Sime Darby Healthcare Group And Malaysian Healthcare Industry Economics Essay

Healthcare is related to the prevention and treatments of illness. According to the latest Global Industry Classification Standard (2010), the healthcare industry is comprised of 2 main sectors. The first is made up of the companies who manufacture and supply healthcare equipments or provide healthcare related services. The second includes the companies that involved in research and development (R&D), production and marketing of pharmaceuticals and biotechnology products.

1.2 Company

Sime Darby Healthcare Group is one of the big players in the Malaysia healthcare industry providing health care services. Sime Darby Healthcare is a business unit under the Sime Darby Berhad. Sime Darby Health Care started operating in 1985 with the establishment of Sime Darby Medical Centre Subang Jaya. Other entities under the Sime Darby Healthcare Group are the Sime Darby Specialist Centre Megah, which is a day-surgery and outpatient centre, and the Sime Darby Nursing and Health Sciences College, in Kuala Lumpur. Sime Darby Healthcare has the vision to become the gold standard healthcare provider in the region (Sime Darby Healthcare, 2008). The company also has a number of health care services under different centres such as blood diseases centre, cancer and radiosurgery centre, health screening centre, comprehensive epilepsy management, menstrual clinic and many more.

2.0 Macro Environment

2.1 Political

The growth of health care industry in Malaysia is closely related to the political environment. Recently, in the 10th Malaysia Plan tabled by the government, private health care is included in the 12 national key economic areas of Malaysia. Therefore, private healthcare industry is going to be benefited with the access to some portion of the total RM230billions allocated for the 10th Malaysia Plan. In addition, one of the 10th Malaysia plan focuses on attracting talents. According to this plan, the government is taking steps to attract foreign or Diasporas Malaysia talents to work in Malaysia by issuing open visas to highly skilled foreign professionals and loosen others restriction (Esman, 2009). This policy will benefit the healthcare industry that are short of talents, where the doctor-patient ratio is 1:905 compared to 1:600 standard set by the World Health Organization (The Star, 2010). With the new policy, Sime Darby HealthCare can have the opportunity to develop and is able to attract more professional, who are able to help them to achieve the vision as the gold class health care provider.

On the other hand, the government is also actively promoting Malaysia health tourism. In order to promote the health tourism, the government provides the healthcare providers that involved in the health tourism with enhanced tax incentives in 2010 budget. These incentives aim to encourage the improvement of quality health services and the expansion of private hospital capacity (Mohan, 2002). The health tourism is the opportunities for the healthcare providers to expand their existing market and for further development. Currently, Sime Darby Healthcare is 1 of the 35 hospitals that are recognized by the Malaysian Ministry of Health in promoting health tourism (Woodman, 2010). Hospitals are including of Sime Darby Medical Centre Subang Jaya, Sime Darby Specialist Centre Megah and Sime Darby Medical Centre Ara Damansara which is more than a notable centre of excellence with mission of providing a comprehensive customer focused healthcare which epitomizes ethical business and clinical practice. However, the micro objectives are to ensure that the quality of healthcare services is at reasonable cost, expansion of healthcare services to the rural and urban population and encouraging research and development (R&D) for more advance technology. With this involvement, it can help to increase the company’s revenues, while can access to the incentives provided by the government.

2.2 Economic

Sime Darby Healthcare have has performed numerous great project for the economic by participating actively in economical conservation throughout Malaysia. They involved from massive projects and support large-scale and long-term economical conservation programme to enhance bio- and eco-diversity around the country. Although healthcare services are needed by any individuals, the fluctuation of economy still affects the performance of the industry. During the time of economic downturn, the performance of private health care providers will always be affected because people can shift to other alternative that is the public hospitals, which required a lower cost for treatments. The implementation of government policy and encouraging competition on healthcare service industry has caused the industry under an aggressive competitive market. Furthermore, during the time of downturn, the health tourism would be reducing as well. Medical tourists may postpone their treatments that are not vital such as cosmetic surgery and even hip and knee surgeries (Reisman, 2010). Moreover, the competitive market will cause innovation in products and services, therefore, more new and innovative products and services will introduce to the market (Kiesling, 2008). As a result, economic fluctuation is a threat for Sime Darby Healthcare to maintain the growing of their revenues.

