McKesson Corporation (Mckesson) is an American pharmaceutical distributor with operations mainly in the U.S. The firm has been in operation since 1833, and boasts extensive market share, robust financial strength, and strong market power. The firm has built strong relationships with its key stakeholders, which adds to its strengths. Nonetheless, limited diversification and market focus as well as the threats of competition, unfavourable regulatory changes, and counterfeits present significant concerns for the company. To enhance its competitive advantage in the rigorously competitive pharmaceutical landscape, it is imperative for the firm to take advantage of consolidation, strategic partnerships, increased healthcare expenditure, and emerging markets. Introduction

McKesson Corporation (Mckesson) is an American health care company involved in the distribution of pharmaceutical productions as well as provision of health information technologies and care management tools majorly in the U.S. With a history that stretches back to close to two centuries, the organisation has grown to be the fifth largest company and the largest pharmaceutical distributor in the U.S. in terms of revenue, making it a Fortune 500 company. This paper provides a comprehensive analysis of Mckesson. Keen on examining the company's corporate strategy and its ability to increase competitive advantage, the analysis particularly focuses on internal and external stakeholders as well as the internal and external environment (SWOT analysis).

External Stakeholders

Competitors

Competitors comprise an important stakeholder group for any business organisation. They largely determine the degree of rivalry as well the extent to which new entrants can enter the industry (Prasad & Warrier, 2016). As a pharmaceutical distributor, Mckesson faces stiff competition from Amerisourcebergen Corporation and Cardinal Health. These are the two major competitors for the company, representing approximately 30% and 22% of the total market share in the U.S., respectively (MDM, 2016). Besides these two, there are other significant competitors, including Morris & Dickson, H.D. Smith, Smith Drug, Curascript Specialty Distribution, Anda Distribution, North Carolina Mutual Wholesale, and Rochester Drug Cooperative. Mckesson faces further competition from thousands of small and mid-sized regional and specialty wholesalers spread across the U.S. In spite of an intense threat of rivalry, Mckesson is the largest pharmaceutical distributor in the U.S., representing about one third of the total market share (MDM, 2016). This is a significant source of competitive advantage for the company.

Industry

The pharmaceutical distribution industry comprises two categories of players: full-line wholesalers and speciality distributors (MDM, 2016). The former distribute manufacturers' products to diverse outlets including outpatient outlets and institutional healthcare facilities, while the latter distribute speciality pharmaceutical products to physician owned and/or operated hospitals and clinics. The industry is highly concentrated with only three companies accounting for approximately 85% of the total industry revenue as of 2015 (MDM, 2016). These include Mckesson alongside Amerisourcebergen Corporation and Cardinal Health. High concentration in an industry provides an important advantage for incumbents, particularly those with dominant positions. It is quite difficult for new entrants to successfully enter the industry and grab a considerable share of the market (Prasad & Warrier, 2016). More importantly, concentration enhances buyer power, which can be crucial for dictating prices as well as trade terms and conditions (Hess & Rothaermel, 2011). Incumbents in a concentrated industry retain or increase their dominance by acquiring competitors. There have particularly been significant mergers and acquisitions in the pharmaceutical distribution industry in the last one decade. On its part, Mckesson has recently acquired PSS World Medical and U.S. Oncology, further consolidating its position in the industry (MDM, 2016).

Vendors

McKesson obtains pharmaceuticals from various manufacturers, none of which accounts for over 6% of the firm's purchases as of 2016 (Securities and Exchange Commission [SEC], 2016). This is a crucial supply chain strategy for the firm. Relying on multiple vendors cushions a firm against the risk of business discontinuity in the event one of the vendors is affected by adverse events. The major vendors for Mckesson include the largest pharmaceutical manufacturers: Gilead Sciences, Astrazeneca, Glaxosmithkline, Sanofi S.A., Pfizer, Novartis, and Merck & Co. Whereas these manufacturers command substantial power due to their dominance, Mckesson also commands significant power as a buyer given that it is the largest pharmaceutical distributor. The importance of buyer power cannot be overemphasised (Prasad & Warrier, 2016). As a powerful...

It can also influence manufacturing standards and other aspects. For instance, the law now requires drug manufacturers to serialise products. As a buyer, Mckesson can readily decline to do business with vendors that defy the requirement. Even so, the firm strives to maintain healthy, mutually beneficial relationships with its vendors.
Customers

McKesson supplies pharmaceuticals to a wide array of customers, including pharmacies, institutional healthcare providers, physicians, retailers, and medical laboratories. Whereas the firm has operations in other parts of the world, especially the UK, Australia, and New Zealand, majority of its customers are in North America, which actually accounts for more than 80% of its total revenues (SEC, 2016). The firm's largest customer is CVS, which accounted for approximately 20.3% of the firm's total revenue in 2016 (SEC, 2016). As stakeholders, customers expect quality and safe products, delivery reliability, and legal compliance, among other expectations. These expectations are particularly important in the pharmaceutical industry. Healthcare providers, pharmacies, and buyers of pharmaceuticals would not want to stock or provide drugs that may endanger the health of patients. Mckesson fulfils the expectations of its customers by working with reputable drug vendors.

Government Entities

Government entities also comprise important external stakeholders. Mckesson is subject to laws and regulations by local, state, and federal authorities (SEC, 2016). These laws and regulations may relate to aspects such as consumer safety, competition, environmental pollution, employee welfare, and financial reporting. Regulatory requirements for the pharmaceutical industry are even more stringent given the critical nature of the products the industry provides. Government entities expect the firm to comply with all the relevant laws and regulations, failure to which the firm may incur severe consequences such as fines, expensive lawsuits, and even loss of operating licenses.

Communities

Communities generally denote the greater public or society in which an organisation operates. Organisations in diverse sectors and industries have increasingly recognised the benefits of contributing to the wellbeing and prosperity of the communities they operate in (Benn, Abratt & O'Leary, 2016). Mckesson fulfils the expectations of communities via a number of ways. These include donating to social causes, supporting non-medical cancer management services for low-income populations, commitment to reducing environmental footprint, volunteerism, as well as supporting causes that promote employee wellbeing (Mckesson, 2015). These initiatives clearly demonstrate the firm's concern for its communities, a vital source of goodwill.

Internal Stakeholders

Shareholders

The primary interest of shareholders in an organisation is wealth maximisation (Benn, Abratt & O'Leary, 2016). Shareholders invest in an organisation in return for dividends and increased stock value. Mckesson is a publicly listed company, meaning that shareholders comprise a vital stakeholder group. Through annual reports and SEC filings, the firm must regularly inform shareholders about its financial position, often quarterly and annually. Mckesson's impressive financial performance indicates that the firm has commendably fulfilled the expectations of its shareholders. The firm has been profitable in the last five years, with earnings per share growing consistently from $5.56 in 2012 to $9.84 in 2016 (SEC, 2016). Nonetheless, the firm's performance in the stock market has been quite poor since 2015, with its share price declining from $226.20 in 2015 to $157.25 in 2016 (SEC, 2016). This could be worrying for shareholders.

Board of Directors

Directors serve as the custodians of shareholder funds. In other words, they make decisions on behalf of shareholders. Their job is to ensure the organisation is properly governed and make decisions that most significantly maximise shareholder wealth (Benn, Abratt & O'Leary, 2016). They achieve this by defining the organisation's strategic focus, hiring and supervising the management team, and ensuring compliance with all relevant laws and regulations.…