Porter’s Five Forces
Forces Grade Note
Segment Rivalry Strong The current market is divided between a few powerful competitors that can relatively easily attract customers from one another as the switching costs are low and practical absence of product differentiation contributes to the easy loss of market share.
Threat of Mobility Weak While the new entrants only need a relatively simple GUI and a supplier in order to enter the market, the federal and local regulations will require significant investments prior to any positive cash flow. Again, the differentiation is practically non-existent and the new entrants will have to compete with financially established enterprises capitalizing on competitive advantage.
Supplier power Strong In order to sustain the market share in this highly competitive industry the pharmacies have to establish and maintain strong working relationships with PBMs that have power to divest particular clients from a pharmacy by denying reimbursement privileges to their customers.
Buyer Power Strong It is not hard to obtain the same drugs from different sources so the customer loyalty is virtually non-existent and the pharmacies have to try extremely hard to sustain their consumer base.
Threats of substitutes Weak There are very few alternatives to drugs. The alternatives are practically limited to traditional medicine. Therefore, the threat of substitute is weak.
Conclusion: CVS is in a favorable position because it already controls the large share of the market and its brand name is known to the populace. Therefore, it is crucial for the company to protect its market share and pursue the aggressive expansion policy to secure even large customer base.
Financial Analysis
CVS was able to se...
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...ts and special deals with PBRs. Thus, the firm’s pricing policy should be flexible enough as not to discourage the price-sensitive consumers and yet allow the company to sustain ever increasing product and service development costs.
Also, mergers and acquisitions could be used by the company to its advantage. That would be following into footsteps of the CVS recent acquirement of Arbor Drug and Revco and comparable transactions performed by the CVS competitors such as Rite Aid acquiring Marco, Thrifty Payless, and K&B.
The M&A practices make sense as they reduce competition, increase the customer base, and provide convenient locations for the existing customers. One of the main points in this respect is the necessity to create a unified customer database similar to the one operated by Walgreens that allow customers to access their prescriptions from any CVS store.
When brothers Sidney and Stanley Goldstein partnered with Ralph Hoagland in Lowell Massachusetts in 1963, they were unaware of the nationwide impact that CVS would have on the retail drug industry today. Just six years after establishment, Goldstein and Hoagland sold to Melville Corporation and began acquiring companies including Revco, Prescription Health Services, People’s Drug and Eckerd Health Services. This led to an increase in sales reaching one billion dollars in 1985 as well set the bar for all pharmaceutical companies within the United States.
The main characters in this article include the merging PBM companies Express Scripts Inc. and Medco Health Solutions Inc. Their PBM competitor companies include UnitedHealth Group Inc. with its OptumRx pharmacy unit, Walgreen Co., and CVS Caremark Corp. These PBM companies compete against each other for contracts with employers and health plans.
In the recent years the drug industry underwent a significant transformation. Many of the big companies generate high revenues, which allow them to expand. Some of them expand on their own others through mergers and the buying of smaller companies.
We strive to be the number one provider in the United States by investing not only in our company and technological advancements, but also in the communities in which we serve. Whether our customers are new to this world or our veterans, we know that our company can provide them with the newest and most effective products and services, while promoting the healthy communities in which they live. Through our valued employees, CVS is able to provide quality services and quality products. Retail Pharmacy Growth Strategy: CVS has managed to grow considerably in the past few years with the help of acquisition of beneficial companies and integrated the operations of these companies by creating synergy to drive higher margin and greater economies of scope. CVS is building more and more pharmacy stores in convenient locations.
Marketing at the Vanguard Group. In light of an evolving market, faced with new competitors, and after a careful analysis of their current customers, the Vanguard Group (hereinafter referred to as “Vanguard”) realizes it must rethink its entire marketing strategy. However, in order to protect and leverage their competitive advantage, which is their low management fees, and to optimize the loyalty that their customers continuously demonstrate toward their organization, they must now target the most profitable segment for them, and develop the best way to serve and delight these customers. SITUATION ANALYSIS Highlighted SWOT Strengths Low fees strategy - a good idea.
