GE Health Care case Study

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Computed topography for the billions. GTM to penetrate the computed topography market in India

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  • very precise and informative. Tarun would you please email it to me at afp15narendrak@iima.ac.in
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GE Health Care case Study

  1. 1. Computed Tomography (CT) For The Billions Submitted by- Pragya Joshi | Pulkit Bohra | Pulkit Mathur| Tarun Gupta Team Iguanas, IIM Ranchi Composition: Cover Slide - #1 Executive Summary - #2 Main Slides - #3-7 Appendix - #8
  2. 2. Executive Summary Strategic objectives Insights To identify market potential for diagnost- ic market in India Industry Analysis Market/Competitor Analysis To determine the market Drivers and Constraints Forecasted CT market is growing steadily but still not to its full potential. Disruptive innovation needed to boost growth India will have 68 cities with population of 1 million, up from curre- nt 42 by 2030. The Indian Tier 2 & 3 markets have 20,000 underserved private diagnostic centres. With large number of alternatives Repla- cement Market drives sales Increasing scope of clinical applications is boosting the sales of CT machines Demand for Refurbished Machines is lowering the sales of new Equipment. Lack of Medical Insurance Coverage hampers adoption rate in tier 2 & 3 cities Leverage on synergy which can be obtained from GE Capital. Synergy Analysis To identify synergies that can be leveraged Leverage on the GE wing to wing hospital service infrastructure and GE’s Healthcare expertise. Leverage on the GE’s Established Service & Maintenance reputation. Establish a hub & spoke model with 1 central diagnostic centre (tier 2) catering to 3 satellite diagnostic centres (tier 3). Recommendations Using a PPP (public Private partnership) model to open Block Level Diagnostic Centres with GE as suppliers and operation & maintenance Organizing the CT Re- furbishment Market Tie up with vocational training institutes to train & develop skilled CT machinery operators GE Healthcare can tie - up with banks to provide clients with easy loans Standardization Initiative be launch- ed by GE Healthcare Associate with government program Like NRHM & National Elderly Health Mission Program. Establish GE Diagno- stic Labs with CT ma- chines in Medical Colleges Of Repute Innovating a New Diagnostic Scans Insurance Policy 2
  3. 3. Scope Of Computed Tomography (CT) Market in India Changing Indian Customer Segment Dynamics 590 TIER 1 population >4 million TIER 2 1-4 million TIER 3 & 4 <1 million 340 93 52 195 331 104 155 9 9 13 33 29 55 ~5000 ~4970 ~6000 4 26 conversion from rural villages ~1000 Indian Tier 1 & 2 cities come out as attractive target segments for CT market Indian Diagnostic Equipment Market Forecast CT market growing at CAGR of 13.88% 0 100 200 300 400 500 2011 2012 2013 2014 2015 2016 2017 2018 Revenueinmillion$ General X-ray CT MRI Ultrasound CT Ultrasound Stifled growth forecast of Indian CT Market Market Dynamics - Insights • Forecasted CT market is growing steadily but still not to its full potential. • Disruptive innovation needed to boost growth • India will have 68 cities with population of 1 million, up from current 42 by 2030. • The Indian Tier 2 & 3 markets have 20,000 underserved private diagnostic centres. 1 2Movements of number of cities from one tier to another Sources : Indian Urbanization Econometric Model, Census 2001; McKinsey Global Institute Analysis YEAR 2008 Total Population in each tier (in millions) . YEAR 2030 projected Total Population in each tier (in millions) 3
  4. 4. Market Drivers for Indian CT Market; Competitors Analysis Sources : Overview Of Diagnostic Equipment Market in India – Frost & Sullivan Availability of cheaper Technology Alternatives offers threat to CT market share CT 3% MRI 2% Ultraso und 44% General X-ray 51% Total Units (12,376) CT market occupies only a meagre 3% market share in 2011 Threat Of Technology Alternatives in Indian CT Market Diagnostic Equipment Market CT MRI Ultrasound X-ray • Single slice • 16-64 slice • 128-320 slice • Black & white • Colour Doppler • Hand held • Analog • CR / DR • Mammo Compromising on technology, clients prefer to buy low end equipment variety and then REPLACE with higher end after experience Market Drivers Increasing scope of clinical applications is boosting the sales of CT machines 2 With large number of alternatives – Replacement Market drives sales 1 Demand for Refurbished Machines is lowering the sales of new Equipment. 1 Lack of Medical Insurance Coverage hampers adoption rate in tier 2 & 3 cities 2 Market Constraints GE Healthcare 29% Siemens 35% Trivitron- Hitachi & Blue Star 7% Toshiba- Erbis Engineerin g Co. Ltd. 10% Philips 19% Competition from other market players TIER 1 Competitors: Siemens, GE Healthcare Captures 66% of market share. Current Tier 1 market is stagnant. TIER 2 Competitors: Philips, Toshiba-Erbis, Trivitron- Hitachi & Blue Star. Tier 2 market shows strong growth potentialIndian CT Market in % Revenue, 2011 Market share captured in tier 1; Growth opportunity exists in tier 2&3 market Total Revenue = $90.7 million 4
