CVS Caremark Corporation – 2011 Harvard Case Solution & Analysis

CVS Caremark Corporation internal strengths and weaknesses:

Strengths:

One of the major strengths of CVS is the compound growth rate of the company that is way higher than the overall average of the industry. Moreover, a loyalty card by the company named as CVS/ Caremark extra is known to be one of the best and ranked on the first position in loyalty programs. The acquisition of Caremark by the company was a huge success and that in turn generated approximately $700 million and helped achieving economies of scale. Further, the current collaborations and agreements made by the company have proved to be extremely beneficial for the company. Inventory management of the company is extremely efficient that allows CVS to make a better link with the distribution centers of the company and boost the overall supply chain process. Moreover, the company is known to be number one supplier of drugs and medicines in the country with selling almost one billion drugs on an annual basis. The company is also enjoying positive net income and cash flows from the past few years.

Weaknesses:

One of the major weaknesses of the company is that the company owns hardly 4.2% of their retail stores and rest of the stores are rented by estate agencies. Furthermore, the leasing costs for the buildings are high and the buildings have not been utilized appropriately. Moreover, there is a list of government investigations and lawsuits that is still in pending. In terms of experience, the technicians and pharmacists of CVS have ranked the lowest in comparison with its competitors. The company is also not concentrating on proper marketing and advertising promotions. The company has faced a loss of approximately $4 billion in its PBM sales. In addition to this, the employees of the company have not been adhered to the rules and regulations of the company. Lastly, the operating income of the company is lower than the industry average and from the competitors as well.

Recommended specific strategies and long-term objectives:

Annual objectives of CVS for three years:

Objectives for first year:

As mentioned in the internal analysis of the company that the company is not focusing and spending much on the promotional and advertising activities. To cope-up with this weakness, the first annual goal of the company for the year 2012 is to make an increase in the marketing expense of the company almost by 50%. Along with these marketing objectives, another goal of the company for the year 2012 is to increase mergers and acquisitions. Specifically, the company has planned to acquire Rite Aid by the end of 2012.

Objectives for second year:

The objective of CVS for the second year that is 2013 will be increasing its marketing expense by more than 25%. In this way, the company would be better able to make advertising about the company. Another important goal of CVS is to renovate the acquisition that has been made in the previous year. This goal includes renovating a one-third of the acquired company’s location that is Rite Aid to CVS Caremark.

Objectives for third year:

The long term goal and objective of CVS for the third year is to make an increase in the marketing expense by 25%. In addition to this, another long term strategic goal of the company is to renovate the remaining part of the Rite Aid locations to CVS Corporation.

Costing of long term goals and objectives:

As mentioned above, the long-term goals of the company include making an increase in marketing expense by 50% in year 1 and then by 25% for the next two years. The next objective of the company is the acquisition of Rite Aid. The estimated cost for these two annual costs is given as follows:

201220132014
$300 million$400 million$450 million

In addition to these marketing expenses, the acquisition cost of the company is estimated to be one billion US Dollars................................

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