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Ultrasound Machines, India, China, and a Skewed Sex Ratio General Electric Co. and other companies have sold so many ultra- Both companies deny wrongdoing and say they comply with sound machines in India that tests are now available in small towns Indian laws. A GE spokesman said its legal team would be looking like Indergarh, where there is no drinking water, electricity is infre- into the charges. quent, and roads turn to mud after a March rain shower. A scan Vivek Paul, who helped build the carly ultrasound business in typically costs $8, or a week's wages. India, first as a senior executive at GE and then at Wipro, says GE has waded into India's market as the country grapples with blame should be pinned on unethical doctors, not the machine's a difficult social issue: the abortion of female fetuses by families suppliers. "If someone drives a car through a crowded market and who want boys. Campaigners against the practice and some gov- kills people, do you blame the car maker?" says Paul, who was ernment officials are linking the country's widely reported skewed Wipro's chief executive before he left the company in 2005. Paul sex ratio with the spread of ultrasound machines. That's putting is now a managing director at private equity specialists TPG Inc., GE, the market leader in India, under the spotlight. It faces legal formerly known as Texas Pacific Group. hurdles, government scrutiny, and thorny business problems in one India has been a critical market to GE. Its outsourcing opera- of the world's fastest growing economics. tions have helped the Fairfield, Connecticut, giant cut costs. The "Ultrasound is the main reason the sex ratio is coming down," country also is a growing market for GE's heavy equipment and says Kalpana Bhavre, who is in charge of women and child welfare other products. The company won't disclose its ultrasound sales, for the Datia district government, which includes Indergarh. Hav- out Wipro GE's overall sales in India, which includes ultrasounds ing a daughter often is viewed as incurring a lifetime of debt for and other diagnostic equipment, reached about $250 million in parents because of the dowry payment at marriage. Compared with 2006. up from $30 million in 1995. that, the cost of an ultrasound "is nothing." she says. Annual ultrasound sales in India from all vendors also reached For more than a decade, the Indian government has tried to $77 million in 2007, up about 10 percent from the year before, stop ultrasound technology from being used as a tool to determine according to an estimate from consulting firm Frost & Sullivan, gender. The devices use sound waves to produce images of fetuses which describes GE as the clear market leader. Other vendors or internal organs for a range of diagnostic purposes. India has include Siemens AG, Philips Electronics NV, and Mindray Inter- passed laws forbidding doctors from disclosing the sex of fetuses, national Medical Lid., a new Chinese entrant for India's price- required official registrations of clinics, and stiffened punishments sensitive customers. for offenders. Nevertheless, some estimate that hundreds of thou- India has long struggled with an inordinate number of male sands of girl fetuses are aborted each year. births, and female infanticide-the killing of newborn baby girls- GE, by far the largest seller of ultrasound machines in India remains a problem. The abortion of female fetuses is a more through a joint venture with the Indian outsourcing giant Wipro recent trend, but unless "urgent action is taken," it's poised to Lid., introduced its own safeguards, even though that means forsak- escalate as the use of ultrasound services expands, the United ing sales. "We stress emphatically that the machines aren't to be Nations Children's Fund said in a report. India's "alarming used for sex determination," says V. Raja, chief executive of GE decline in the child sex ratio" is likely to exacerbate child mar- Healthcare South Asia. "This is not the root cause of female feti- riage, trafficking of women for prostitution, and other problems, cide in India." the report said. As discussed in Chapters 4 and 5, recent census But the efforts have failed to stop the problem, as a growing figures show sex ratios still favoring boys to girls by a wide mar- economy has made the scans affordable to more people. The gin in India. skewed sex ratio is an example of how India's strong economy has, GE sells about three times as many ultrasound machines in in unpredictable ways, exacerbated some nagging social problems, China as in India. In January, the Chinese government pledged to such as the traditional preference for boys. Some activists are accus- improve the gender balance, including tighter monitoring of ultra- ing GE of not doing cnough to prevent unlawful use of its machines sounds. Some experts predict China will be more effective than to boost sales. India in enforcing