Firms, Markets and Behaviour

(Microeconomics)

By
Rohit Arora (410)
Swapnil Gugnani(417)
Neha Chaudhary(459)
Amit Khandelwal(427)
Rasagya Bagga(411)
Abhay Mishra(433)

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 1. Introduction
Cosmetic surgery has been practiced in India for a long time but this branch of plastic surgery
gained considerable importance and popularity in the last 10-12 years. There has been a notable
surge in the Indian cosmetic or aesthetic surgery during the past five years mainly because of the
increasing demand for aesthetic procedures from people in the urban cities of Mumbai, Delhi,
Kolkata, Chennai, Bangalore, Pune and Chandigarh.
Cosmetic surgeries were associated with celebrities and people of the affluent class at a point of
time, but today these surgeries are increasingly being taken by the burgeoning middle class
whose demand for them is based on their needs. At present, more and more men and women
from the upper middle class group are opting for cosmetic procedures to get attractive looks in
order to grab lucrative jobs, best possible marriage partner and mainly get rid of any deformity
that they feel impacts their self-confidence and self-esteem.

This industry is a service industry and hence there is no product as such. The service is based on
the provider and hence there is no homogeneity involved. The market structure revolved around
the process, the interaction during the process and the final end result.
The industry is akin to the healthcare industry in the country operating from general hospitals
and specialized clinics.

2. Background
In the 1950’s, the historic developments in operating microscope led way to procedures like
Reconstructive, micro-vascular surgery and free tissue transfer, and thus made it possible to
Perform relatively more accurate and complex reconstructions.
Plastic and reconstructive surgeries in the modern times are represented by a combination of
different surgical skills and techniques which seek to re-establish normal and functional anatomy
from the congenital or traumatic abnormality resulting from a diseases process like cancer or
infection. Practically, the task of a plastic surgeon is to correct a wound to regain the original
form and function of the affected body part.

3. Advent of cosmetic surgery

Developments in the field of dermatology and dermatologic surgery, ophthalmology and
ophthalmic plastic surgery and plastic and facial surgery over the years have given rise to the
discussion of the scope of cosmetic surgery in modern times. Historic records suggest that the
general field of cosmetic surgery has highly benefited by the significant contributions made by
the aforementioned surgical specialties.
With the increasing participation of non-traditional cosmetic surgeons, which include primary
care physicians, obstetricians and ophthalmologists, in the area of cosmetic surgery, has directed
the future of the aesthetic market on a positive track. More and more non-traditional surgeons are
incorporating aesthetic procedures into their practices.

Keeping in line, dentists are also trying to make a place for themselves in the field of cosmetic
facial surgery. Recently, the California legislature passed a law which authorizes oral surgeons

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(DDS dentists) to perform all sorts of facial cosmetic surgeries. It allows dental surgeons to
perform facial cosmetic procedures, which are usually termed as complex, like rhinoplasty,
otoplasty, and face-lift.

The scope of cosmetic plastic surgery continues to evolve. The active person demands the
maximum benefit with the least amount of down time. Today there are a host of procedures,
which can be performed efficiently and safely and still allow a person a quick return to work.
Hollywood actress Kate Winslet opines that plastic surgery and breast implants are fine for
people if it makes them feel better about who they are.
Aesthetic treatments are offered through two different categories of invasive (surgical) or
noninvasive (non-surgical) procedures. Invasive procedures involve radical measures taken to
alter the appearance of a patient. Some of the most sought after cosmetic surgical procedures are
breast enlargement, rhinoplasty (nose surgery), surgical face-lifts, tummy tucks, and liposuction.
Non-invasive procedures, on the other hand, do not involve breaking of the skin and holds
attractiveness largely due to their lower cost, shorter time of procedures, and less recovery time.

4. Global cosmetic surgery industry

Worldwide, in the cosmetic surgery industry, around 30,000 traditional cosmetic surgeons are
operating that include dermatologists, plastic surgeons (facial plastic surgeons and anti-ageing
specialists) and other aesthetic surgeons. Another 150,000 non-traditional surgeons are also
operating in this industry that includes primary care physicians, obstetricians, ophthalmologists
and other specialists, who are engaged in performing aesthetic procedures.
Cosmetic surgeries are most popular in the United States followed by the UK, Italy and France.
In the global US$30 billion cosmetic surgery industry, United States is the undisputed leader
with an annual contribution of US$13 billion.

