Presentation on theme: "A Strategic Management Case Study"— Presentation transcript:
1A Strategic Management Case Study Shane Theriault, Pierre-Olivier Lachance, Garik Teriault, Sierra DaigleYour Logo
2Overview Company Overview Company Timeline New Mission and Vision Existing Mission and VisionNew Mission and VisionExternal AssessmentIndustry analysisOpportunities and threatsCPM MatrixEFE MatrixInternal AssessmentOrganizational StructureFinancial ConditionDivisional AnalysisStrengths and weaknessesIFE MatrixStrategy FormulationSWOT MatrixSpace MatrixIE MatrixGrand Strategy MatrixMatrix AnalysisQSPM MatrixStrategic Plan for the FutureObjectivesStrategiesImplementation IssuesEPS/EBITProjected financialsEvaluationBalanced ScorecardCVS Caremark2
3Company TimelineMelville had been founded in 1892 by shoe supplier Frank Melville.Melville Corporation was incorporated in1922.First Consumer Value Store (CVS) opens in Lowell, Massachusetts in 1963.The CVS name was used for the first time in 1964 with 17 locations.Throughout the following decades they have purchased many other pharmacies.Clinton Drug and Discount stores – 84 locations in Indiana and Midwest.New Jersey-based Mack Drug chain – 36 locations in New Jersey.Peoples Drug – 490 Locations throughout Mid-Atlantic1997 – Revco Chains – 2500 locations in Ohio, Mid-Atlantic, and Southeast US.Sales reached $1 billion in 1985In 1993, formerly traded as MVL on the New York Stock Exchange, the company now trades as CVS.In 1995 and 1996, Melville Corp. sold off the company’s other segments to focus on CVS.
4Company TimelineIn1999, CVS launched their CVS ProCare Pharmacy for complex drug therapies.In 1999, CVS acquired Soma.com, the first online pharmacy, and renamed it CVS.com.In 2004, CVS purchased 1,268 Eckerd drug stores and Eckerd Health Services, a PBM/mail-order pharmacy business, from J. C. Penney. as CVS.On July 13, 2006, CVS announced that it had entered into a definitive agreement to acquire Minneapolis-based MinuteClinic.On November 1, 2006, CVS announced that it was entering into a purchase agreement with Nashville-based Caremark Rx Inc., a pharmacy benefits manager. The new company is called CVS Caremark Corporation.
5Current Vision & Mission Statement Vision statement:We strive to improve the quality of human life.Mission Statement:We provide expert care and innovative solutions in pharmacy and health care that are effective and easy for our customers.
6Revised Vision Statement Our purpose is to guide people along the path of better health
7Revised Mission Statement At CVS Caremark we strive to improve the every day quality of human life by providing the highest quality pharmaceuticals and consumer products (2) in the United States (3). With the help of our valued employees (9) and advancing technology (4), we will provide the premier shopping experience to all of our customers, ranging from child to adult (1). Our goal is to reward our customers with the best prices and best service possible(7). CVS will continue to grow and improve through investment and expansion opportunities (5) while always maintaining the highest ethical and moral standards (6). Most importantly, we will continue to care and support the communities and the environment (8) that we are a part of.
12OpportunitiesOrganic food industry has rebounded from the recession quickly with growth rates back above 6% in 2011, bringing annual US sales above $26 Billion.1,0154,000 people will reach the age of 65 in the coming three years71.7% of Americans report having internet access in their home.Affordable Care Act passed in 2010 will extend medical coverage to over 45 million Americans currently without coverage, starting in 2014.In 2011, patent drugs with annual sales of $12 Billion have expired. Additional patent expirations is expected to increase this number to above $30 Million in the coming year.In 2008, the AAMC projected a shortage of full-time equivalent physicians by 2025.Medicare drug spending is expended to increase by 8.5% annually over the next decade.
