A Business Model of Aravind - Case Study Example

Case Study of the of the Contents Introduction 3 Analysis 3 Conclusion and Recommendation 8 Bibliography 9 Introduction A business model is a strategic plan for successful operation of any business. It works by identification of revenue sources, products, customer base as well as financial details. The current study is based on Aravind Eye Care, a social enterprise based in India. The study will be an extensive review on the business model followed by Aravind, its sustainability, implementation of the same in similar social business enterprises as well as its application in United States for solving the nation’s current healthcare issues. Analysis The Social Enterprise Analytical Framework is a criteria used for evaluating the authenticity of a social enterprise. This is done by implementing six steps with the objective of testing and evaluating the social enterprise. Further, this framework is applied to evaluate if a social enterprise is of high performance or not. A short discussion will be helpful in understanding the process and its application in the Aravind Case. According to the SEI framework, the motivation behind high performance enterprises is social impact. They use innovation in order to achieve social impact. They are also committed to measurement and evaluation of their impact. The six criteria for high performance social impact are: 1. The social environment must be driven by social impact. Profit enterprises can also be social enterprises, only if they prioritize impact over profit in their strategies and models. 2. Use of appropriate business model such as, using profit for creating sustainable impact or using not-for-profit model to meet situational criteria. 3. Presence of meaningful as well as lasting innovation at the enterprise’s core. 4. Commitment to evaluation and measurement of the social impact by the enterprise. 5. Financial and operational sustainability of the social enterprise. Financial sustainability is abundance of financial resources and operational sustainability is human and managerial capacity for meeting strategic goals. 6. Scalability of the enterprise. Sustainable and long-term social enterprises are scalable as well as replicable. Out of the above six analytical steps of the framework, the fifth criterion will be the best in evaluating and identifying the unique contribution of Aravind to the social enterprise world. Aravind Eye Care is using a unique hybrid business strategy by utilizing both profit and non-for-profit models. This is a highly efficient model for social organizations. The social enterprise performs 70 percent of its surgeries for free or minimum cost and the rest 30 percent are done for above cost. However, the quality of surgery, care and overall management is not compromised in any price range. The operations of the Eye Care are highly effective and technologically equipped. Also, the current pricing structure helps these hospitals in maintaining a profit margin of 50 percent. Of the total annual budget, 90 percent is self-generated and the rest is channelized from charity. The social enterprise has decided not to compromise on the current business model. The business model of Aravind is considered as one of the most innovative social entrepreneurship model, effectively utilizing concepts like, just-in-time, in order to deliver quality and affordable healthcare services. Thus, the model can be regarded as sustainable as well as operationally and financially efficient for long-term. Aravind Eye Care System was founded in the year 1976 by Dr V. Aravind. It is a hybrid business model encompassing eye hospitals, training and education programs as well as research foundation. At present, there are five major eye care hospitals, functioning in five different cities across South India. These are situated in Theni, Madurai, Tirunelveli, Pondicherry and Coimbatore. During the initial years, the social enterprise ran almost on charity. Most of its employees were workers from the government and other private sectors, who quit their jobs for lesser pay and double effort and work. Nonetheless, with continuous hard work, expansion in various regions across India and implementation of unique and sustainable business models, Aravind had quickly expanded its base and turned into a profit making social enterprise. Word of mouth advertising proved as an important benefit to the social enterprise, which helped in bringing patients from far off places. Aravind does employ any paid advertising strategy. However, patients, who are satisfied with the system, often carry banners and other information about the Eye Care facility, thereby spreading positive brand awareness. Aravind implemented various innovations in its healthcare enterprise. The strategic alliance with Aurolab was an important step for expanding its social impact across regions. The social enterprise was able to sell lenses in a much lower price range, enabling more people to be connected with the Eye Care. The enterprise also followed a hybrid model in which surgeries cost minimum to people, who could not afford it. It not only helped in positive advertising and branding of the eye care, but also helped in creating a big name for the enterprise, attracting more charities as well as patients from affluent background. Efficient management of patients and high performance, in terms of surgery and results, has boosted