2.3 Socio-Cultural

Social culture is one of the crucial factors that affect healthcare industry. As the world develops in terms of medical technology, life expectancy continues to increase and people today are more concerning on the quality of their lives. According to UNICEF (2010), life expectancy in Malaysia has increased from 70 in year 1990 to 75 in year 2009; 71 years for male and 77 years for female (CIA, 2011). By the social trend, it is now getting more important for Malaysians to pursuit better quality life and it is now easy to find health products in the market and people lining up to check their health in hospitals. This trend definitely affects health care industry in positive ways. Malaysians prefer to seek for private healthcare services rather than government healthcare services because of time-consuming and service quality. Purchasing medical insurance therefore has become a necessity for this generation in order to cover high expenses on private healthcare service. Sime Darby Healthcare, as one of the biggest private healthcare service companies, obtains great chance to increase its market share. Furthermore, as many countries in the world are facing in their aging population, Malaysia is no exception. Currently, one out of every 16 people in Malaysia is an older consumer; by 2030, the proportion of older consumer in Malaysia will hit 15% of the total population (Lee, 2008). This is especially important because as those individuals experience a decline health during their golden age, this could lead greater expenditure on health products and services. Hence, the increasing ageing population will influence positively on the growth of healthcare industry in Malaysia. Therefore, Sime Darby Healthcare can continue to expand and develop with the increasing market demand.

2.4 Technological

Development in medical technology has helped and still helps modern society to have better quality of life. Technology plays very important part in the healthcare industries. Currently, one of the finest technologies in the industry is TomoTheraphy System. This technology consists of precise radiation therapy for cancer patients. This technology is able to deliver the desired dose to the tumour while minimising exposure to non-tumour areas of cancer patients. With this technology, doctors are able to keep track of the cancerous cells. In addition, researchers had proven that TomoTheraphy System along with potent chemotherapy and robotic surgery help to enhance cancer patients’ survival rate (Hensley, 2010). With this invention, it can help to improve the quality of healthcare services in treating cancer. Sime Darby Healthcare had launched this technology in April 2010. Thus, it will be able to attract more cancer patients to seek treatments in their hospital. Plus, there are more cutting-edge medical technologies in Sime Darby Medical Centre satisfying customers such as 640-slice PET/CT scanner system, 3D HDR branchytherapy system and 3-Tesla MRI system (Sime Darby Healthcare, 2011). Hence, Sime Darby Healthcare Group is praised with the world class services and is recognized by customers as one of the most reliable medical centres in Malaysia. In short, the use of these highly advanced technologies enables greater and faster accuracy in diagnosis and treatment which results in better outcomes for patients. It therefore attracts and brings more customers to the company.

2.5 Environmental

One of the environmental factors that affect healthcare industry lately is the influenza of A (H1N1). As the disease is spreading, people tend to seek for better healthcare and healthcare centres if compared to the past. A (H1N1) had created greater awareness of potential healthcare threats among the citizen of Malaysia. This will lead to the increase in demand for healthcare services therefore; Sime Darby can gain opportunities out of this disaster. For instance, Sime Darby Medical Center Subang Jaya was chosen as one of the private hospitals that are involved in the management of influenza H1N1 thus, it brings about an increase in demand for their services.

However, if influenza cannot be handled properly, it will affect a nation to close on its economic and social activities and the losses to be incurred are huge. Due to this, government had created a standard infection control principles to healthcare industry that should be followed by all healthcare practitioners. Hence, Sime Darby Healthcare would need extra investments for the prevention of diseases. For example, staffs that need to get in touch with H1N1 patients will need to wear personal protective equipment to prevent them from being infected (Kementerian Kesihatan Malaysia, n.d.).

Sime Darby is also on the fight to stop cancer and this is a huge contribution to the environment and people. They have health awareness campaigns for people suffering with cancer. They also support people with cancer with their “Fight cancer with food” campaign (Sime Darby, 2008).

2.6 Legal

The Act which governs the medical care provisions is known as the Private Healthcare Facilities and Services Act 1998 and it is enforced by Ministry of Health.

Under section 106 of the act, the minister may make regulations prescribing a fee schedule for any or all private healthcare facilities or services or health related facilities or services. All healthcare facility or service must comply with the fee schedule enforced by Ministry of Health. Thus, government can always interfere in the healthcare industry by regulating the fees charged by private healthcare providers. As a result, Sime Darby may need to take extra consideration when deciding on the mark-up margin for their services.

Apart from that, there are laws regulating the board of management in private healthcare company. Under section 77 (Law of Malaysia, 1998), minister specify that two members of Board of Management shall be from the Medical Advisory Committee established under paragraph 78 (b) or 79 (b). Thus, those who are involved in private healthcare industry need to make sure that they find someone who is qualified to become the members of Board of Management (Law of Malaysia, 1998). As a result, the board of management of Sime Darby Healthcare cannot makeup of shareholders themselves but need the involvement of other parties.

