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Strategic Management - I Piramal Diagnostics

Piramal Diagnostics

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Page 1: Piramal Diagnostics

Strategic Management - IPiramal Diagnostics

Page 2: Piramal Diagnostics

Company Background (1/2)Subsidy of Piramal GroupFounded in 1999 with the acquisition of

Tribedi & Roy Diagnostic centre in Calcutta

Grew exponentially between 03 to 08 through acquisitions

CAGR 35% for last decade compared to industry CAGR of 20%

Estimated to reach Rs 2000m in revenues by Mar 2009

Page 3: Piramal Diagnostics

Company Background (2/2)By 2008, Piramal was the largest chain

of diagnostic centers in India104 test centers across 48 cities

supported by 300 collection and pick-up centers

Centers of excellence in Mumbai for specialized tests

Performed close to 4m pathology and radiology tests in a year

Total manpower strength of 2200

Page 4: Piramal Diagnostics

Porter’s Five Forces Model

Page 5: Piramal Diagnostics

Threat of New Entrants (1/2)Routine Tests (HIGH)

Tests ranging from Rs 30 to Rs 800Low product differentiationLow initial capital requirementAbsence of effective government policies for

restricting new entrantsLow possibility of getting cost advantage as

generating volumes is a problemAverage cost of opening at a rented place Rs 1

to 5 Lacs

Page 6: Piramal Diagnostics

Threat of New Entrants (2/2)Specialized Tests (LOW)

Tests ranging from Rs 1000 to 15,000High initial capital requirementHigh brand equityHigh expenses due to the ever changing

technologySignificant economies of scale benefitting the

current players

Page 7: Piramal Diagnostics

Threat of Substitutes (LOW)With the invent of new technology the accuracy

of diagnostic tests was increasing Self diagnostic tests for sugar, blood counts for

leukocytes, hemoglobin and urine analysisCalibration and standardization is difficult and

complexHigh initial and running costUsers also need education and training to use

the equipmentsMost tests require interpretation by expertsGlucometer for estimating blood sugar has been

the only one to gain some popularity

Page 8: Piramal Diagnostics

Bargaining Power of BuyersRoutine Tests (HIGH)

Low product differentiationPatients visit labs recommended by doctors,

thus doctors enjoyed high bargaining powerMany players in the market

Specialized Tests (LOW)Less number of players in the marketDoctors had to refer patients to high end labs

Page 9: Piramal Diagnostics

Bargaining Power of SuppliersRoutine Tests (LOW)

Large number of suppliers and reagent suppliers

Labs often played one supplier against the other

Specialized Tests (HIGH)Low number of suppliersQuality of after sales service played an

important roleSome suppliers enjoyed monopolistic powers in

areas like molecular biology

Page 10: Piramal Diagnostics

Rivalry Amongst Existing Competitors (1/2)Local level (HIGH)

For routine testsDiagnostic industry remains mostly

unorganized with 40,000 independent labs across the country

Hardly any factors to distinguish between them

Low initial investment and variable costs Price war and high incentives for doctors

Page 11: Piramal Diagnostics

Rivalry Amongst Existing Competitors (2/2)National level (LOW)

Firms owned by corporate players focusing on specialized tests

Current major players are SRL Ranbaxy, Piramal, Lal Pathlab, Thyrocare, Vimta Lab and Metropolis

Huge untapped profitable market Leading to new entrants like Metropolis and

Quest Diagnostics

Page 12: Piramal Diagnostics

Thank You