CVS Pharmacy And Pulling Off Tobacco Products Research Paper

Length: 15 pages Sources: 12 Subject: Business Type: Research Paper Paper: #40484292 Related Topics: Tobacco, Smoking Cessation, Nicotine, Accountable Care Organizations
Excerpt from Research Paper :

Business Strategy - CVS Pharmacy Strategy.

CVS Rebranding Strategy

CVS took out tobacco from its stores' shelves one month earlier than was planned originally. This move plus the alteration of the company's corporate name is targeted at helping the company rebrand as a health care company. With a name such as CVS health, the company believes that not being part of the tobacco distribution system is good for the company in the long-term and is aligned with the company's new focus on health. CVS health had also announced that it was to launch a campaign against smoking. Observers were surprised by CVS Caremark Corporation (NYSE: CVS) when it made the announcement concerning its stance on Tobacco. The announcement was accompanied by a big banner proclaiming the new logo and name of the company across the NYSE (Sheets, 2014).

The company's rebranding, they said, is aimed at assisting people be of better health. The rebranding is also positioning the company for an even bigger role in the provision of healthcare services - services going beyond the common business model of retail pharmacy. They say that because they have always have been at the forefront of innovation, they will continue delivering innovative products and so enable businesses and people as well as communities manage health more effectively and in a more affordable manner by having programs in specialty pharmacy, medication adherence as well as walk-in medical clinics. Earlier on, the company had made an announcement that having tobacco on the shelves of its stores conflicted with their mission as well as their stance on good health. It had been said by officials from the company that it was not mere coincidence that this decision was made at the time of rebranding (Cheney, 2014).

The company noted that the company's new name is in line with the goals of the company as a new kid in the block in the market of health care service providers. They said that they are actively involved in shaping the outlook of healthcare as well as its future by rolling out medication adherence programs, having walk-in medical clinics and giving support to the patient who come with complex or chronic conditions. Some of their offerings include:

Programs for the management of chronic conditions

Programs for connecting patients and pharmacists to assist them stick to the medications prescribed

Having digital capacity to support the programs

They are also planning to liaise with health plans and physicians in order to give medication, clinical support, monitoring of chronic conditions as well as wellness programs.

The company is offering programs to manage chronic conditions as a way of expanding their revenue stream. With the high cost of medical care, their offerings gives these patients an affordable way to manage their conditions as CVS accepts most insurance plans and their rates are more manageable. Health care costs in the United States is growing each year and becoming prohibitive for a majority of the population. CVS customers can take advantage of the affordable offerings and so make savings in healthcare. In fact, the company is positioning itself to take advantage of opportunities brought forth by Obama's Affordable Care Act. The Affordable Care Act has lead to many Americans seeking access to health care. CVS is positioning itself to take advantage of this fresh group of customers by expanding their product offering. It is now providing a range of healthcare products tailored for various needs and the new branding efforts are in line with that. With its new name, CVS Health, the company is more appealing as a destination for health services. More people can now go to a CVS store not just to buy drugs but also to get other health services not offered at your typical pharmacy.

CVS has partnered with various other providers in the health space to increase their product offering. This is aligned with their new found goal of a focus on health. Various players in the industry have applauded the decisions CVS has made in the recent past especially the move to so away with tobacco from its shelves. It is in CVS interest that they partner with these health institutions so as to support their programs.

Digital programs are crucial as a supplemental offering to the various programs they now offer....

...

The competitors are running smoking cessation programs and CVS is seeking to improve its smoking cessation program. The competitors categorically stated that stopping sale of tobacco was completely unnecessary as reducing smoking in America can not be done by simply reducing the availability of tobacco. They touted their programs of tackling the root problem as more efficient and useful.

Officials at the company are saying that the rebranding efforts are to help the company align with the bigger roles it is to play in the expanded business model. Because of its culture of always bringing forth innovative products it has to strategize to serve its clients effectively and meet their needs (Chenney, 2014).

The rebranding will be of help to CVS in 2 ways. One, health conscious consumers and those seeking to stop their tobacco usage are likely to get the needed support at CVS and so shop at their stores. Second, because of its commitment to health care, it will be taken more seriously by other players in the market as well as potential partners. Because a key component of the business model of the company is partnering with various players in the health sector, this decision will go along way in smoothening future efforts. The company is currently affiliated to over 41 health providers and is making efforts at growing that number since the Affordable Care Act has grouped health care providers among accountable care organizations. While CVS may be the first pharmacy to halt tobacco sale in its stores, Target was the first big retail store to halt the sales. This was done way back in 1996. Some other small retailers followed their lead including Wegmans Food Market Inc. that did this in 2008 (Sheets, 2014).

