Cruzsalud: Health care for low-income sectors Harvard Case Solution & Analysis

Cruzsalud: Health care for low-income sectors Case Solution

Brief Introduction about the Case:

Cruzsalud is a medium sized firm located in Caracas, Venezuela, which provides pre-paid health services at low prices. The company’s target market was low-income sector (LIS) as it was established with a goal to provide best possible health services. The company had a unique strategy, as it it first asked consumers that how much they are willing to pay for health care and according to their responses, the company started its business. Cruzsalud also provided call center services regarding health issues, home medical visits, ambulance service in emergency, medical supply kit, 24 hours dental services, laboratory tests and medical consultation. Despite providing excellent health care services, the president of the company, Jean Rivas, had several concerns as according to the financial statements the return of investment was not up to the company’s expectations. In addition to this,the company was facing issues due to low profit which was not as per the shareholders’ expectations.

Identification of the Problem:

In July 2005, a law was passed, which was known as Lopcymat (organic law for on conditions, prevention's and working environment) regarding workplace safety and prevention's. According to this law, all the companies regardless of their size were required to provide healthcare services at the workplace. Moreover,when a company had more than 250 employees, then it was obliged to operate its own safety service. Due to this, the companies increased their demand for healthcare services. It could be said that Lopcymat has created a new market for the company. This situation together with the opportunity led Cruzsalud to face challenge and as a result, the the company had to decide that whether it should remain to target its low-income sector or move forward by employing health care plans in small and medium sized firms.

Symptoms:

In Venezuela, the health care services are provided free in public health care service institutions, however these services were destitute in terms of access and treatment. Moreover,the public hospitals despite having good infrastructure lacked basic necessities such as medications bandages, plasters and other supplies required to take care of the patients. Other than this, privately held hospitals provided high-quality services and treatment however, they charged higher price. Insurances companies and other privately held companies focused on targeting high-level consumers leaving behind the low-income sector. Only small number of the total low-income sector was benefited by the corporate to cover for the healthcare expense.

Causes:

Due to the above-explained symptoms, it is considered that the low income sectors of Caracas were not provided with the necessities of healthcare. The private hospitals were charging high fee due to which the low income class was reluctant to get basic health care service. The survey, which was conducted by the company, had revealed that low-income sector had no facility in case of emergency or serious illness. It was expected that due to such problems, the law passed to employee healthcare services in the workplace.

Effects:

The Lopcymat has created a unique market opportunity for the company to provide its services in the small and medium sized enterprises. Moreover, the Lopcymat had posed problematic situation for the company asit became difficult for the company to decide whether to enter in the new market (providing healthcare services in the corporate sector) or to continue focusing on low income sector level despite having low return on investment.

Alternative Solution:

  1. The first alternative for the company is that the company should enter in the new market created by Lopcymat since this will assist the company in generating better returns on investment together with higher profit as compared to the business in the low-income sector. The company could continue its growth by providing healthcare services in both the markets (low-income sector and Lopcymat market). Therefore, this would enable the company to provide better healthcare services in every part of the society as well as it would help the company to gain more recognition both from the people and from the corporate...................
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