scalability of the enterprise. This has also directly affected the level of awareness of other social enterprises and such other organizations have started to replicate Aravind’s business model. The social enterprise is also committed to provide high quality service, without compromising on facilities on the basis of price terms and other factors. All these features have helped in creating a strong social impact for Aravind. The unique hybrid model adopted by Aravind has helped in attracting patients and customers from all economic spectrums. This has helped Aravind in not only becoming a high performance social enterprise, but also profitable, in terms of financial and operational stability. Since Aravind is a social enterprise, the overall financial sustainability should not be limited to its financial statements and profitability. It should also be measured in terms of its overall performance regarding social impact created, level of expansion and brand awareness achieved. Figure 1: Performance (April 2013- March 2013) The above snapshot is a brief highlight of various activities conducted by the social enterprise in one year. Total number of patients visiting the Eye Care was almost 4,000,000 and the social enterprise conducted a whopping 371, 893 surgeries in one year, alone. This suggests the increasing popularity and trust among patients from different economic spectrum. Of the total outpatient visits, almost 14 percent were given free surgeries and eye care facilities and nearly 18 percent patients were provided free services through the outreach program. Nonetheless, the social enterprise has also implemented profitable business model and in order to survive in the social business environment, Aravind ensures that majority of its patients are from higher economic strata. This not only helps in maintaining a profitable business, but also secures continuous establishment of new foundations and hospitals, thereby serving more patients in need. Figure 2: Outreach Performance (April 2013- March 2013) Another table from Aravind’s annual reports briefly explains the overall outreach performance achieved by the social enterprise. The social enterprise has been involved in numerous community programs and campaigns in order to provide health care opportunities to those patients who are unable to travel long distances. The various outreach programs involved include diabetic camps, refraction camps, pediatric camps, eye-screening camps for school children, vision centers and community clinic. It should also be noted here that majority of these campaigns cater to those patients who are unable to pay, partly or entirely. The overall operating performance of the social enterprise is supported by various international agencies such as, World Health Organization. Aravind mostly runs on its own funds, which keeps it unaffected by volatility of the government or regional economic conditions. Therefore, it can be said that the operating performance structure and strategies are formulated to provide long-term growth and sustainability to its financial as well as overall performance. Conclusion and Recommendation Aravind’s hybrid business model has already garnered much attention from other social profit and non-for profit enterprises. The business model has been well-established in India with many branches, hospitals, training centers and eye care programs. Aravind’s business model attracts both lower and higher strata of people. Many national and international social organizations are now implementing this model in their social businesses. United States has seen a rise in eye diseases. Also, healthcare is becoming increasingly expensive, in this current global environment. The US healthcare system is facing certain stiff issues such as, wastage on unnecessary items and equipments, improper care of patients resulting in accidents, unnecessary care in high-end hospitals and over-usage in lower end government departments. Another issue is lack of a transparent system. In order to minimize operational wastes and maximize efficiency, the business model opted by Aravind can be enforced. Even though the social enterprise might face many hiccups and roadblocks while establishing itself in United States (majority of them pertaining to corruption and lack of good staff), the social enterprise can still take support from the government in order to make its situation better. The overall per capita income and level of affordability of U.S. patients is much higher than in India and Aravind’s business model will definitely flourish in United States. Bibliography Aravind. (2013). Activity Report 2012- 13. Retrieved from http://www.aravind.org/downloads/AECS_Annual_Report_2012_13.pdf Aravind. (2014). Genesis. Retrieved from http://aravind.org/aboutus/genesis.aspx Forbes. (2010). Aravind Eye Cares Vision for India. Retrieved from http://www.forbes.com/global/2010/0315/companies-india-madurai-blindness-nam-familys-vision.html Forbes. (2013). The five biggest problems in healthcare today. Retrieved from http://www.forbes.com/sites/leahbinder/2013/02/21/the-five-biggest-problems-in-health-care-today/ Green, D. (2010). Case Study: Social Profit Network. Retrieved from http://www.socialprofitnetwork.org/pdfs/david.pdf Shaughnessy, D.R. (2010). Framework for Analysis of Social Enterprises. Retrieved from http://iris.lib.neu.edu/cgi/viewcontent.cgi?article=1008&context=soc_ent_curr_pubs Read More