Considering New Ventures and Corporate Renewal

CVS Caremark is the largest pharmacy health care provider in the U.S. Last year, the company filled more than a billion prescriptions through its retail and mail order pharmacies. Cardinal Health is a leading health care services company and an essential link in the health care supply chain, providing pharmaceuticals and medical products to more than 100,000 provider and pharmacy locations each day. The joint venture will maintain CVS Caremark and Cardinal Health's leadership positions as they drive value for their customers, clients and shareholders in a capital-efficient manner.

Organizational Structure

In chapter 11 there is a concept known as the balanced scorecard, which is a strategic management support system for measuring vision and strategy against business and operating unit level performance. CVS currently has a system in place to measure performance of each individual store. This concept is called S.O.S. (Stores Own Sales). S.O.S. measures how a store is performing based on how managers implement business strategies created by CVS. It is the manager's duty to create and grow sales every month and make sure the store is operating at its' full potential.

Studying Mergers and Acquisitions

In 1972, CVS acquired 84 Clinton Drug and Discount stores, which introduced CVS to Indiana and the Midwest. By 1974, CVS had 232 stores and sales of $100 million. In 1977, CVS acquired the 36-store New Jersey-based Mack Drug chain. In 1972, CVS acquired 84 Clinton Drug and Discount stores, which introduced CVS to Indiana and the Midwest. By 1974, CVS had 232 stores and sales of $100 million. In 1977, CVS acquired the 36-store New Jersey-based Mack Drug chain. In 2004, CVS purchased 1,268 Eckerd drug stores and Eckerd Health Services. On July 13, 2006, CVS announced that it had entered into a definitive agreement to acquire Minneapolis-based MinuteClinic, the pioneer and largest provider of retail-based health clinics in the U.S. MinuteClinic operates as a wholly owned subsidiary of CVS Corporation.

Alliances

CVS Caremark and prescription drug distributor Cardinal Health are combining their buying power through a 10-year joint venture to purchase generic medicines.

The joint venture will become active in July and will negotiate supply contracts for both Dublin, Ohio-based Cardinal and CVS Caremark, the nation's second largest drugstore chain and one of the largest pharmacy benefits managers.

Cardinal will make $25 million quarterly payments to CVS Caremark, which is headquartered in Woonsocket, R.I., over the life of the contract. Those payments boil down to a total of about $435 million after taxes.

Drugstores and pharmacy benefits managers have been hit with a wave of generic drugs over the past few years as popular brand-name medications like the cholesterol fighter Lipitor lost patent protection. These cheaper generic drugs have hurt pharmacy revenues but they also help earnings because they come with a larger margin between the cost the company pays for the drug and the reimbursement it receives.    -BusinessWeek.com

Looking at International Strategies

CVS is not very much involved in international business, but acquired a privately owned Brazilian drug store chain last year. There are about 44 stores that made BR1.3 billion in revenue in 2011.

“As you know, we have been exploring opportunities for possible international expansion, and we have said many times that our approach would be measured and we would exercise financial discipline, We believe this acquisition is a great example of that strategy and action.”

“We view Brazil as an attractive market given that health care and pharmacy are expected to grow double digits for the next decade, and while chains are prevalent, it is still a highly fragmented market. So, we see nice opportunities to grow the business over time."  -Larry Merlo

http://www.retailingtoday.com/article/cvs-caremark-bullish-international-opportunities

Developing Corporate Strategy

Synergy occurs when the combined benefits of a firm's activities in two or more arenas are more than the simple sum of those benefits alone. CVS Caremark achieves synergy by integrating its' pharmacy and Minute Clinic. This strategy allows consumers to receive treatment as well as have their prescriptions filled all in one convenient stop. Most large and publicly traded firms offer multiple products and services through a process called diversification. CVS Caremark builds its' diversification by offering products in retail and services in pharmaceuticals and healthcare.

Crafting Business Strategy

A great business strategy can do wonders for a company if done correctly. CVS was the first major pharmacy to offer a customer loyalty card, and has enjoyed the success for the last 17 years. Chapter 6 mentions companies categorized as first movers, fast followers, and habitually late movers. In the case of the customer loyalty card, CVS was a first mover; followed by the second mover, Rite AID, then the habitually late mover in Walgreens. Walgreens did not adopt the loyalty card until two years ago, 15 years after CVS. CVS leads all pharmacies in annual prescriptions filled and the loyalty card is a big reason for their success. The card offers customers coupons and discount based on how many prescriptions are filled.