CVS:  The Web Strategy a Harvard Case Analysis

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Outline. Company descriptionPorter's Five Competitive ForcesSTEEP and SWOTThe Business E-commerce and CVSThe Internet and CVS.COMIndustry comparisonKey management challengesVisionProblem StatementRecommendationsSummary. . CVS. Consumer Value StoreFounded in 19634,100 stores and 12.5% of all prescriptionsCVS operations are grouped into four businessRetail pharmacyPharmacy Benefit Management Plans (PBMs)Specialty pharmacy - ProCareInternet pharmacy - CVS.COM.

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CVS: The Web Strategy a Harvard Case Analysis

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1. CVS: The Web Strategy a Harvard Case Analysis E-Commerce Management 671 Radford University John Carson David Keeley Bryant Ermel Ben Reeves

2. Outline Company description Porter’s Five Competitive Forces STEEP and SWOT The Business E-commerce and CVS The Internet and CVS.COM Industry comparison Key management challenges Vision Problem Statement Recommendations Summary

3. CVS Consumer Value Store Founded in 1963 4,100+ stores and 12.5% of all prescriptions CVS operations are grouped into four business Retail pharmacy Pharmacy Benefit Management Plans (PBMs) Specialty pharmacy - ProCare Internet pharmacy - CVS.COM

4. CVS Total Healthcare solutions Soma.com - First web based pharmacy Spin-in of Soma.com provides CVS and CVS.COM “First-mover” status - 8/99 Drugs on-line - “Sell more drugs” The best of Bricks and Clicks

5. The Industry

6. Retail Prescription Drug Industry Increased from 2.0 B in 1992 to nearly 3.0 B in 1999 - 50% increase in 7 years The year 2000 was expected to reach 3.15B Chain pharmacy is the leading component Dispensing more than 60% of these prescriptions 2 billion prescriptions annually

7. Porter’s Big 5 Suppliers Buy direct from manufacturers Physicians PBM Insurance Buyers Aging America (50+) Fast growing new internet users are the 60+ Physicians PBM Insurance

8. Porter’s Big 5 Competitors On-line DrugStore.com PlantRX.com Walgreens Eckerd Bricks and Mortar Walgreens. Duane Reede Inc. Walgreens Company Rite Aid Corp. Longs Drug Stores Corp. New Entrants Highly regulate, mature industry with high barriers to entry Clicks without Bricks have failed Substitutes Bricks Mail order MerckMedco

9. STEEP Situation CVS recognized Web threat Established first mover Brick and Clicks presence with spin-in of Soma.com Technology Use of MS DNA platform allowed CVS.com to be fielded in 11 weeks Updated all IT systems, both Bricks and Clicks Customers, supplier, and e-commerce

10. STEEP Economic Healthcare: an economic safe haven Necessity industry Bricks and Clicks synergy has benefited CVS Environment Increasing presence of Manage Care Organizations (MCOs) Emphasis on cost control Aging population Increase in new drugs and therapies

11. STEEP Political Managed healthcare Hillary

12. SWOT

13. Business Model E-shop with value integration A hybrid Clicks and Bricks Benefit of B2B from mature Brick Evolution, not a Revolution Mail-order model with option to pick-up at local Brick or delivery Healthcare content provider Two way Banner hyperlinks with affiliates

14. Core Competencies BRAND Buying power Direct from manufacturers -vertical integration Marketing synergies CRM IT

15. BCG

16. Management Issues Relationships with PBMs and insurers, physicians, manufacturers B2B and B2C costs (Margin) Maintain alliances Pricing, Privacy, and Customer Relations Managed Care Adapting on-line merchandising strategies

17. Vision Our goal is to provide our customers with a total healthcare solution. Consistent with this goal, CVS launched two exciting businesses in 1999, CVS ProCare and CVS.com Our goal is to achieve long-term and sustainable earnings growth of 16-18%, while continuing to invest in our future.

18. Problem Statement How should CVS and CVS.com maintain their position and continue to reap the benefits? How important is the balance of building BRICKS and expanding CLICKS?

19. Recommendations Penetrate new geographical markets - West Coast : enhancement of BRAND awareness Buy Longs Focus on Health Care Solutions enhancement of CRM Promotion & Advertising - programs such as Health Content (web portals & links), Xtra! - ‘frequent shopper program’, and expand on-line Market Synergies Continue to develop and evaluate on-line merchandising strategies: Buying Power

20. Summary Unique Bricks & Clicks Integration A Leading Retail Pharmacy Chain Nationally Recognized Name

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