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SWOT analysis CVS Health Corporation...

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SWOT Analysis CVS Health Corporation (CVS or 'the company'), formerly known as CVS Caremark Corporation, is a pharmacy health care provider in the US. The company's extensive network and extracare loyalty program driving are the major strengths of the company. Reducing cash positions could be areas of concern to the company. Aging US population to boost demand for the company's services and increase in healthcare spending in the US ensures a stable revenue growth over the years. However, intense competition, and price war in PBM industry could impact profitability and its future growth avenues (CVS Health Corporation). Strength Extensive network ExtraCare loyalty program driving Weakness Reducing cash positions Opportunity Increase in healthcare spending in the US Aging US population to boost demand for the company's services Threat Intense competition Price war in PBM industry TOWS Matrix Threat Intense competition (CVS Health SWOT) CVS operates in a highly competitive industry. As a pharmacy retailer, the company competes with other drugstore chains, supermarkets, discount retailers, independent pharmacies, membership clubs, Internet companies and retail health clinics, as well as other mail order pharmacies and PBMs. In addition, some of these competitors may offer services and pricing terms that CVS may not be willing or able to offer. Competitors in the PBM industry include large national PBM companies, such as Express Scripts, as well as many local or regional PBMs. In addition, there are several large health insurers and managed care plans (such as United Healthcare and CIGNA) and retail pharmacies which have their own PBM capabilities as well as

several other national and regional companies that provide some or all of the same services. An intense competition could affect CVS’ market position. Price war in PBM industry (CVS Health SWOT) The PBM industry has been experiencing margin pressure as a result of competitive pressures and increased client demands for lower prices, enhanced service offerings and/or higher service levels. In that regard, CVS maintains contractual relationships with generic pharmaceutical manufacturers and brand name pharmaceutical manufacturers that provide for purchase discounts and/or rebates on drugs dispensed by pharmacies in the company's retail network and by its mail order pharmacies (all or a portion of which may be passed on to clients). Manufacturer rebates often depend on a PBM's ability to meet contractual market share or other requirements, including in some cases the placement of a manufacturer's products on the PBM's formularies. Competitive pressures in the PBM industry have caused CVS (and other PBMs) to share with clients a larger portion of rebates and/or discounts received from pharmaceutical manufacturers. In addition, market dynamics and regulatory changes have impacted the company's ability to offer plan sponsors pricing that includes the use of retail "differential" or "spread", which could negatively impact the company's profitability in future. Opportunity Increase in healthcare spending in the US (CVS Health SWOT) The company may benefit from increase in healthcare spending in the US. According to the Centers for Medicare & Medicaid Services (CMS) 2016-25 report, health spending in the US is projected to grow at a CAGR of 5.6% during 2016-25. As a share of the country’s Gross Domestic Product, health spending is expected to reach 19.9% 2025. Furthermore, health spending in the US is expected to grow at an average rate from 17.8% in 2015 to 19.9% by the end of 2025, 1.2% faster than expected average annual growth in the GDP. The growth is further expected to be accelerated during 2016-25 due to improving economic conditions, the Affordable Care Act (ACA) coverage expansions, and increasing number of the aging population. Since the company offers a number of products to the healthcare industry and has strong presence in the US. Therefore, increase in healthcare spending in the US may increase demand for company’s products. Aging US population to boost demand for the company's services (CVS Health SWOT) The US population is aging rapidly. According to the US Census Bureau, by the year 2060, the number of elderly is expected to climb to 98.2 million of the total population. Due to the increasing life expectancy of Americans, the number of

people aged 85 years and older is also expected to increase to 19.7 million by the year 2060. This increase in life expectancy will increase demand for healthcare services and, more importantly, the demand for innovative, more sophisticated means of delivering those services. Hence, the aging population would spur the demand for CVS’ products and services. Weakness Reducing cash positions (MarketResearch.com) Declining cash position could be a major cause for concern to the company. As of December 2017, the company had cash and cash equivalents of US $1,696 million compared to US $3,371 million in the previous year, representing an annual decline of 49.7%. This resulted in the company recording negative cash flow from financing and investing activities of US $2,932 million in FY 2017. Therefore, declining cash positing illustrates the company’s failure to secure capital requirements. Strength Extensive network (MarketResearch.com) CVS has a broad network of retail pharmacy stores in the US. The company's retail pharmacy stores sell prescription drugs and an assortment of general merchandise. As of December 31, 2017, the retail/LTC segment included 9,803 retail stores located in 49 states, the District of Columbia, Puerto Rico and Brazil operating primarily under the CVS Pharmacy, CVS, Longs Drugs, Navarro Discount Pharmacy and Drogaria Onofre names, 37 onsite pharmacies; and 1,135 MinuteClinic locations in 33 states and the District of Columbia, of which 1,049 were located in CVS Pharmacy stores and 79 were located in Target stores. The company also has an extensive network of pharmacy services business which provides a range of pharmacy benefit management (PBM) services. As of December 31, 2017, the pharmacy services segment operated 23 retail specialty pharmacy stores, 18 specialty mail order pharmacies and four mail order dispensing pharmacies located in 40 states, Puerto Rico and the District of Columbia. An extensive network of retail pharmacy stores and portfolio of pharmacy services enables CVS to reach its broad customer base across the US. ExtraCare loyalty program driving (MarketResearch.com) CVS’ front-store business, which sells prescription drugs and an assortment of general merchandise, offers ExtraCare loyalty program to its customers. The ExtraCare loyalty program, introduced in 2001, is one of the largest and most successful retail loyalty programs in the US. Customers who choose to participate in the ExtraCare loyalty program receive mailers featuring special coupon offers and