its rules, given its success at other population- "There is a demand for a boy that's been completely exploited control measures. by multinationals," says Puneet Bedi, a New Delhi obstetrician. He Boys in India are viewed as wealth earners during life and light- says GE and others market the machines as an essential pregnancy ers of one's funeral pyre at death. India's National Family Health tool, though the scans often aren't necessary for mothers in low-risk Survey showed that 90 percent of parents with two sons didn't groups. want any more children. Of those with two daughters, 38 percent Prosecutors in the city of Hyderabad brought a criminal case wanted to try again. Although there are restrictions on abortions in against the GE venture with Wipro, as well as Erbis Engineering this Hindu-majority nation, the rules offer enough leeway for most Co., the medical equipment distributor in India for Japan's Toshiba women to get around them. Corp. In the suits, the district government alleged that the compa- GE took the lead in selling ultrasounds in the early 1990s soon nies knowingly supplied ultrasound machines to clinics that were after it began manufacturing the devices in India. It tapped Wipro's not registered with the government and were illegally performing extensive distribution and service network to deliver its products to sex-selection tests. The penalty is up to three months in prison and about 80 percent of its customers. For more remote locations and a fine of 1,000 rupees. lower-end machines, it used sales agents. CS2-25CS2-26 Part 6 Supplementary Material The company also teamed with banks to help doctors finance During an audit last year, Kumar demanded paperwork for 389 the purchase of their machines. GE now sells about 15 different local scan centers. Only 16 percent could furnish complete address models, ranging from machines costing $100,000 that offer sophis- information for its patients, making it almost impossible to track ticated color images to basic black and white scanners that retail women to check if they had abortions following their scans. Kumar for about $7,500. ordered the scizure of almost one-third of the ultrasound machines To boost sales, GE has targeted small town doctors. The com- in the district due to registration and paperwork problems. A suit pany has kept prices down by refurbishing old equipment and mar- also was lodged against Erbis, the Toshiba dealer. keting laptop machines to doctors who travel frequently, including GE's Raja says that, in general, if there's any doubt about the to rural areas. GE also offered discounts to buyers inclined to boast customer's intent to comply with India's laws, it doesn't make the about their new gadgets, according to a former GE employee. "Stra- sale. "There is no winking or blinking," he says. tegically, we focused on those customers who had big mouths," said A Wipro-GE representative is scheduled to appear at the Hyder- Manish Vora, who then sold ultrasounds in the western Indian state abad court hearing. An Erbis spokesman said he was unaware of of Gujarat for the Wipro-GE joint venture. the case in Hyderabad. A court date for Erbis had not been set. Without discussing specific sales tactics, Raja, of GE Health- A visit to the clinic in Indergarh, a town surrounded by fields care South Asia, acknowledges the company is "aggressive" in pur- of tawny wheat, shows the challenges GE faces keeping tabs on suing its goals. But he points out that ultrasound machines have its machines. Inside the clinic, a dozen women wrapped in saris broad benefits and make childbirth safer. As the machines become awaited tests on GE's Logiq 100 ultrasound machine. The line more available, women can avoid making long trips into citics snaked along wooden benches and down into a darkened basement. where healthcare typically is more expensive, he says. On the wall, scrawled in while paint, was the message: "We don't Indian authorities have tried to regulate sales. In 1994, the gov- do sex selection." ernment outlawed sex selection and empowered Indian authorities Manish Gupta, a 34 yearold doctor, said he drives two hours to search clinics and seize anything that aided sex selection. Today each way every week to Indergarh from much larger Jhansi City, any clinic that has an ultrasound machine must register with the where there are dozens of competing ultrasound clinics. He said local government and provide an affidavit that it will not conduct even when offered bribes, he refuses to disclose the sex of the fetus. sex selection. To date, more than 30,000 ultrasound clinics have "I'm just against that," Dr. Gupta said. been registered in India. But he is not complying with Indian law. Although the law GE has taken a number of steps to ensure customers comply requires that clinics display their registration certificate in a con- with the law. It has educated its sales force about the regulatory spicuous place, Dr. Gupta's was nowhere