Case
Teaching Notes
Supplementary Resources
Abstract
It was the morning of December 2014, Munesh Makhija reflected on the existing strategy of General Electric (GE) for Bottom of Pyramid (BoP) markets. Makhija had taken over as Managing Director, GE India Technology Center and Chief Technology Officer (CTO) – GE South Asia, in early 2014. Earlier, he served as the CTO for GE Healthcare India from 2010 to 2012 and had spent a little over 12 years, much of it in the US, in its healthcare business. In the past few years, he had the opportunity to get a first-hand feel of the BoP market. He could see how healthcare sector, particularly medical devices market was undergoing a rapid transformation. The impact of ‘Reverse Innovation’ which was the outcome of the strategy adopted by GE to promote frugal innovations with a focus on BoP markets in India and other like markets fascinated him. GE had successfully launched 25 super value products (Exhibit 1) primarily for the BoP market in the last five years and had received a favorable response for all of them. However, frugal innovation in India was becoming more common in the healthcare space ranging from low-cost surgeries to low-cost medical devices and competition was building up.
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved
Resources
Exhibit 1: List of Super-value Products launched by GE Healthcare in India
Year | Category | Device | Description |
1996 | Ultrasound | LOGIQ 100 | India’s first portable ultrasound device. |
2003 | Ultrasound | LOGIQ 3 | India’s first window-based color Doppler ultrasound device. |
2006 | X-Ray | HF Advantage | High frequency x-ray system that can bridge the gap between two-pulse x-ray technology and digital technology. |
2007 | ECG | Mac 400 | Battery operated portable ECG device. |
2008 | Ultrasound | LOGIQ A3 | Low cost powerful black and white ultrasound system. |
2009 | X-Ray | Tejas XR 2000 | High frequency x-ray system that can be upgraded to digital x-ray without changing the unit. |
2009 | Ultrasound | LOGIQ P3 | Ultrasound imaging system delivering imaging related to radiology, OB/Gyn practices at 20% less cost as compared to similar systems. |
2010 | Infant Care | Lullaby Baby Warmer | A lifesaving bassinet that provide warmth to new born babies. Costing 30% less than similar quality imported products. |
2010 | ECG | The new MAC I | Priced at INR 25,000, MAC I is a low cost ECG device that made ECG accessible and affordable to masses at a price as low as INR 9 per ECG. |
2010 | Cathlab and Imaging | Centricity PACS REACH | A low cost picture archival and communication tool marketed at 1/10th the cost of imported system. |
2011 | ECG | MAC 600 | An energy efficient digital ECG system that can generate ECG report in pdf format. This product is priced 80% lower than comparable imported product. |
2011 | Ultrasound | VIVID P3 | A cardiac ultrasound system at 50% lower price than similar imported products. |
2012 | Infant Care | Lullaby Phototherapy system | A low cost phototherapy device for safe treatment of jaundice in newly born babies. |
2012 | Infant Care | Lullaby LED | High intensity phototherapy system to treat new born babies with jaundice using LED technology. |
2012 | Ventilator | Vayu | Low cost, intuitive ventilator with a compact design offers critical care facilities to BoP customers. |
2012 | Cathlab and Imaging | Optima 2100 | A cost effective fixed interventional cathlab with large flat panel detector for whole heart coverage. |
2012 | Ultrasound | Voluson P6 & P8 | World’s first ever four-dimensional ultrasound system. Facilitates radiologists for premium imaging and interventional procedures. |
2012 | Ultrasound | Venue 40 OB | Specialty ultrasound system designed for obstetricians that enhances clinical confidence. |
2013 | X-Ray | Brivo XR 115 | An ultra-high frequency mobile x-ray system that is faster and affordable. |
2013 | Ultrasound | LOGIQ F3-F8 | Advanced high performance ultrasound system that provides a cost effective way to diagnosis. |
2013 | Life Science Solution | Akta Start | Life science solution designed in India for the first time by GE Healthcare. |
2013 | Infant Care | Lullaby Warmer Prime | Specially designed for the rural and remote locations. Lullaby Warmer Prime is a phototherapy system that delivers exceptional thermoregulation in a cost effective way. |
2014 | Infant Care | Lullaby Resus Prime and Lullaby Resus Plus | A set of integrated compact neonatal resuscitation devices that allow simple, intuitive operation possible by minimally skilled/trained health workers in BoP. |
2014 | ECG | MAC 2000 | ECG analysis system equipped with Marquette 12SL that provides fast and accurate diagnosis support to the clinicians. |
2014 | PET CT | Discovery IQ | An affordable molecular PET/CT imaging system that is used to detect and diagnose cancer at early stage. |
Source: Provided by company.