health information. They also receive exclusive cardholder savings on select merchandise, and earn "Extra Bucks" for purchases they make during designated shopping periods. The ExtraCare loyalty program has approximately 70 million active cardholders, making it one of the largest and most successful retail loyalty card programs in the US. Furthermore, the loyalty program has helped CVS in leveraging the customer insights (gained through ExtraCare loyalty program) to convert customers to categories they shop elsewhere, to launch personalized digital circulars, and to tailor its merchandise mix to meet customer needs. The ExtraCare loyalty program of CVS has helped it in driving its front-store profitability besides helping it in leveraging customer insights. Strategies #1 Link extracare card to minute clinics Strength: ExtraCare loyalty program driving Accumulate points the more often visited = when getting a prescription Why: CVS is the largest pharmacy health care provider in the U.S with over 7,100 pharmacies Offer incentives to employees based on customers they get to sign up for loyalty program Medicare D insurance. One Stop Shop CVS Stores 9,800 Minute Clinics 1,100 Open more minute clinics Year 1: Begin Construction estimated $12 million Year 2: Open 50 New MinuteClinics estimated $10 million Year 3: Open 50 New MinuteClinics estimated $10 million Financials: for each minute •$175,000 Salaries/per location/per year •$85,000 Building (start up cost) •$40,000 Supplies and Equipment _______________________________________ 300,000 per MinuteClinic *100 Locations

= 30,000,000 Capital Needed #2 Productively and customers Increase number of stores open 24 hours by 20%. ● CVS’ is behind Wal-Mart by nearly $140 billion in market cap. ● Walgreens increased the number of prescriptions filled in 2010 by 7.5% , whereas ours decreased Offer Educational Programs/Trainings to better prepare our staff to answer customer questions.

#3 Expansion & Advancement Strength: Extensive network Opportunity: Increase in healthcare spending in the US Threat: Price war in PBM industry Intense competition Increased client demands for lower prices, enhanced service offerings and/or higher service levels. Expand into areas such as Latin America and Asia. Take advantage of the expiring patents on drugs by developing more Generics Why: Generates more than $11 billion in specialty pharmacy revenue annually Increase food segment to increase revenue and better compete with Walmart and Walgreens Why: Pharmacy services segment is showing less revenue than the retail segment

#3 best fits, the healthcare industry is growing rapidly. In order to stay above or on the curve CVS must implement a good insurance for customers they are on the right path with medicare D, and produce drugs at a low price but still make

profit and advancement in their pharmaceutical segments. It won’t be hard to expand overseas since a lot of the supplements come from these areas. References: CVS Health Corporation SWOT Analysis. (2018). CVS Health Corporation SWOT Analysis, 1–6. Retrieved from https://search-ebscohostcom.owu.idm.oclc.org/login.aspx? direct=true&db=bth&AN=132280335&site=ehost-live CVS Health SWOT & PESTLE Analysis. (2018, November 01). Retrieved from https://www.swotandpestle.com/cvs-health/ Department, S. M. (n.d.). CVS Health Corporation SWOT Analysis Matrix (Strengths, Weakness, Opportunities, Threats). Retrieved from http://fernfortuniversity.com/term-papers/swot/nyse/1680-cvs-healthcorporation.php MarketResearch.com. (2017, August 22). Retrieved from https://www.marketresearch.com/GlobalData-v3648/CVS-Health-CorporationFinancial-Strategic-11119976/ Mittal, M. (2018, August 01). CVS Health Corp (CVS) - Financial and Strategic SWOT Analysis Review. Retrieved from https://www.kenresearch.com/healthcare/general-healthcare/cvs-health-corpfinancial/46523-91.html SWOT Analysis of CVS Health. (2015, November 26). Retrieved from http://marketingdawn.com/swot-analysis-of-cvs-health/ Z. (n.d.). CVS Caremark SWOT Analysis | Competitors & USP | BrandGuide. Retrieved from https://www.mbaskool.com/brandguide/lifestyle-and-retail/4306-cvscaremark.html...