You are the chief financial officer of a leading dental hospital located in Indi

Question

You are the chief financial officer of a leading dental hospital located in India. Your hospital has been having a roaring practice. You have a large group of dedicated doctors and a wide range of patients traveling from all over the region. Your hospital is known for its professional perfection and value-for-money services. Of late the hospital has started offering services to relatively well off customers under ‘cosmetic dentistry’. The opening of this market segment has helped the hospital to reduce per patient charges for patients of ‘essential dentistry’. The hospital is also planning to start ‘mobile dental clinics’ to cover rural areas, in line with its motto ‘Oral Hygiene for All’. While the Ministry of Public Health and Social Welfare is supporting the second initiative, the Ministry of Tourism and Hospitality is supporting the previous initiative along the lines of ‘Smile India’ campaign. This has helped India in becoming a preferred destination for the emerging market for ‘health tourism’. A majority of customers of cosmetic treatment are from Europe and the US of A. Recent interest of some of the corporate clients from Australia and some pop-divas has given your hospital practically free media coverage. Expectedly, this success is not an unmitigated blessing. Competition in the region is coming from a Chinese dental hospital. They are offering ‘tooth’ transplant with the help of a Korean firm. This firm has asked a claim that they have the technology to organically grow a tooth with the help of root-canal cells taken from a patient. This is a time consuming and costly process and requires a longer stay in China and frequent visits to Korea, but patients do not seem to mind—since they are assured of an ‘organically’ grown tooth. There is another competitor coming up in Belgium. They have a different technology. It is neither ‘organic’ nor as good as Indian, but highly cost effective since they fix an artificial tooth in a metallic socket, which can be removed and refitted without much effort. However, in last few months, the dedicated lot of dentists with your hospital are also reading the media reports and there is growing feeling among them that the hospital is increasingly straying away from its path of ‘oral hygiene for all’. Some of the younger dentists have, on more than one occasion voiced their demand for higher compensation. Recently, a group of experienced dentists have taken up visiting positions with the Belgian hospital for a few weeks in a year. Now, the dentists have taken up visiting positions with the Belgian hospital for a few weeks in a year. Now, the dentists want a pay hike and that wages to be paid in USD, not in INR as was the practice so far. Your CEO has asked you to see her with the possible scenario analysis in a month from now. You have gone through all your cost sheets. You know that the costliest element is the special grade dental cement, which is to be imported in packs of 1000gm each costing over INR 1,000,000. Each tooth requires about 2gm of this secial grade cement. Adding other facilities and services, it costs INR 3000 per tooth for each ‘cosmetic’ treatment. Your charges are in the range of USD 200 which is very competitive in the international market. However, the Chinese-Korean combine is offering ‘organic’ tooth at USD 600 per tooth, all inclusive. The Belgian experiment is at about USD 30 per tooth, but has a shorter useful life. When you look at your cash inflow you find that your earnings are in all possible currencies of the world but your costs are tied with USD and INR. The cover story of The Economist indicates possibility of USD appreciating against INR and other major currencies on account of successful resolution of the Iraq situation and peaceful resolution of the Iraq crisis, leading to the softening of world oil market prices. Though you are not a dentist by profession, you have a tooth in every possible profession! You have suggested to the chief dentist to explore the possibility of using heavy metal/precious metal with ceramic composite. You heard about this kind of material in your previous job while dealing with the Japanese Satellite Agency. The chief dentist was not very happy but promised to explore the possibility. You want to get into this material because there are commodity futures available on heavy/precious metals, while there is no way to cover ‘special grade cement’. With this information on hand, you want to approach the Ministry of Public Health and Social Welfare and the Ministry of Tourism and Hospitality with a request to absorb price variation due to strengthening dollar. You have also approached RBI to grant permission to trade in futures in all the currencies in the world, but there are problems. Question: How will you guide your CEO in this situation?

Explanation / Answer

The CEO can be guided on the following lines -

The CEO can be made aware of the happenings around. He should be briefed with the sequence of the events taking place. Then the opportunity is two pronged. One is the foray into the rural areas and the other to serve the elite. Both are well supported by the respective ministries i.e. the former is getting due support from Ministry of Public Health & Social Welfare, while the latter is supported by Ministry of Tourism & Hospitality.

Thus the CEO must be made aware of the above situation. This provides an opportunity to the firm to grow in multifaceted aspects, catering to the needs of the masses and also becoming an attractive destination for the tourists. Thus, taking up this challenge will let the firm grow.

Then the price fluctuations etc. can be easily handled by presenting the case to the concerned authorities. Moreover the availability of commodity futures further eases the situation. The fluctuation in the price rise can be handled by referring the same to the concerned ministries.

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