Introduction
CVS Health Corporation is a big business whose size is approximately Five thousand to Thirty thousand square feet. CVS has other new stores whose size range from Eleven thousand to Fifteen thousand square feet, with a drive-through and employing over 243, 000 people. Its operations include an extensive retail pharmacy network, urgent care MinuteClinics, specialty services, as well as ambulatory services. The company is the second biggest pharmacy benefits manager (PBM) in the U.S. It is also one of the best funded PBM in the world (CVS Health, n.d). Cochrane (2017) points out that the company undertakes various initiatives to ensure growth. These include strategic alliances with the likes of the National Black Nurses Association and the National Association of Hispanic Nurses. With the rising competition from its close competitors, the company has been experiencing slow growth. Increasing competition is negatively affecting CVS Corporation and entering into strategic alliances with other companies will help it achieve steady growth.
Strategic Alliances within Past Three Years
Within the past three years, CVS Health Corporation has entered several strategic alliances with other PBM companies such as Cardinal Health and Target among others. The company currently faces many challenges that revolve around competition (Cochrane, 2017). This year, it has lost its most important deal for filling prescriptions for customers of pharmacy benefits manager (PBM), Tricare and Prime Therapeutics to its rival Walgreens Boots Alliance Inc. and is also struggling with rising online competition from Amazon.com, Inc. In November 2016, the company CEO Larry Merlo came up with a strategic plan to enable the company to resume steady growth.
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The initial step of the plan was announced during the company's second quarter conference call, to leverage the company's capabilities as well as its compelling value proposition through partnering with other PBMs and health plans. To this effect, the initiative started to see implementation in 2017. The company announced three partnerships that promised growth for the company (Cochrane, 2017). According to Resource.org (2018), these companies include Optimum, Cigna Corporation, and Express Scripts Holding Company. Optimum operates within health services and implements technology in delivering integrated solutions. The launch of the alliance was in July 2017.
CVS also announced it's alliance with Cigna in June 2017, Cigna members under self-funded employer-sponsored plans would receive discounts from CVS MinuteClinics as well as Health-branded over-the-counter products (Cochrane, 2017). This move is expected to increase traffic to the company's pharmacy and retail locations. CVS also entered into a strategic partnership with Express Scripts Holding Company, and this will allow CVS to provide retail services to ESRX's diabetes care value program.
According to Cochrane, CEO Mr. Larry Merlo sentiments points to the need for these alliances to steady the company's performance amid stiff the stiff competition specifically from Walgreens Boots Alliance Inc. All its strategic partners have massive customer reach, and this is expected to boost CVS's sales and profits. CVS's strategic partnership with Capital Health, for example, enables them to leverage on each other's vantage leadership position in generic-drug supplies and sales to cut better deals (2017).
Changes in the Marketing Strategies
Stiff competition for market share and internal network infrastructure issues are some of the challenges faced by CVS in its quest to venture into new markets. Additionally, due to the nature of the business, CVS has limited options to modify its products. It can either provide original drugs or their generic forms. The issue of concern here is the marketing strategies to be applied in new markets. International markets offer great potential for growth, but they are also full of strict business and legal regulations by host countries that present business risks to an entity (Wuhrer & Bilgin,2014).
CVS Health (2015) highlights the factors that the organization needs to consider. These include cultural factors, political and legal factors, economic factors and intangible factors. Cultural factors include language, taste, consumer habits, environmental values, and demographics. Political and legal factors include taxes, laws, permits and licenses, tariffs, fees, currency risks, political stability among others. Economic factors include supply and demand, per capita income, class structure, financial transactions, and banking. Intangible factors include environmental factors, product adaptation, and regional partnerships. Due to globalization, the world has become a global village where parties across the globe can trade easily. With the help of advanced technology, effective international marketing will enable a company to tap into the vast growth potential that global markets offer (United StatesSecurities and Exchange Commission, 2015).
Organization Structure
The company uses a divisional structure primarily through the executive vice presidents of its four branches. These subsidiaries include CVS Caremark, CVS Pharmacy, CVS MinuteClinic and CVS Specialty. Some of the company’s significant weaknesses as a result of this type structure is many hierarchies and a variety of middle managers, giving rise to a tall and wide organizational structure because of the high vertical as well as horizontal differentiation, and this increases company's liabilities in the form of large of employees' salaries. Secondly, a lot of complexities characterizes the pharmacies making processes such as communication equally complex and slow. The president of the company's pharmacies is responsible for all issues related to the retail business which entails more than 9600 retail pharmacy stores, merchandising, marketing, supply chain, pharmacy operations, distribution centers, real estate, etc. (CVS Health, n.d).
