GE Group1 SecA

Case Analysis GE Healthcare India(A): The marketing Challenge of Low-Resource Customers Submitted by-

Group no. 1, Section B, PGP-2, IIM Indore ---------------------------------------------------------------------------------------------------------------------------------------------------------

Q.1 Is Lullaby Warmer the right solution for the Indian market ? Yes, Lullaby warmer may result as the right solution for the Indian market. India has the world’s highest number of neonatal deaths (750,000 in 2013 alone) and the mortality rate in rural areas is higher by 50% compared to cities. Many of the deaths are associated with hypothermia. Newborn babies have a limited ability to thermo regulate because of the absence of muscular contraction and shivering. Maintaining a normal body temperature is critical for newborn survival, particularly in premature infants. Launch of Lullaby warmer may be successful in India due to the following reasons: Large Population India has the second largest population, with 1.2 billion people and everexpanding middle class, which is why India is a market of unlimited potential. India has one of the most privatized healthcare system in the world, with government spending of just over 1.3% of the country’s GDP on public health, ranking India among the lowest in the world. High Demand In Rural India India has a poor quality of healthcare facilities, which even diminishes more when we move from tier 1 urban to a semi-urban or rural setting. This gives rise to a higher demand for a better product in semi urban and rural India. Infant Mortality And Neonatal Deaths India is ranked 1 in neonatal deaths. In developing countries the average neonatal mortality rate is 23 per 1000, compared to 4 per 1000 in high-income countries. India has a graver situation with 31 deaths per 1000 children, taking the number 1 position in the world. Low Resources As mentioned above public health centres in India has a poor quality of care delivered with very little government spending in the sector. This gives rise to a low resource business customer segment for GE Healthcare in India. These public health centres lack an adequate supply of capital and appropriate infrastructure such as steady supply of electricity. Adequate equipment and staff comprises of another set of problems. Acute Poverty

High treatment cost and out of pocket expenditure placed a heavy burden on families, especially those close to the poverty line. There are around 540 million rural poor with annual household incomes less than $2000 giving rise to problems of acute poverty.

Q.2 What are the characteristics and needs of business customers in low-resource settings? As we know, GE currently sells 2 brands of baby warmers in India : 1) the premium brand ‘Giraffe’ 2) the performance brand Lullaby Warmer, which is the biggest seller in terms of units. But, the low-resource business customers face various challenges such as tough operating conditions for machine like electricity shortage / interruptions, limited water supply, more heat & dust. Also, the lack of skilled workers, operators & technicians. All these poor infrastructure & lack of structured formats for delivery centres/ organized health centres in rural india, hint the lack of resources for maintenance and service of these machinery too. Usually most B2B companies focus on product innovation only (to enter a new / emerging market). But to ensure success, companies must go beyond mastering product innovation, they must develop unique commercial expertise, because the interaction with the customer is not a straight-line process, for example, the purchasing cycle of responding to product information then providing a quote then payment, delivering and final set-up of the equipment. Also, training about the usage of the equipment will also take time and energy. So, companies must focus on their sales and distribution strategy to work out an efficient plan to reach and serve these facilities to the clients/ B2B customers.

India’s growth focus is shifting from big cities to semi-urban and rural areas but serving low-resource business B2B customers in these settings is a formidable but important task. The new product must have the following characteristics to ensure it is successful in rural & semi-rural India: 1. Inexpensive 2. Durable 3. Portable 4. Safe 5. Effective 6. Hygienic

Q.3 Should GE go after this market ?

Yes, given the needs specified above and the capabilities of GE in terms of developing new products given the new research facility, brings an opportunity to cater to this segment. Additionally, the public expenditure is stated to grow three times in real terms by 2018 on healthcare, with real life births not growing at the same rate. (Exhibit 1,2)

Exhibit 1 : Public Health Expenditure

Year 2011 2012 2013 2014 2015 2016 2017 2018

GDP $18,22,98,95,07, 290.05 $18,28,98,52,83, 085.00 $18,63,20,83,43, 557.81 $20,42,43,85,91, 343.98 $20,95,39,83,49, 095.54 $22,00,16,82,66, 550.32 $23,10,17,66,79, 877.83 $24,25,68,55,13, 871.72

%age of GDP Real Terms 1.18 $21,42,01,26,7 % 10.66 1.18 $21,65,51,85,7 % 51.73 1.29 $23,97,94,91,3 % 81.59 1.41 $28,73,71,10,9 % 80.21 1.69 $35,37,87,05,7 % 26.13 2.03 $44,57,71,69,2 % 14.92 2.43 $56,16,72,33,2 % 10.80 2.57 $62,43,71,45,1 % 27.06

Assuming GDP growth rate of 5% YoY Source: World Bank Case Fact: %age will double between 2013-18

Exhibit 2: Live Births in Rural Areas Year No. of live Births In Rural Area 2011 10737462 2012 9599280 2013 10905920 2014 10763908 Source: Civil Registration System, Census India

Exhibit 3 Neo Natal Deaths Prevention of hypothermia can reduce deaths by Cost of one lullaby warmer No. of PHCs with equipment No. of PHCs with low weight management equipment

Source: Case Facts

42.5/1000 live births 18-42% 3000-4000$ 28% 35%