2.7 Geographic Segmentation

Currently, Sime Darby Healthcare owns and operates the Sime Darby Medical Centre, the Sime Darby Specialist Centre and Sime Darby Nursing & Health Science College. They all are located in Malaysia, particularly in Kuala Lumpur, and Sime Darby Healthcare Group is planning third hospital by 2012 in Kuala Lumpur which is also in Malaysia (Ismail, 2009). It tells that Sime Darby Healthcare focuses on Kuala Lumpur, which is capital city of Malaysia with high degree of population and its density. Since Sime Darby provides world class services to the customers and most of customers are high-salary paid, they have segmented their customers within urban areas. Here, it might seem as a local-focusing company. However, Sime Darby Healthcare has a presence in Indonesia, Vietnam, the United Kingdom and the United States as well. Though they do not own a hospital in each country, they have partnership or representative offices in those countries serving as medical travel assistances and information centres. Upon its world class medical system and other sophisticated facilities, Sime Darby attracts and brings customers to experience better medical services and treatments. Furthermore, Sime Darby Group has business in over 20 countries ranging from motor, industrial, property and plantations. Based on its wide connection, Sime Darby Healthcare also would be able to expand their business to further out of Malaysia.

2.8 Demographic Segmentation

Demographic segmentation targets services for certain socioeconomic characteristics such as gender, age, or cultural ethnic background (McDonald, 2007). Sime Darby Healthcare Group strategies that target women, in particular, are becoming increasingly prevalent for several reasons such as capturing the female patient means influencing the vast majority of health care decisions made for families and most women are dissatisfied with how they receive care, which is often in settings that do not support the unique aspects of care to women. For these reasons, significant opportunity exists to develop services targeted to women, and even to certain age groups within this population, that can make a meaningful distinction in the marketplace, improve quality of care, and increase patient satisfaction. These opportunities can range from focused niche service development to comprehensive approaches that incorporate a wide range of programs.

3.0 Micro Environment

Microenvironment consists of the actors close to the company that affect its ability to serve its customers, suppliers, marketing intermediaries, competitors, government, financial community and pressure group.

3.1 Customers

Sime Darby Healthcare respects and treat each customers as like to be treated, share knowledge responsibly and take ownership and accountability for business decisions and results. And collectively put effort towards building a socially responsible organization. With a tagline of “We Care, We Serve”, Sime Darby Healthcare with commitment to deliver comprehensive customer focused healthcare services with the best clinical and business practices and to believe that customers healthcare needs will be well taken care of in Sime Darby Healthcare. To ensure the importance of customer’s preferences Sime Darby Healthcare enrich the capability to not only become Malaysia’s leading healthcare provider but also to emerge as a major player in the region by committed to provide excellent integrated healthcare services, where innovation and teaching will be integral to the delivery of care (Heng, 2007). Sime Darby Healthcare respects and treats each customer as like to be treated, share knowledge responsibly and take ownership, accountability for business decisions, and collectively put effort towards building a socially responsible organization. The expectations of patient are one of the determining factors of healthcare service. Patient expectations can also be defined as the features which medical and management service that the patients demand from health institutions should bear. The kind of Sime Darby Healthcare of which the patient is in need, economic facilities, environmental factors, existing health institutions and social insurance is the factors affecting customer’s expectations.

3.2 Suppliers

As hospitals strive to improve productivity and control the cost and quality of care; many are demanding their suppliers’ assistance. Suppliers are developing new sales strategies to build long-term, service-oriented partnerships with selected major accounts (Graham, 2005). To maintain global presence, Sime Darby Healthcare synergizing businesses with suppliers by strategic positioning for sustainable futures to be a successful multinational healthcare service provider. Material from the Sime Darby Healthcare various suppliers is delivered in bulk to the centres loading dock and transported to a main store room. As hospitals strive to improve productivity and control the cost and quality of care, many are demanding their suppliers’ assistance. Suppliers are developing new sales strategies to build long-term, service-oriented partnerships with selected major accounts. Material handlers then transport material from the main store room to various secondary store rooms in wards throughout the hospital as the inventory in those wards diminishes. 

3.3 Intermediaries

Marketing intermediaries such as reseller, marketing service agencies, physical distribution firms and financial intermediaries help Sime Darby Healthcare to develop marketing programs As a healthcare provider, there were many types of strategies offered by outsource with regard to how to help health professionals become hospital performance information intermediaries for their customer including creating and disseminating information that is credible and easily accessible to health professionals (Slager, 2004). By keeping the information updated, Sime Darby Healthcare responds to the changing environment efficiently and effectively.

3.4 Competitors

The private healthcare industry in Malaysia has experienced continuous growth since the beginning of the 90s (MGCC, 2010). Plus, ever since Medical Tourism Malaysia, through Wellness Visit, offers a reliable source for its medical tourism patients and tourists from around the world, there are more and more healthcare companies starting to involve in medical tourism. Offering various surgeries in affordable prices through world class technology and surgeons is enough to attract customers around the world.