  5. 5. Go-To-Market Strategy : Reaching the Masses REACH VISIBILITY TWO CHALLENGES FOR GE HEALTHCARE When expanding CT Market to Tier 2&3 Cities Solution 1 Solution 2 Improving Availability Leverage on the GE wing to wing hospital service infrastructure and GE’s Healthcare expertise. Use a PPP (public private partnership) model to open Block Level Diagnostic Centres with GE as suppliers and operation & maintenance This model will improve availability in tier 2&3 cities. GE should tie up with vocational training institutes to train & develop skilled CT machinery operators By this GE can overcome the biggest deterrent of skilled labour for its CT clients. Thus improving the CT adoption rate. Improving Affordability Leverage on the GE’s Established Service & Maintenance Reputation. Also leverage on synergy which can be obtained from GE capital GE should Organize the CT Refurbishment Market Through this method GE can engage the clients not willing to put in heavy capital and can offer them GE’s reputed maintenance services. GE Healthcare can tie up with banks to provide clients with easy loans This will overcome the current industry challenge of lack of product knowledge with bank & hence lack of loan sanctions. GE Capital can offer seed money for setting up GE certified Diagnostic labs with CT scanners for big clients. GE CT Technology “delivering to masses” A A B B C 5
  6. 6. Go-To-Market Strategy : Improving The Adoption Rate Solution 3 amongst Patients amongst Doctors REACH TWO CHALLENGES FOR GE HEALTHCARE When expanding CT Market to Tier 2&3 Cities VISIBILITY Solution 4 Overcome Low adoption rate by the patients for comparatively expensive CT Technology by following means: Innovate a New Diagnostic Scans Insurance Policy Patients will be able to afford expensive CT scans(INR 2000/scan) at GE certified diagnostic centres. Associate with government programs Like NRHM & National Elderly Health Mission Program. Standardization Initiative be launched by GE Healthcare This would indicate to the patients that the dosage is being monitored and CT technique is safe. Leverage on the high performance of GE CT technology by showcasing the same to potential clients – Doctors in medical school Establish GE Diagnostic Labs with CT machines in Medical Colleges Of Repute 1. The future Doctors training in these colleges will have an exposure to the increasing clinical applications of CT machines. This would make them conversant with GE technology and will create potential clients for GE. 1. Also GE would have a short term gain in terms of the service & maintenance fee from the college. 1. GE certified labs should provide details of exposure to patient and use this to market their superior technology to conscious patients/doctors. A B C A 6
  7. 7. Proposed Advanced Centre & Associated Satellite Centre Model Central Advanced Diagnostic Center • In Tier 2 Cities • Nearby Hospitals with service lacking • Outpatient specialists in vicinity Satellite Diagnostic Centers • In Associated Tier III Cities • Well Populated, self contained neighborhoods GE Distribution Model For Targeting Tier 2 & 3 Cities Setup Cost Premise Renovation $2,500 Equipment $14,00,000 UPS/Generator $80,000 Rental Deposits $20,000 Legal $10,000 Advertising $20,000 6 month Operating Expense $2,52,000 Total $17,84,500 Year CT MR X-ray Ultrasound Mamography Revenue Cost Net Income 1 $3,15,000 $1,50,000 $45,000 $36,000 $16,800 $5,62,800 $5,04,000 $38,220 2 $3,62,250 $1,72,500 $51,750 $41,400 $19,320 $6,47,220 $5,54,400 $60,333 3 $4,16,588 $1,98,375 $59,513 $47,610 $22,218 $7,44,303 $6,09,840 $87,401 4 $4,79,076 $2,28,131 $68,439 $54,752 $25,551 $8,55,948 $6,70,824 $1,20,331 5 $5,50,937 $2,62,351 $78,705 $62,964 $29,383 $9,84,341 $7,37,906 $1,60,182 Proposed Model: Establish a hub & spoke model with 1 central diagnostic centre (tier 2) catering to 3 satellite diagnostic centres (tier 3). Using this model & the Go-To-Market Strategies discussed in slide 5/6, GE can create a strong eco-system in tier 2&3 cities for CT market. How it Works: Tie-ups with private diagnostic centres giving them status of registered GE Diagnostic Centres in tier 2&3 cities. These centres will act as the diagnostic hubs for GE. GE will maintain a operations & service contract with them. Feasibility study: • GE Capital / Unique bank tie-ups will offset the huge initial setup cost at a centre. • Net Income from this setup justifies the feasibility of this model. Sources : Data from Appendix (Exhibit 1); A modern Diagnostic Centre Chain – Metupalle ; The total monthly fixed cost is taken as $42,000 based on employees salary, maintenance and misc expenses. Satellite 1 Satellite 2 Satellite 3 … Central Diagnostic Centre Tier 3 Tier 2 Initial Setup Cost For A Centre 5 year revenue-cost projections 7
  8. 8. Zonography Prototype CT scanner Spiral CT scanner Mass Adoption of CT Tie up with vocational training institutes PPP (public Private partnership) model to open Block Level Diagnostic Centres GE Diagnostic Labs with CT machines in Medical Colleges Of Repute Association with government program AdoptionofCT Time Normal Evolution Disruptive Evolution Laminography 1960sPre 1950s 1970s 2013 2015 2018 Establish a hub & spoke model … Type Price volume/month Mean CT Scan $70 375 Mean MR Scan $50 250 X-ray $5 750 Mean U/S Scan $10 300 Mean Mammo $7 200 Exhibit 1 Appendix: Disruptive evolution by GE Healthcare will quicken mass adoption of CT and position GE as a leader in the respective industry 8

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