Strategic Management - I

Piramal Diagnostics
Company Background (1/2)
Subsidy of Piramal Group
Founded 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
Company Background (2/2)
By 2008, Piramal was the largest chain of
diagnostic centers in India
104 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
Porter’s Five Forces Model
 Threat of New Entrants (1/2)
Routine Tests (HIGH)
Tests ranging from Rs 30 to Rs 800
Low product differentiation
Low initial capital requirement
Absence of effective government policies for
restricting new entrants
Low possibility of getting cost advantage as
generating volumes is a problem
Average cost of opening at a rented place Rs 1
to 5 Lacs
 Threat of New Entrants (2/2)
Specialized Tests (LOW)
Tests ranging from Rs 1000 to 15,000
High initial capital requirement
High brand equity
High expenses due to the ever changing
technology
Significant economies of scale benefitting the
current players
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 analysis
Calibration and standardization is difficult and
complex
High initial and running cost
Users also need education and training to use the
equipments
Most tests require interpretation by experts
Glucometer for estimating blood sugar has been
the only one to gain some popularity
Bargaining Power of Buyers
Routine Tests (HIGH)
Low product differentiation
Patients visit labs recommended by doctors,
thus doctors enjoyed high bargaining power
Many players in the market

Specialized Tests (LOW)

Less number of players in the market
Doctors had to refer patients to high end labs
Bargaining Power of
Suppliers
Routine Tests (LOW)
Large number of suppliers and reagent suppliers
Labs often played one supplier against the other

Specialized Tests (HIGH)

Low number of suppliers
Quality of after sales service played an important role
Some suppliers enjoyed monopolistic powers in areas
like molecular biology
Rivalry Amongst Existing
Competitors (1/2)
Local level (HIGH)
For routine tests
Diagnostic 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
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
Thank You