The decision the company made has been a serious public health win. The decision is also very shrewd and can later mint profits for the company as it positions itself as a major player in the healthcare provider space. The company's new name is CVS Health. This could also mean that CVS is taking steps to align its operations to Obama's Affordable Care Act. The Act brings forth great opportunities for CVS to exponentially grow - not just in the business of pharmacies but also the expansion of MinuteClinics that give basic primary care in their stores. There are plans to grow the number of stores offering this from 900 that existed last year to an estimated 1,500 by the year 2017. The company is continually opening new clinics every quarter and its revenues are growing. A key component of these openings is partnering with hospitals and insurance systems and having cigarettes in their store directly contradicts this goal. There is no use of having tobacco on their shelves any more. Fresh customers brought by the decision are likely to stay longer and get their prescription medicine at CVS. This strategy is bound to make more money than would cigarettes. More money can be brought in if the company is perceived as a place one can stop by to receive healthcare and also to purchase healthcare products (Friedman, 2014).

Porter's Five Forces Model

1. Threat of Entry: there is a low threat of entry into the pharmacy market because of the prohibitive cost of entry. Entering a single market like Memphis is however easier since erecting just one store isn't as hard (Itorbett, 2013).

2.

Threat of Rivalry - there is a high threat of rivalry as pharmacies can be found in nearly every corner. Price cutting is a competitive strategy in the store front. This isn't common though in the main pharmacy as the price is often set by the wholesaler. Promotions like gift cards as well as price marching are common, however.

3.

Threat of substitutes: there are substitutes for the products at the front store in various locations at supermarkets and gas stations. Medications, however, can't be substituted (Itorbett, 2013).

4.

Threat of suppliers: the operations of companies are dependent on their suppliers. When there is no medication, there is no pharmacy. Displays also work well in attracting clients. Suppliers alone aren't the problem as shortages can occur at the manufacturing plant too (Itorrbett, 2013).

5.

Threat of buyers: the buyer count for pharmacy benefit providers and pharmacies is limited. Smaller pharmacies are continually being acquired by bigger chains like CVS and Walgreens (Itorbett, 2013).

The inherent financial risk in CVS stopping selling tobacco was thought to be offset by the PR hallo that would be created. This differentiation might just help the store win new business in other operations of the corporation like administration of prescription drugs (Zibro, 2014).

Effects of the rebranding of CVS as a company focused on health and what…

Sources Used in Documents:

References

Itorbett (2013). Evaluating Environmental Threats. Retrieved from: https://ltorbett.wordpress.com/2013/02/

Nicole, Holsted., Jennifer, Jones., Benjamin, Levin. Walgreen Co. Wednesday, April 11, 2012. Retrieved from: http://economics-files.pomona.edu/jlikens/SeniorSeminars/Likens2012/reports/Walgreens.pdf

Japsen, B. (2014). Why Walgreen Won't Stop Selling Tobacco Like CVS Health. Retrieved from: http://www.forbes.com/sites/brucejapsen/2014/09/04/why-walgreen-wont-stop-selling-tobacco-like-cvs-health/

Cheney, C, 2014, Behind the CVS Health Rebranding Strategy, Retrieved from: http://www.healthleadersmedia.com/content/LED-308131/Behind-the-CVS-Health-Rebranding-Strategy
Speights, K, 2014, 3 Reasons CVS Health Corporation's Stock Could Fall, The Motley Fol, Retrieved from: http://m.fool.com/investing/general/2014/09/15/3-reasons-cvs-health-corporations-stock-could-fall
Giblom, K., Cortez, M, F, 2014, CVS's Competitors Can't Afford to Quit Tobacco, Bloomberg Business, Retrieved from: http://www.bloomberg.com/news/articles/2014-11-04/cvs-s-competitors-can-t-afford-to-quit-tobacco
Cheney, C, Behind the CVS Health Rebranding Strategy, Journal For Retail Medicine, Retrieved from: https://retailmedicinejournal.wordpress.com/2014/12/04/behind-the-cvs-health-rebranding-strategy/
Sheets, C, A, 2014, Why CVS Pulled Tobacco To Rebrand As Health Care-Focused Company, International Business Times, Retrieved from: http://www.ibtimes.com/why-cvs-pulled-tobacco-rebrand-health-care-focused-company-1677466
Friedman, L, 2014, Here's Why CVS' Decision To Stop Selling Cigarettes Makes Perfect Business Sense, Business Insider, Retrieved from: http://www.businessinsider.com/why-cvs-stopped-selling-cigarettes-2014-9
Vara, V, 2014, Why CVS quit smoking, The New Yorker, Retrieved from: http://www.newyorker.com/business/currency/cvs-quit-smoking
Schoultz, M, 2014, The CVS Rebranding Strategy: A Case Study, Retrieved from: http://www.digitalsparkmarketing.com/uncategorized/cvs-rebranding-strategy/
DeAngelis, M, CVS and the delivery of Healthcare, Retrieved from: http://www.peoriamagazines.com/ibi/2015/jan/cvs-and-delivery-healthcare
Shadel, W.G. (2014). CVS Health: Breathing a Little Easier and Holding Our Breath, The Health Care Blog, Retrieved from: http://thehealthcareblog.com/blog/2014/09/11/breathing-a-little-easier-and-holding-our-breath/


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