Exhibit 2a: Healthcare Industry in India: Per-capita Healthcare Expenditure in India
Source: India Brand Equity Foundation Report, 2014.
Per capita healthcare expenditure in India is estimated to grow at a CAGR of 15.4% during 2008-15 to reach USD 88.7
Exhibit 2b: Shares in Healthcare Spending in India, 2015
Note: Private sector’s share in healthcare delivery is expected to increase from 66% in 2005 to 81% in 2015.
Source: India Brand Equity Foundation Report, 2014.
Exhibit 3: Shortfall in Healthcare Infrastructure
Type of Infrastructure | Required | Present | Short-fall | Avg. No. of Villages covered |
Sub Centre* | 179,240 | 152,326 | 36346 | 4 |
Primary Health Centers (PHCs)** | 29,337 | 25,020 | 6,700 | 26 |
Community Health Centers (CHCs)*** | 7,322 | 5,363 | 2,350 | 119 |
Notes:
*The Sub-Centre is the first layer of primary health care infrastructure for rural population. Each Sub-Centre is manned by one Auxiliary Nurse Midwife and one Male Health Worker. The Sub-Centers are provided with basic drugs for minor ailments needed for taking care of essential health needs.
**The Primary Health Centre is the first contact point between rural population and the medical officer (doctor). PHC is manned by a medical officer supported by 14 paramedical and other staff. It acts as a referral unit for 6 Sub Centers. It has 4–6 beds for patients. The activities of PHC involve curative, preventive, primitive and family welfare services.
***The Community Health Centre is a 30 bed Hospital/Referral Unit for 4 PHCs offering specialized services.
Approximately 60% of population in India is dependent upon Sub-Centre, PHCs and CHCs.
Source: India Health Stat 2014, www.indiastat.com, Ministry of Health and Family Welfare, Government of India (2011). Report on Rural Healthcare System in India Chapter III.
Exhibit 4: Overview of Indian Healthcare Sector
Note: Accredited social health activists (ASHAs) is community health workers founded by Ministry of Health and Family Welfare, Government of India under the National Rural Health Mission (NRHM). Government aspires to achieve 100% coverage of villages through asha workers. In July 2013 a total number of Ashas in India was reported to be 870,089.
Source: India’s Healthcare System – Overview and Quality Improvements. The report was written by Peter Wennerholm and Andreas Muranyi Scheutz at the Agency’s New Delhi office and Yasmin Zaveri-Roy, Senior Advisor Health, Embassy of Sweden, New Delhi, May 2013.
Exhibit 5a: Indian Medical Electronics Market (in USD billion)
Note: Analyst CAGR – 17%; Deloitte Analysis CAGR 17 – 19%
Source: Indian Medical Electronics Industry Outlook 2020, Deloitte & FICCI report, December 2011, Retrieved July 10, 2015 from http://www.ficci.com/spdocument/20210/FICCI-Deloitte-Though-paper-on-Medical-Electronics.pdf
Exhibit 5b: Snapshot of Indian and US Medical Device Market
India | US | |
Market Size (Medical Devices) | USD3 billion | USD100 billion |
Primary medical device market for | Class I and II | All Devices |
Total Healthcare spending | USD 0.064 trillion | USD 2.3 trillion |
Research and Development | > 2% of total revenue | Approximately 11-12% of total revenue |
Source: Compiled from “Indian Medical Electronics Industry Outlook 2020”, Deloitte – FICCI report (2011); “India’s Healthcare System – Overview and Quality Improvements”, Direct Response (2013).
Exhibit 6: Medical Devices and Equipment in Make in India Campaign
India has recently launched its ambitious campaign Make in India under the leadership of Prime Minister Narendra Modi. The campaign was launched with the objective of strengthening India in manufacturing sector. It also focuses on the medical device sector and has provisions to strengthen the sector in India. Following are the highlights of India’s medical device sector and how Make in India is beneficial for medical device manufacturers in India.
- Globally medical device industry was pegged at USD330 billion in 2013 and was reported to grow at a CAGR of 6%. India contributed only USD 2 billion to this but was expected to grow at a CAGR of 12–14% and cross the USD 7 billion mark by 2017 if Make in India campaign gains the momentum as desired by its planners. 1
- 80% of medical devices under various categories sold in India were imported. 2
- Under the campaign 100% FDI in medical device sector was announced to promote manufacturing in this sector. 3
- India received USD 693 million of FDI in the medical technology sector till 2014. 4
- Government announced to open two medical device industrial parks to promote manufacturing in this sector. The first park was to open in the state of Gujarat whereas the second one in the state of Tamil Nadu.
- Major reforms in Pharmaceuticals manufacturing were proposed by the department of Pharmaceuticals.