5. Barriers and Government Role

The cosmetic surgery industry is also a burgeoning industry. As it has blossomed out of the
healthcare industry, the requirements and government role is the same as it was in the industry.
The growth is rapid but it is not rapid enough to credit separate regulations.
However, this may be a very big drawback as well. This industry is cosmetic in nature. This
implies that even thou it falls under the ambit of ‘Health Care’, it does not qualify for insurance
and does not have the government’s support as it does not benefit society as a whole. Also, the
business largely depends on viral and word of mouth marketing. Therefore, it takes a while
before the business picks up pace.
This implies that for a new firm the market is very risky. The combined factors of low trial rate,
high expenditure on equipment, high government policies and regulations and restricted market
demand, make the barriers to entry very high.

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 6. Cost Structure
The business is one of service. Here, fixed capital (equipment) is used by the service professional
in order to give the end result. Hence, the cost structure is divided into
1. Fixed – This includes the cost of equipment and other infrastructure.
2. Variable – It depends on the client’s requirements, ex. implants, medicines, etc.

7. Pricing Policy
The Approximate price of most commonly done cosmetic surgery procedures is mentioned here.
Depending upon the nature of surgery and anesthesia the actual cost may vary. However the
components

Prices of surgeries include:

1. Registration charges.
2. Surgeon's operation fee.
3. All medicines and disposables required for operation
4. OT charges.
5. Anesthesia fee.
6. Stay up to two nights.
7. Nursing fee.
8. Dressings in the first post op. week

But do not include:

1. Cost of the Implants.

2. Cost of multi stage procedures if required.
3. Cost of medicines in the post operative period.

The client is charged according to the service he or she wishes to purchase. Over and above
which the clinic charges a tax of 10.3 %.

The price includes both the price of the services provided and also the fixed cost incurred on the
equipment contributing to the total cost.
Having said all this, it is important to know that in India the market is growing. Hence the
industry depends on Medical Tourism. Therefore, it must maintain competitive prices with
respect to the international markets.

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 9. The Consumer
Several practicing plastic surgeons have started doing cosmetic surgeries. The growing interest
of plastic surgeons to enter into the field of aesthetics market is evident through the increasing
membership of the Indian Association of Aesthetic Plastic Surgeons, which has reached 200
from +10 around a decade back, according to Dr. Vasundhara Oberoi, an aesthetic surgeon
associated with Sir Ganga Ram Hospital, Delhi. About the demographics – people, who are
opting for cosmetic surgeries, Dr. Lakshyajeet Dhami, an aesthetic surgeon from Mumbai
believes that the market growth is largely driven by the young people ageing between 20 to 27
years, who mainly opt for procedures like hair transplant, liposuction and rhinoplasty, and the
people falling in the age group of 30 to 45, who wish to look good after marriage or post
pregnancy.
The growing interest of teenagers to take up cosmetic surgery is further adding to the market
growth. Teenagers are approaching cosmetic/aesthetic surgeons for facial hair removal and scar
revision to rhinoplasty and gynaecomastia (male breast reduction) to breast reduction and
augmentation (in girls). Dr. Ashok Gupta says that the age group of people undergoing aesthetic
procedures have widely expanded in the recent past ranging from 15 to 90 years.
The consumer seeks perfect aesthetics. They are more worried about the end result than the
amount of money they have to pay. Therefore the focus is on quality. It is also obvious that a
person undergoing cosmetic surgery must have complete trust in the doctor. This can only be
achieved through recommendations by personal sources. Hence, the consumer must also be made
into an advocate for the business to function.

10. Conclusion

The market is risky, for new entrants, however it caters to a premium segment in spite of low
infrastructure cost. Hence, the margins are extremely high due to which the number of players in
this market are increasing rapidly.

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 11.References
http://www.prlog.org/10465859-cosmetic-surgery-trends-in-india-in-2010.html

http://www.tour2india4health.com/

http://www.csisite.com/pay.html

http://www.indiaprofile.com/medical-tourism/surgeries/cosmetic-dental-surgery.html

dir.indiamart.com/industry/cosmetics-toiletries.htm

www.marketingprofs.com/ea/qst_question.asp?qstID=1737

www.thehindubusinessline.com/.../2002070700501300.htm

www.csisite.com/liposuction.html

www.forerunnershealthcare.com/trm_cosmetic.php

www.cosmeticsurgeonindia.com/