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Company Overview
A brief history of CVS
Existing Mission and
Vision
Existing Strategies
New Mission and Vision
Overview
External Assessment
Industry Analysis
Opportunities and
Threats
EFE Matrix
CPM Matrix
Internal
Assessment
Organizational Structure
Strengths and
Weaknesses
Financial Condition
IFE Matrix
Strategy
Formulation
SWOT Matrix
Space Matrix
Grand Strategy Matrix
Matrix Analysis
QSPM Matrix
Evaluation
Balanced Scorecard
CVS Caremark Update
Implementation
Projected Financials
Company Timeline
The CVS name
was used for the
first time in 1964.
That year, they
had 17 retail
locations, and 40
stores only five
years later
1960s
1970
s
By 1974, CVS
had 232 stores
and sales of
$100 million
1980
s
1990
s
In 1994, CVS
started
PharmaCare
Management
Services.
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
20002005
20062010
On November 1, 2006,
CVS announced that it
was entering into a
purchase agreement
with Nashville-based
Caremark Rx Inc., a
pharmacy benefits
manager
On August 12, 2008, CVS
Pharmacy announced
that it would acquire
Longs Drugs for $2.9
billion
2009
2010
We strive to
improve the
quality of
human life.
Existing Strategies
Use Minute Clinic locations and
Specialty pharmacy division to lower
cost while improving the health of
those we serve
Increase CVS Caremark leadership in
and contribution to the areas of
pharmacy services and healthcare
External Analysis
Competitive Analysis
Rx Same-Store-Sales Trends
Opportunities
1. Universal Health Care and economy recovery, $10 trillion by 2020
2. Imminent introduction of generic brands lowering the cost
3. Over the next five years, roughly $50 billion branded drugs will lose patent
protection
4. With healthcare reform slowly coming into effect, 32 million Americans
previously without coverage will now have some short sort of coverage.
5. People 65 years of age or older fill more than 25 prescriptions annually on
average, 3 times the national average.
6. As baby boomers age, approximately 70 million Americans will turn 65 in
the next 20 years
7. It is estimated that by 2014, 8 out of the top 10 drugs in the U.S. will be
specialty drugs, where expenditures are expected to rise to $100 billion.
8. Medicare part D market is expected to grow 8.5% annually from 2010 to
2020
9. Global pharmaceutical industry is expected to grow, especially Brazil, India,
Russia, and China, which is expected to be the 3 rd largest market in 2011
Threats
1. It is estimated that there could be a dearth of 200,000 healthcare
professionals and 800,000 nurses by 2020
2. Potential government intervention in health care after election in 2012
3. Imminent introduction of generic brands lowering the margin
4. CVS is behind Wal-Mart by nearly $140 billion in market cap.
5. CVS additional competitor Walgreens is behind them by a market cap of
roughly $10 billion.
6. Walgreens increased the number of prescriptions filled in 2010 by 7.5% ,
whereas ours decreased.
7. In the next 5 years, 9 out of the top 10 best-selling drugs in the world
will go off patent, resulting in an expected loss of sales
8. Extensive regulation has increased the time from drug discovery to
approval from 6 years in the 1970s to 13.5 years in the 2000s.
9. Pharmaceutical companies struggle to develop new drugs as R&D costs
become high, on average between $4 billion to $11 billion per drug
CPM
CVS
Walmart
Walgreen
Weights Rating Weighted Score Rating Weighted Score Rating Weighted Score
0.0 to 1.0 1 to 4
1 to 4
1 to 4
Advertising
0.08
0.24
0.32
0.16
ProductQuality
0.12
0.36
0.48
0.36
PriceCompetitiveness
0.10
0.20
0.40
0.30
FinanicalPosition
0.10
0.30
0.40
0.30
CustomerLoyalty
0.14
0.42
0.56
0.28
GlobalExpansion
0.11
0.33
0.44
0.22
MarketShare
0.07
0.21
0.28
0.14
OrganizationStructure
0.06
0.18
0.24
0.18
CustomerService
0.08
0.32
0.24
0.24
ProductionCapacity
0.10
0.30
0.40
0.30
EmployeeDedication
0.04
0.16
0.12
0.12
Totals
1.00
3.02
3.88
2.60
EFE
Opportunities
Weights
0.0 to 1.0
Rating
1 to 4
Weighted Score
0.06
0.07
4
3
0.24
0.21
0.04
0.08
0.04
0.08
0.06
0.12
0.06
0.18
It is estimated that by 2014, 8 out of the top 10 drugs in the U.S. will be
specialty drugs, where expenditures are expected to rise to $100 billion
0.04
0.12
Medicare part D market is expected to grow 8.5% annually from 2010 to 2020
0.05
0.1
0.15
0
0.04
0.12
0.06
0.06
2
2
0.12
0.12
0.07
0.21
0.07
0.28
0.05
0.1
0.04
0.08
0.05
0.2
0.09
0.36
2.87
In the next 5 years, 9 out of the top 10 best-selling drugs in the world will go
off patent, resulting in an expected loss of sales
Extensive regulation has increased the time from drug discovery to approval
from 6 years in the 1970s to 13.5 years in the 2000s
Pharmaceutical companies struggle to develop new drugs as R&D costs
become high, on average between $4 billion to $11 billion per drug
Totals
0.05
Internal Analysis
Organizational Chart
THOMAS M. RYAN
Chairman of the Board and
Chief Executive Officer
LARRY J.