The main competitors in private healthcare industry are Pantai Hospital, Prince Court Medical Centre and Columbia Asia. Pantai Hospital, under Pantai Holdings Berhad, is one of the biggest hospital chain companies in Malaysia. It owns and operates 10 hospitals around Malaysia having a total of 1,409 beds with an average of 100,000 admissions a year (Pantai, 2011). Prince Court Medical Centre (PCMC) is a 300-bed private healthcare facility located in Kuala Lumpur. It is fully owned by Petronas, Malaysia’s national petroleum company (PCMC, 2011). With its powerful support, PCMC could be designed like hotel to make itself as the most luxurious hospital in Malaysia with world class facilities. Columbia Asia is a chain of hospitals in Asia with 16 medical facilities across not only Malaysia but also India, Indonesia and Vietnam (Columbia Asia, 2011). There are a total of 8 hospitals around Malaysia. Unlike other giant hospitals, Columbia Asia also has its facilities in residential areas instead of overcrowded central cities. Although it is smaller in size, it keeps expanding its business around the world getting recognition from regions.

3.5 Government

As medical industry has become an emerging sector of Malaysia’s economy, government tries its best to encourage the industry to be expanded in order to the country’s economy. For the 2010 budget, the government has announced to allocate a sum of RM 14.8 billion to enhance health facilities and provide equipments, increase supply of medicines, intensify research and enforcement activities as well as building more hospitals and clinics (MGCC, 2010). The thrust of the health sector in the 9th Malaysia Plan (9MP) for the years 2006-2010 is ‘Toward achieving greater health through consolidation of services’ (Parliamen Malaysia, 2006). By deciding the 9MP, the government put greater emphasis on bridging quality healthcare to all the Malaysians and developing the industry. Also for medical tourism, due to its high standards, Malaysia is experiencing a constant increase. From 2001 to 2006, the number of foreigners seeking medical treatment in Malaysia has even tripled and is expected to further increase by a rate of 30% (MGCC, 2010). Since Malaysia is ranked one of the world’s top five medical tourism destinations, the government has set up official council to boost medical tourism and invested certain amount of money which represents nearly 2 percent of GDP (Kaur, 2009). Government also manages to enhance the performance by operating government websites like ‘wellnessvisit.com’ providing more information.

3.6 Financial Communities

The financial communities are referring institutions or individuals who support the organization for future expansion. It can be shareholders and others that fund on the business. For Sime Darby, ordinary people are the majority shareholders accounting for nearly 50% of its total number of listed shares (Sime Darby, 2004). Also, Sime Darby gets support from government because its business is close-related to government plan such as 9th Malaysia Plan. Furthermore, since Sime Darby is currently expanding its business globally, it can have great chance to get potential investors from overseas.

3.7 Local Communities

Sime Darby provides jobs for the community and people around them and help people realize their full potential. The hospital may purchase goods and services from local suppliers which are already a contribution to the local community as to these suppliers have contract with the company therefore providing employment and jobs indirectly. These businesses and employees then spend a portion of their income on local goods and services, which in turn supports other local jobs and companies. Thus, the effect of one dollar of wages is multiplied as it circulates through the community.  

The amount of jobs, economic output, and income in a local community attributable to a particular industry sector can be determined by calculating its employment, output, and income multipliers. Industries with the highest multipliers generally are those who buy supplies, services, and labour from the local community, sell products and services outside the local community, and pay a high income to their employees. The relatively high wages earned by hospital employees also tend to boost hospitals’ multipliers. 

The company is also provides quality education that nurtures competent and compassionate healthcare personnel (Sime Darby, 2008). This indicates that they also provide education to people within the community that are willing to help out within the organisation to create a better and healthier environment for people to live in.

3.8 Pressure Groups

These are usually people that have a say and can be against or for the company depending on what angle it’s viewed from. However pressure groups are usually against the company and they can detract seriously from the image that the company has worked hard to develop so they cannot afford to ignore this group. Earlier in 2010 the company lost RM 1Billion which rose the community’s suspicion about where the funds had been swindled this was mentioned by New Straits Times (2010) in their article “Sime Darby: Practise corporate transparency”.

4.0 Conclusion

Sime Darby Healthcare is a large player in Malaysia healthcare industry. Their performance is greatly influenced by both the macro and micro environment factors, which are PESTLGD and customers, suppliers, intermediaries, competitors, government, the financial community, local community and lastly pressure groups. The macro-environments are the driving forces of the company, which creates opportunities for growth and development, meanwhile can also be appeared as an threat that disrupt the growth. It is very important for Sime Darby to evaluate the external environmental forces in order to utilize the opportunities and reduce the effects from the threats. With the analysis of the micro and marco environmental factors, Sime Darby Healthcare can always plan for the future and react accordingly.

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