13Threats Unemployment is at 8.5% R&D costs are high, on average between $4 billion to $11 billion per drug.Threat of large distributors such as, Target who already have over 1031 locations, entering the pharmaceutical market increasing competitionWalgreens increased prescriptions refills by 5.3% in the last year.Increase demand for environmentally safe productsLegalization of drug importation would lead to a national saving of 1.7 billion.Future government policy changes to regulation48 million American adults did not fill prescription in 2010
14EFE External Factor Evaluation Matrix (EFE) Opportunities Weight External Factor Evaluation Matrix (EFE)OpportunitiesWeightRatingWeighted Score1.Organic food industry has rebounded from the recession quickly with growth rates back above 6% in 2011, bringing annual US sales above $26 Billion.0.0412.1,0154,000 people will reach the age of 65 in the coming three years0.0930.273.71.7% of Americans report having internet access in their home.0.070.214.Affordable Care Act passed in 2010 will extend medical coverage to over 45 million Americans currently without coverage, starting in 2014.5.In 2011, patent drugs with annual sales of $12 Billion have expired. Addition patent expirations is expected to increase this number to above $30 Million in the coming year.20.186.In 2008, the AAMC projected a shortage of full-time equivalent physicians by 2025.0.0840.327.Medicare drug spending is expended to increase by 8.5% annually over the next decade.0.06ThreatsUnemployment is at 8.5%0.050.10R&D costs become high, on average between $4 billion to $11 billion per drug.0.30Threat of large distributors such as, Target who already have over 1031 locations, entering the pharmaceutical market increasing competitionWalgreens increased prescriptions refills by 5.3% in the last year.Increase demand for environmentally safe productsLegalization of drug importation would lead to a national saving of 1.7 billion.Future government policy changes to regulation8.48 million American adults did not fill prescription in 20100.15TOTALS1.082.83
18Divisional Analysis Netflix recognizes three segments Pharmacy ServicesRetail PharmacyCorporate (Please note that this segment is not acknowledged in the book’s case study)
19StrengthsWe operated 657 MinuteClinics in 25 states and the District of Columbia of which 648 were located within CVS/pharmacy storesOur proprietary loyalty card program, ExtraCare ® , has well over 68 million active cardholders, making it one of the largest and most successful retail loyalty card programs in the countryCVS carries over 4,400 CVS/pharmacy and proprietary brand products,Strong service assortments including Prescription management systems, Mail pharmacy, Minute clinic, eye care, discounted drugs agreements$48 million in charitable contributions in 2011cvs.com attracted at least 26 million visitors annually by 200821st on the Fortune 500's list of largest corporation in US4.6 Billion in free cash flow in 2011, a 39% increase over 2010's number
20WeaknessesCVS has a smaller Gross Margin with 21.01% compared to its competitors: Rite Aid 26.54%; Walgreens 28.36%; Walmart 25.26%8+ major legal cases against CVS in the last decade.Near all revenues are derived from the United State MarketCVS has a goodwill value ofFewer Physical(7,300) locations then next biggest competitor Walgreens who has 8,582657.8 million prescriptions filled versus 819 millions by Walgreens.CVS Caremark has a American Customer Service Index of 73
343 Year Goal Annual Objectives First Year- Increase marketing expense by 50% in 2012- Acquire Rite AidSecond Year- Increase marketing expense by 25%- Renovate a 1/3rd of Rite Aid Locations to CVS CaremarkThird Year- Renovate half of remaining Rite Aid Locations to CVS Caremark
35Strategic Fit- Increase in Demand - Supply shortage of Health Care providers - Location is a large Critical success factor - Great Cash flow and financial stability - Close Competing firms
36Strategy CostsMarketing Expense: = $317 Million = $211 Million Increase to $316.5 Million Increase to $395.5 Million Increase to $496.5 Million Estimated Acquisition Cost - $1,000,000,000
47UpdateNew CEO at end of 2011Order Refill is the most visited area of their WebsiteRevenues increased by 15% in 2012Market cap increased by 12%Stock price increased to $48 a shareEarning per share increased 2.59 in 2011 to 3.03 in 2012Old CEO – Tom RyanNew Ceo – Larry Merlo
49ReferencesCVS Caremark. (2012) Annual Report. Woonsocket. CVS Caremark. (2013). Company History. Retrieved from CVS Caremark: CVS Caremark Corp. (2013). Retrieved from Business Insight: Essentials: Gross, D. D. (2014, April 6). CVS Caremark Corporation. Retrieved from nternational Directory of Company Histories: Rite Aid. (2012) Annual Report. East Pennsboro Township. University of Oregon Investment Group. (2011). CVS Caremark Corporation. Eugene: University of Oregon. Walgreen. (2012) Annual Report . Chicago.