MERLO
President
and
Chief
Operating
Officer
TROYEN A.
BRENNAN,
M.D.
ExecutiveVice
Presidentand
ChiefMedical
Officer
DAVID M.
DENTON
HELENA B.
FOULKES
PER G.H.
LOFBERG
Executive
ExecutiveVice ExecutiveVice Vice
President
Presidentand
Presidentand
and
Chief
Chief
President
Financial
Marketing
Caremark
Officer
Officer
Pharmacy
Services
JONATHA
N C.
ROBERTS
ExecutiveVice
Presidentand
ChiefOperating
Officer
Caremark
Pharmacy
Services
EVP;
President,
Caremark
Pharmacy
Services
DOUGLA
S A.
SGARRO
Executive
Vice
President
and
ChiefLegal
Officer
LISA G.
BISACCIA
SeniorVice
President
and
Chief
Human
Resources
Officer
EVP
Internal
Operation
s, Real
Estate,
Retail
Field,
Organizati
ons
NANCY R.
CHRISTAL
SeniorVice
President
Investor
Relations
LAIRD K.
DANIELS
SeniorVice
President
Financeand
Controllerand
Chief
Accounting
Officer
CAROL A.
DENALE
SeniorVice
President
and
Corporate
Treasurer
SARA J.
FINLEY
Senior
Vice
President
and
General
Counsel
STUART M.
MCGUIGAN
SeniorVice
Presidentand
Chief
Information
Officer
17,12
0
(Stock Price/EPS) * NI
45,72
6
45,82
Income Statement
Balance Sheet
CVS
1.60
0.63
0.39
0.65
0.23
11.59
1.55
9.01
21.01
5.84
3.55
5.54
9.33
13.35
21.11%
22.85%
Walgreens
Wal-Mart
1.60
0.61
0.87
0.27
0.45
0.82
0.17
0.57
1.34
0.46
6.03
2.57
9.14
4.1
2.39
12.31
28.15
5.00
3.10
8.13
14.53
17.28
25.37
5.41
3.51
8.58
21.08
13.64
9.82%
6.04%
7.23%
6.90%
Strengths
1. CVS is the largest pharmacy health care provider in the U.S with
over 7,100 pharmacies.
2. Gross profit as a percent of net revenues increased 21.0%
3. Operating expenses decreased 1.8% from 2009.
4. Employee base of 202,000 employees
5. CVS is recognized as one of the largest pharmacy benefit
managers (PBMs) in the US. Registering more than four million
customers per day
6. Market cap increased by 5.8% from 44 billion to 47 billion in 2010
7. More than 65% of stores are open around the clock or offer
extended hours
8. Has 560 MinuteClinic locations across 26 states, easing health
care overcrowding from lack of Primary care providers.
9. Generates more than $11 billion in specialty pharmacy revenue
annually
Weaknesses
IFE
Internal Strengths
Weights
0.0 to 1.0
Rating
1, 2, 3 or 4
3or4
Weighted Score
0.08
0.06
0.04
0.03
4
4
3
3
0.32
0.24
0.12
0.09
0.05
0.15
0.07
0.28
0.09
0.27
0.07
0.28
0.05
3
1or2
0.15
0.05
0.05
0.04
0.08
0.03
0.03
0.08
0.03
1
2
0.08
0.06
0.04
0.03
0.04
1
1
2
0.04
0.03
0.08
0.03
0.06
2.64
Strategy Formulation
SO
Strength
s
ST
Opportunitie
s
Offer educational
programs/training to better
prepare our staff to answer
customer questions. (S4, S7, T1)
WOto employees
Offer incentives
based on customers they get to
sign up for loyalty program.