to be seen. When Dr. regime, demanded its own affidavits from customers that they will George, the social activist, asked for the registration, he was shown not use the machines for sex selection, and followed up with peri- a different document, an application. But the application was for a odic audits, say executives. They note that in 2004, the first full different clinic: the Sakshi X-ray center. Dr. Gupta said the proper year it began implementing these new measures, GE's sales in India document wasn't with him, adding: "I must have forgotten it at shrank by about 10 percent from the year before. The sales decline home . " in the low-end segment, for black and white ultrasound machines, Asked by The Wall Street Journal about the clinic, the local chief was especially sharp, executives say. Only in 2006 did GE return magistrate of Datia district called for Dr. Gupta's dossier later in to the sales level it had reached before the regulations were imple- the day. When a local official arrived, "Sakshi X-Ray center" had mented, according to Raja. been crossed out on the application. In blue pen was written the Complying with Indian law is often tricky. GE cannot tell if correct name, "Sheetal Nagar," the part of Indergarh where the doctors sell machines to others who fail to register them. Different clinic is located. states interpret registration rules differently. GE also is under close It's not clear how Dr. Gupta procured the GE machine. Dr. scrutiny by activists battling the illegal abortion of female fetuses. Gupta said he bought it from a GE company representative, but Sabu George, a 48-year-old activist who holds degrees from Johns he declined to show documents of ownership. GE says it does not Hopkins and Cornell universities, criss crosses the country to spot comment on individual customers. illegal clinics. Like the rest of India, the Datia district government has taken a The criminal case in Hyderabad against Wipro-GE, a company number of steps to try to boost the number of girls in the district. representative, three doctors, and an ultrasound technician fol For girls of poor families, the local government provides a place lowed an inspection that found one clinic could not produce proper to live, free school uniforms, and books. When they enter ninth registration and had not kept complete records for two years. A grade, the government buys bicycles for them. Yet the low ratio of team of inspectors seized an ultrasound supplied by Wipro-GE. girls born had not budged much over the past decade, according to The inspection team's report said it suspected the clinic was using Bhavre, the district government official. the machines for illegal sex determination. Ultimately, says Raja, head of GE Healthcare in South Asia, it's The owner, Sarawathi Devi, acknowledged in an interview that her the job of the government, not companies, to change the prevailing clinic, Rite Diagnostics, was not officially registered at the time of the preference for boys. "What's really needed is a change in mind-sets. inspection. She said the ultrasound machine was owned by a "free- A lot of education has to happen and the government has to do it," lance" radiologist who had obtained proper documentation for the he says. Wipro-GE machine but was not there when the inspectors had arrived. India's Ministry of Health, which is now pursuing 422 different She denied the clinic has conducted sex determination tests. Later, Dr. cases against doctors accused of using ultrasounds for sex select Devi's records show, she registered the clinic with the government and tion, agrees. "Mere legislation is not enough to deal with this prob bought a Wipro-GE machine, a sale the company confirms. lem," the ministry said in a statement. "The situation could change The court case was part of a wider dragnet spearheaded by only when the daughters are not treated as a burden and the sons Hyderabad's top civil servant, District Magistrate Arvind Kumar. as assets."Cases 2 The Cultural Environment of Global Marketing CS2-27 Most recently, both Siemens and GE have introduced handheld Source: Peter Wonacall, "Medical Quandry: India's Skewed Sex Ratio Puts Gill Sales ultrasound machines, only slightly larger than an iPhone. Initially in Spotlight," The Wall Street Journal, April 18, 2007, pp. Al, A&. Licensed from Dow they will sell for under $10,000. Jones Reprint Services, Document J00000002007041834100032; Paul Cilader, "Gil Is Latest to Make Handheld Ultrasound," The Wall Street Journal, February 12, 2010. QUESTIONS (each question may be online answered in about 150 to 200 words) (1) What mistakes did GE commit in understanding the socio- cutural and legal environment in India ? (2) How will the evolving situation affect the brand image as well as the sale of GE's other product lines in India? (3) Compare GE's problem in China to the problem in India. (4) What should GE management do in India about this problem, if anything? In China