Source: Compiled by Case authors (for details please see endnotes/references indicated above)
Exhibit 7: Healthcare Spending, International Comparison (% of GDP)
2010 | 2011 | 2012 | 2013 | |
India | 03.8 | 03.8 | 03.8 | 04.0 |
China | 05.0 | 05.1 | 05.4 | 05.6 |
Brazil | 09.0 | 09.2 | 09.5 | 09.7 |
South Africa | 08.7 | 08.6 | 08.9 | 08.9 |
Russia | 06.9 | 06.7 | 06.5 | 06.5 |
US | 17.1 | 17.1 | 17.0 | 17.1 |
Japan | 09.6 | 10.1 | 10.3 | 10.3 |
Germany | 11.6 | 11.2 | 11.3 | 11.3 |
Source: World Bank, Retired April 02, 2015 from http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS
Exhibit 8: Infant Mortality in India
Every year 27 million babies are born in India. Approximately 35% babies are born pre-mature. According to World Bank report approximately 0.76 million neonates die every year in India; 70% of infant deaths were reported within the first four weeks of birth whereas, 45% in the very first week of birth.
Infant Mortality Rate (IMR) (per 1000 live births)
2010 | 2011 | 2012 | 2013 | 2014 |
46 | 45 | 43 | 41 | 40 |
Source: World Bank data.
According to World Health Organization (WHO) premature birth is defined as the birth of a alive baby before completion of 37 weeks of pregnancy. It has further been classified into three sub-categories on the basis of gestational age:
- Extremely pre mature – less than 28 weeks
- Very pre mature – less than 32 weeks but more than 28 weeks
- Moderately pre mature – less than 37 weeks but more than 32 weeks
Source: World Health Organization (2015). Preterm Birth, November, Retrieved April 02, 2015, from http://www.who.int/mediacentre/factsheets/fs363/en/
Exhibit 9: Carestation 30 – Anesthesia Device
Source: Provided by company.
Exhibit 10: ECG Machine
Source: Provided by company.
Exhibit 11: Lullaby LED Phototherapy System and Baby Warmer
Source: Provided by company.
Exhibit 12: Examples of Frugal Innovations in India
Company | Product | |
MediVed | Pacemaker | Produces and market pacemaker at a price USD 350 below the equivalent pacemakers produced by companies globally. |
Bigtec Labs | Micro PCR | A miniaturized, no-frills and portable version of the bulky PCR (polymerase chain reaction) machine Costs USD1,600 as compared to a high-end PCR’s retailed at a price USD 24,000 |
Skanray | X-ray imaging systems | High-frequency digital X-rays with radiation leakage control at a cost that is significantly lower as compared to imported devices. |
Source: Medical technology industry in India Riding the growth curve, Deloitte – Confederation of Indian Industry report, July 2010, Retrieved July 25, 2015 from https://www2.deloitte.com/content/dam/Deloitte/in/Documents/life-sciences-health-care/in-lshc-medical-technology-in-India-noexp.pdf
Exhibit 13: Neo Natal Market (in USD)
2014 | 2019 Projected | |
Global pre-natal equipment market 5 | 6.63 billion | 8.92 billion |
Pre-natal equipment market in US | 1.86 billion | 2.05 billion |
Pre-natal equipment market in India | 32.42 million | 90.00 million. |
Note: According to an article published in Business Today “GE launches new low cost infant warmers”, December 2013, approximately 12,000-14,000 baby warmers are sold in India every year. In an interview with Business Today a representative of GE reports that the company has a capacity to produce 5,000 warmers per annum.
Source: eHealth (2015) Mother-Child Care Equipment Market Smiles Ahead, March 25. Retrieved April 02, 2015 from http://ehealth.eletsonline.com/2015/03/nicu-offers-quality-healthcare/
References
1. Gedney, R. (2014, May 30). Report on Medical Device Market Outlines Challenges, Opportunities for Cost Containment. Retrieved July 15, 2015 from http://www.mdtmag.com/blog/2014/05/report-medical-device-market-outlines-challenges-opportunities-cost-containment
2. Dey, S. (2015, February 25). “Government may increase duty on imported medical devices.” Retrieved July 15, 2015 from http://timesofindia.indiatimes.com/budget-2015/union-budget-2015/Budget-2015-Govt-may-increase-duty-on-imported-medical-devices/articleshow/46361925.cms
3. Ibid.
4. Enriquez, J. (2015, August 25) “FDI Liberalization to Boost India's Medical Device Sector.” Retrieved August 10, 2015 from http://www.meddeviceonline.com/doc/fdi-liberalization-to-boost-india-s-medical-device-sector-0001
5. eHealth (2015) Mother-Child Care Equipment Market Smiles Ahead, Retrieved April 02, 2015 from http://ehealth.eletsonline.com/2015/03/mother-child-care-equipment-market-smiles-ahead/
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved