Practo, an online-based health service provider, was founded by Shashank N. D. and Abhinav Lal out of frustration by the inefficiency and the disorganization of the healthcare facilities in India. Since its foundation in 2008, the company has expanded and works with more than 200,000 clinics across 15 countries. This case study looks at the factors that contributed to Practo's foundation and growth and the company's strategy and management practices leading to its success.
Harvard Business Review (IMB537-PDF-ENG)
October 01, 2015
Case questions answered:
- Understand how India’s business environment (focus on cultural, economic, and political dimensions) has contributed to Practo’s founding and success.
- Understand how the company’s strategy and management practices have contributed to its success.
- Identify the opportunities for the Asian company to expand to other countries in Asia, and to the Western countries. Further, identify the challenges it may face in internationalization and make appropriate recommendations for the company’s internationalization.
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Case answers for Practo
1. Introduction – Practo
Practo, an online-based health service provider, was founded by Shashank N. D. and Abhinav Lal out of frustration by the inefficiency and the disorganization of the healthcare facilities in India. The company’s HQ is situated in Bangalore, the center of India’s high-tech industry.
Since its foundation in 2008, the company has expanded and works with more than 200,000 clinics across 15 countries (Chauhan & Kumar, 2013). Both founders have engineering backgrounds and are involved in product development and marketing process. Along with the two founders are working a team of 200 employees.
The first part of this paper will look at India’s business environment to understand the factors that contributed to Practo’s foundation and growth. The second part will look at the company’s strategy and management practices leading to its success. Lastly, this paper will discuss potential growth opportunities in Asia and in the United States.
2. India’s Business Environment
2.1. History of India
India is the seventh-largest country in Southeast Asia by area and is the second-most densely populated country. Also, it is one of the most populous democracies in the world after it achieved independence in 1947. Prior to independence, India was under British ruling.
Being in Southeast Asia, India is well connected by both land and sea to its neighboring countries. By land, China, Nepal, and Bhutan are on the northwest and Bangladesh and Myanmar are to the east. Thailand and Indonesia share the maritime border with India. The British took advantage of India’s strategic position in carrying out their trade activities, but the growth was stagnant and India ultimately lost its share in global trade.
2.2. Political dimension
Having been ruled under the British for many decades, there was a growing urge for nationalism in India, this was headed by Mahatma Gandhi from 1920. After successfully gaining independence in 1947, India then had its own constitution created in 1949. India is a parliamentary democratic republic, whereby the president is the head of state and the prime minister oversees running the federal government.
Amid gaining independence, Gandhi advocated the Indian population that they had to be united, regardless of religion, caste, and creed in their fight for independence. This was however not followed and resulted in many riots amongst the religions, in 1946 there was also a major riot that resulted in the most bloodshed.
The political system in India can be categorized into three main types, namely, national parties, state-recognized parties, and registered unrecognized parties. The parties which run the government are the national parties, of which, the Bharatiya Janata Party, also known as the BJP and the Indian National Congress dominate the political scene in India (Pariona, 2017). Both parties share the common ideology for the economy to be liberalized and have also incorporated Gandhi’s idea of being one common nation.
With the political party having such an ideology, it gives rise to more economic opportunities for the country, furthermore, a liberalized country is more attractive to foreign investors which will then bring in more investment for the country. This further boosts economic growth in terms of international trade and foreign direct investment. Some of the country’s key trading partners include China and the USA.
2.3. Economical dimension
As much as India is becoming a popular country for foreign investors, its local economy is also fast growing due to its people is one of their key resources (Bhargava, 2016). The service industry of India contributes the largest percentage of 59% to the annual GDP growth.
With the service industry being the biggest in India, it is an added incentive for foreign businesses to shift labor-intensive jobs to India. For example, call centers are common in India whereby large multinationals such as Singapore airlines and Telstra set up their call centers in India to have a lowered labor cost.
Apart from the service industry, the informational technology sector is also a fast-growing sector in the Indian economy, with a 5.9% contribution to the GDP and an annual growth rate of about 22%. Both the service and technological factors create a strong base for start-up companies as these are two resources that key contributing factors to the development of businesses. India also has many home-grown global players such as TATA and ONGC. The combination of urbanization and the people of India are the key driving forces of economic growth.
2.4. Cultural & Social dimension
While importance is placed on India’s large population as a driving economic force, it is also notable that 65% of this population consists of the young below the age of 35 (Government of India). There are five main socio-cultural factors that affect entrepreneurs in India. These factors are family support, education, caste, social network, and religion.
The caste system is one of the stronger factors as a social hierarchy is set from birth and this stands to be a great disadvantage to those born into a lower caste. Individuals born into an upper class have more access to financial and non-financial resources whereas those born in a lower class are simply banned from entrepreneurial activity. The education system in India has been improving over the years which an increasing number of colleges and universities being set up. This goes to show that more individuals are gaining an education and is reflective base on the literacy rate which is currently 74.04% which is deemed high for a developing country (Government of India).
2.5. Influence on Practo
Practo has been able to achieve success in India mainly due to the fast-growing IT industry and the demographics of the population. With its main product being software, it is to the company’s advantage that the large population is made of young individuals who are more receptive to IT products. Furthermore, with the prevalence of better and higher education, these individuals are better equipped with the skillset to use such technologies.
A cultural trend that has also contributed to the company’s success would be the fact that the trust in Indian government hospitals is less compared to private. Practo targets two main user segments, private doctors and the general public in need of medical help.
As India is a developing country, there was a great room for improvement with regards to improving the efficiency of the healthcare system. Coupled with the trend in increased trust for private doctors, Practo was desirable to both doctors and customers. Doctors were able to carry out more effective business operations for saving patient records and users were also able to seek the best medical advice needed. Therefore, these two factors have been the driving force for Practo’s success.
3.1. Overall Strategy
The strategy of the founders of Practo was to use…