Apollo must look at the possible reasons for failure of its Hyderabad initiative, so as to select an expansion policy which could avoid/correct these shortcomings. The reasons could be: 1. High Cost of Fixed assets – Most of the machinery used was too expensive and much of it wasn’t used/needed much in the Indian context. The maintenance of these machines greatly increased the operating costs as well. The hospital was not able to cover these costs through its operations, hence, incurring losses. 2. Presence of private hospitals with lower prices and greater accessibility– Unlike Chennai, prior to the entry of Apollo in Hyderabad, other private hospitals with lower prices and having more accessible locations already existed in Hyderabad. Even though, their services were probably not at par with the international standards Apollo was aiming at, the average Indian consumer, with a per capita income much lower than the Western standard was a lot more sensitive to price differences than to differences in quality standards. Also, its far from the city location could also be working as a disadvantage against Apollo by making it hard to reach. 3. The medical center opened...
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