(W6, O4, O5, O6)
W
Take advantage
T of the expiring
Threats
Weaknesse
s
FinancialStrength
1
2
3
4
5
6
7
Industry
Strength
1
2
3
4
5
6
7
ratingis1(worst)to7
(best)
CashFlow
PriceEarningsRatio
EarningsperShare
WorkingCapital
Liquidity
NetIncome
ReturnonAssets
ratingis1(worst)to7
(best)
ProfitPotential
FinancialStability
ResourceUtilization
Productivity,capacityutilization
MarketEntry
GrowthPotential
ExtentLeveraged
Environmental
Stability
Space Matrix
4.0
4.0
5.0
3.0
2.0
5.0
3.0
Conservative
Total
1
2
3
4
5
6
7
RateofInflation
BarrierstoEntertheMarket
CompetitivePressure
PriceElasticity
DemandVariability
PriceRangeofCompetingProducts
EaseofExitfromMarket
1
2
3
4
5
6
7
ratingis-1(best)to-7
(worst)
MarketShare
ProductQuality
CustomerLoyalty
CapacityUtilization
TechnologicallyAdvanced
GlobalExpansion
ProductLifeCycle
IS
Total 29.0
-4.0
-3.0
-2.0
-4.0
-1.0
-4.0
-2.0
ES 20.
Total
0
1.0
1.0
2.0
4.0
3.0
7.0
5.0
F
S
Aggressive
5.0
6.0
5.0
5.0
2.0
4.0
2.0
Competitive
advantage
C
S
-6
-5
-4
-3
-2
-1
1
2
3
4
5
Defensive
E
S
X Coordinate
Y Coordinate
Competitive
0.86
0.86
IS
GSM
Quadrant I
1. Market
development
2. Market
penetration
3. Product
development
4. Forward
integration
5. Backward
integration
6. Horizontal
integration
7. Related
diversification
Quadrant II
1. Market
development
2. Market
penetration
3. Product
development
4. Horizontal
integration
5. Divestiture
6. Liquidation
Quadrant III
1. Retrenchment
2. Related
diversification
3. Unrelated
diversification
4. Divestiture
5. Liquidation
Quadrant IV
1. Related
diversification
2. Unrelated
diversification
3. Joint ventures
Weak
Competitve
Position
Strong
Competitive
Position
Matrix Analysis
Alternative Strategies
SPACE
GRAND
Forward Integration
Backward Integration
Horizontal Integration
Market Penetration
Market Development
Product Development
Related Diversification
Unrelated Diversification
Retrenchment
Divestiture
Liquidation
IE
BCG
COUNT
Strategic Evaluation
Product Development
Increase number of stores open 24 hours by 20%. (Not Enough Need as
of 2010)
Offer Educational Programs/Trainings to better prepare our staff to
answer customer questions.
(Most questions of customers require answers from a Pharmacist)
Offer incentives to employees based on customers they get to sign up for
loyalty program (Causes customers to be prompted with questions on
their fast and convenient stop at CVS)
Take advantage of the expiring patents on drugs by developing more
Generics ( Already in this market strongly)
Increase our food segment to increase revenue and better compete with
Walmart and Walgreens ( Did not apply to our mission)
Market Development
Expand into areas such as Latin America and Asia. (Country drugs laws
differ)
Increase
number of
MinuteClini
cs by 100
locations
QSPM
Key factors
Opportunities
statesintheU.S.
thatwedonot
have
established
locations
External
Expandto4
other
Weight
AS
TAS
AS
TAS
1 to 4
1 to 4
1.
0.06
2.
0.07-
3.
Over the next five years, roughly $50 billion branded drugs will lose patent protection
0.04-
4. With healthcare reform slowly coming into effect, 32 million Americans previously without
coverage will now have some sort of coverage.
0.04
0.16
0.12
5. People 65 years of age or older fill more than 25 prescriptions annually on average, 3 times
the national average
0.06
0.18
0.24
6.
0.06
0.24
0.18
As baby boomers age, approximately 70 million Americans will turn 65 in the next 20 years
0.18
0.18
7. It is estimated that by 2014, 8 out of the top 10 drugs in the U.S. will be specialty drugs,
where expenditures are expected to rise to $100 billion
0.04-
8.
0.05-
0.05-
Medicare part D market is expected to grow 8.5% annually from 2010 to 2020
9. Global pharmaceutical industry is expected to grow, especially Brazil, India, Russia, and
China, which is expected to be the 3 rd largest market in 2011
Threats
0.2
QSPM Continued
Strengths
Increase
number of
MinuteCli
nics by
100
locations
Expandto4
other
statesinthe
U.S.
thatwedonot
have
established
locations
1.