Why do consumers purchase specific drugs for various ailments, sicknesses or diseases they might have? Why do physicians prescribe certain drugs over competitive drugs that may be available to the public? Why is it that most of us can easily name specific drugs that fit the many ailments of today’s society? On the surface the answer might be as simple as good TV advertising or radio commercials or even internet adds. The truth of matter is the major pharmaceutical manufacturers own the patents on these drugs and this gives them all of the marketing budget and muscle they need to promote the drug and control the pricing. The incentives for larger pharmaceutical companies are very enticing and as a result, they don’t mind spending the time in clinical trials and patent courts to get their drugs approved. Some will even get patents on the process by which the drug is manufactured, ensuring that no competitor can steal the drug or the process. This protects their large financial investment and nearly guarantees a large return for their investors. Many consumer rights groups claim this is nothing more than legalizing monopolies for the biggest manufacturers.
Why are the prices so high? Some critics of the drug companies argue that the larger firms are ripping off the American public, are dishonest and, in some cases, unsafe. On the other hand, there are health care workers such as doctors and their supporters who claim that research and testing for drugs costs money. This supposedly justifies their prices for their products. Also, as an argument to their side, they say that their practice is a benefit to the improvement to mankind. It is a life saving business, but are these prices justified? As one can see, this is a very important issue in medicine today. It affects everyone involved with medicine, which is much of the American public. It also affects the physicians and drug makers.
Currently the dominant player in a new arena, TeraTech a leader in the pharmaceutical industry, is a fiver year-old Customer Relationship Management (CRM) solutions provider. This CRM concept is relatively new, and its basic function is to help develop a complete picture of the industry customers, then evaluating those relationships across products and services.
Due to patents, Pfizer and other companies in the pharmaceutical industry are not always competing in a monopolist’s competition. When a business has a patent they are the only manufacturer who can produce the product until the product expires, so it is clear that the firm can act as a monopoly while in control of the patent. As a monopolistic company, the company has market power, giving it the capability to adjust the market price of a good. The main goal for a monopolist and business owner is to maximize their profits, however, there are rules they have to abide by. The monopolistic companies still have to keep up with the market demand curve. The point at which they decide to produce will rest on their own acidities of revenue, risk and effort. The company also needs to know the price elasticity of the curve: the greater the price elasticity, the more a company such as Pfizer will struggle to establish high prices and a high volume.
Rivalry among established firms is fierce. There are several factors that illustrate this: established market players (6.1). The product is highly standardized and the switching costs of the customers are low. Players are aggressive (6.2)
There are high entry costs to enter the market. The large industry competitors already have captured the market share.
When it comes to running and managing an effective business operation, there are many important considerations to be mindful of. Whether it’s a small business or a conglomerate, it’s crucial to hold a strong competitive advantage. This basically means that there needs to be something that differentiates the business from the rest of the competition, such as the products and services that are offered. In many industries, the market is highly saturated with stiff competition, such as the accounting/tax industry. In this industry, there are many products and services offered, of which, are similar. Some companies have major success, while others have minimal success or go completely out of business.
Difficult to regain trust of existing loyal customers who expected high quality and performance when in competition with other firms in upper trade market.
In other words, their purchasing power is more focused on their need, health, and efficiency and cost effective. It is with this in mind, this writer would say that there lies a possibility for a company to cater to both its best interest and that of the consumer conjointly. Without customers, there would not be any company; therefore, a secure partnership between the company and customers would be more beneficial for both parties, in that the customers would be loyal to the company based on if they feel valued and if their needs are being met by the company. The company can foster this partnership by building a strong customer relationship management – where they have a customer-centric model in which they learn ways to enhance their product and service through feedback received from the customers. Here, both interests of the company and the customer will be