CSA Staff (2015) acknowledges that retail division management is answerable for a day to day running of all the retail pharmacy stores, inventory management, store operations, logistics, real estate as well as construction. This structure also boasts of some strengths. First, a vast pool of expertise that includes real estate business management that smoothly manages the acquisition of premises either through constructing, leasing, and modification of its existing outlets. Another strength by CVS is a massive network of outlet stores that increase its customer reach translating into high sales. Currently, these stand at a total of 9803 stores spread across 49 states. The company pharmacies divided into divisions, areas as well as regions. Store managers manage retail outlets, assisted by pharmacy managers, store supervisors, clerks, pharmacy technicians and department supervisors.
According to CSA Staff (2015), currently, the divisional configuration works well for the company, but the vertical differentiation slows down the communication from management to junior staff and vice versa. However, at the moment, the organization structure is in line with the company's strategies, and there is no need for restructuring of the organization structure. However, if the company could adopt a matrix structure, its operations would be more successful. A matrix structure would enhance collaboration between the PBM, specialty clinics, pharmacy retail as well as MinuteClinics, with pharmacists holding all these divisions together. This way, more services on the retail aspect of the business can be offered including in-depth counseling and medication therapy management
An analysis of CVS Board of Directors
The company's Board of Directors consists of 12 members. Mr. Larry Merlo has been the company's president and CEO since 2010, and David Dorman is the Chairman of the Board. All CVS board members except the CEO Mr. Larry Merlo, are Independent directors, and these include Richard Bracken, David Brown, Alecia DeCouldreaux, Nancy-Ann DeParle, Anne Finucane, Jean-Pierre Millon, Mary Schapiro, Richard Swift, William Weldon, and Tony White. (CVS Health, 2018). Further, CVS Health (2018), acknowledges CVS’s five committees namely, Audit, Management Planning & Development, Nominating & Corporate Governance, Patient Safety & Clinical Quality and Executive. The committees are chaired by Richard Swift, David Brown, David Dorman and Richard Bracken respectively. Notably, the CEO is not the chair of the board. CVS board is chaired by its chairman, Mr. David Dorman.
Additionally, according to CVS Health (2018), of importance to note about CVS board of directors is out of 12 board members, there are four women, making up 33 percent of the total number of directors. CVS board of directors is male-dominated as it lacks the gender balance desired and leveraged upon by many corporations world over to enhance their image. Also out of the 12 members, there is only one member of the African American Minority group, and that is Alecia A. Decoudereaux. The company's Board members come from reputable backgrounds having worked or still working for successful companies. There are, however, no minorities included among them
Conclusion
CVS Health Corporation is one of the leading PBMs in the world. However, the company is facing stiff competition from other peer companies especially Green boots. The aggressive online jostling for clientele is also giving the company serious challenges, and as a result, it has lost so many lucrative deals with other companies. The company is already engaged in various initiatives to enhance growth to maintain and even surpass its market share. One of such move, as incorporated in its strategic plans is to forge partnerships with other companies, a strategy that is expected to increase traffic to boost sales. Strategic alliances will restore positive growth for CVS.
References
Cochrane, M. (2017). CVS Health Hopes Partnerships Will Power Growth: CVS Health recently forged three new partnerships that should drive store traffic and lift sales in the process . Retrieved fromhttps://www.fool.com/investing/2017/08/22/cvs-health-hopes-partnerships-will-power-growth.aspx
CSA Staff. (2015, December 15). 7 ways CVS is driving growth in its stores . Retrieved from https://www.chainstoreage.com/article/ways-cvs-driving-growth-its-stores/
CVS Health. (2015). Prescription for a better world: 2015 Corporate Social Responsibility Report . Retrieved from https://cvshealth.com/sites/default/files/2015-csr-report.pdf
CVS Health. (2018). Board of Directors . Retrieved from http://investors.cvshealth.com/corporate-governance/board-of-directors
CVS Health. (n.d). CVS Health at a Glance: Facts and figures about CVS Health . Retrieved from https://www.cvshealth.com/about/facts-and-company-information
Resource.org. (2018). Rankings: Best Funded PBM . Retrieved from http://www.rxresource.org/news/pbm-top-ten-rankings-best-funded-pbm.html
The Official Board (2018). CVS Health . Retrieved from https://www.theofficialboard.com/org-chart/cvs-health#
United StatesSecurities and Exchange Commission. (2015). Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the fiscal year ended December 31, 2015 . Retrieved from http://secfilings.nasdaq.com/edgar_conv_html%2f2016%2f02%2f09%2f0000064803-16-000074.html#FIS_BUSINESS
Wuhrer, G & Bilgin, F. Z. (2014). International Marketing Compact . Available from https://www.book2look.com/book/9783714301359