CVS is the largest pharmacy health care provider in the U.S with over 7,100 pharmacies
0.08
0.24
0.32
2.
0.06
0.18
0.24
3.
0.04
4.
0.03
0.12
0.09
5. CVS is recognized as one of the largest pharmacy benefit managers (PBMs) in the US.
Registering more than four million customers per day
0.05
0.2
0.15
6.
0.07-
7.
More than 65% of stores are open around the clock or offer extended hours
0.09
0.36
8. Has 560 MinuteClinic locations across 26 states, easing health care overcrowding from lack
of Primary care providers
0.07
0.28 -
9.
0.05-
Weaknesses
0.05
2. Since March 2009, the Company has been named in a series of putative collective and
class action lawsuits filed in federal courts
0.04-
0.27
-
0.2
0.15
3
-
0.15
-
Strategic Fit
Expected shortage
of 45,000 Primary
Care Physicians
(PCP) by 2020
Health Care Reform
expected to add 32
Million newlycovered patients
by 2014
3 Year Goals
Strategic Implementation
Assumptions
Capital needed
Cash Used
Tax Rate
Stock Price (Dec. 31, 2010 - year
end)
Dividends Paid $.50 per share
30,000,000
30,000,000
35%
33.52
683,500,000
98,729
2010
96,413
2011
Cost of Revenue
78,349
76,156
% of total
88,379 revenue
Gross Profit
20,380
20,257
22,495
Operating Expenses
13,942
14,092
6,438
6,165
7,257
5,913
5,629
7,257
5,913
5,629
7,257
2,205
2,190
2,540
3,708
3,439
4,720
Minority Interest
Net Income from Continuing Operations
35% tax
Same
2009
2010
2011
ASSETS
Current Assets
Cash/Cash Equivalents
Short-term Investments
1,086
5
1,427
1,397
Same
4% increase
Net Receivables
5,963
5,436
5,653
Inventory
10,343
10,695
144
151
Other Assets
Total Current Assets
Long-term Investments
140
17,537
-
5% increase
17,706 18,970
-
7,923
8,322
8,750
Goodwill
25,680
25,669
26,657 4%increase
Intangible Assets
10,127
9,784
10,273 5% increase
Accum. Amortization
Current Liabilities
Accounts Payable
6,806
7,096
7,806
10% increase
5,494
3,974
2,454
12,300
11,070
10,260
Long-term Debt
8,756
8,652
8,548
Other Liabilities
1,102
1,058
1,165
10% increase
3,678
3,655
3,630
Minority Interest
Negative Goodwill
Total Liabilities
25,836
24,435
23,603
STOCKHOLDERS' EQUITY
Misc. Stocks Options Warrants
37
34
34
same
Preferred Stock
2010
1.60
0.63
0.39
0.65
11.59
1.55
9.01
21.01
9.33
2011
1.85
0.70
0.36
0.57
12.67
1.70
9.42
20.29
11.26
Strategic Evaluation
Balanced Scorecard
Time
Area of
Expectatio
Objectives
Measure or Target
n
Primary Responsibility
Customers
1 Brand
Industry reports/Market Cap. Higher
Health Care/Strategy
Identity
than competitors
Yearly
Marketing Officer
Health Care/Strategy
2 Satisfaction Customer satisfaction surveys
Semi-Annual Marketing Officer
Employees
1 Employee
Chief Human Resources
Moral
Survey
Semi-Annual Officer
2 Service
Training
# of seminars
Yearly
Chief Operations Officer
Operations
1 Ethics
Chief Human Resources
Training
# of ethics training sessions
Yearly
Officer
2 Patient
"Learn about your medicines"Health Care/Strategy
Awareness
medicinal information
Yearly
Marketing Officer
Stock Performance
MinuteClinic Current
Locations
Update Facts
In 2012, Email-Pharmacist was used 2,000 times.
CVS Pharmacy filled 1.3 million prescriptions filled
through mail service and 3.7 million retail
prescriptions in 2012
99.998% Dispensing Accuracy in 2012 for mail service
Filled 602,992 prescriptions that were 90-day supplies
Order Refill is the most visited area of their Website
60.4% of Mail Service scripts required no intervention,
39.6% required some time of follow up
In 2011 Tom Ryan ( CEO ) retired, and new CEO was
hired- Larry Merlo