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Analysis of Omnicare By: Ashley Pait. Overview of Omnicare Pest Analysis industry Analysis. Snapshot of Omnicare. Established in 1981 in Covington, KY Part of the drugs wholesale industry and pharmaceutical industry Provides pharmaceutical care for seniors

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analysis of omnicare by ashley pait
Analysis of Omnicare

By: Ashley Pait

snapshot of omnicare
Snapshot of Omnicare
  • Established in 1981 in Covington, KY
  • Part of the drugs wholesale industry and pharmaceutical industry
  • Provides pharmaceutical care for seniors
  • Serves more than 1.4 million residents of…
    • Skilled nursing
    • Assisted living
    • Other healthcare facilities
  • Omnicare serves Canada, the District of Columbia, and 47 states in the U.S.
snapshot of omnicare continued
Snapshot of Omnicare Continued

13,700 employees

January 2011- Mr. John G. Figueroa was named the new CEO of Omnicare

February 17, 2011- Omnicare declared a quarterly cash dividend of 3.25 cents per share

Omnicare is a Fortune 500 company

suggestions to address key forces
Suggestions to Address Key Forces

Key Force= High Intensity of Rivalry

  • The pharmaceutical industry is a tough and competitive industry due to…
    • Technological advancements
    • Tighter regulations
    • Investor confidence
    • Drug patents
  • The industry needs to continue to differentiate and create technological advancements to be a very strong industry
possibility of a blue ocean strategy
Possibility of a Blue Ocean Strategy

Omnicare has 3 out of 5 of the major Blue Ocean Strategy Components

Omnicare could easily use a true Blue Ocean Strategy in the pharmaceutical industry

omnicare s current strategy
Omnicare’s Current Strategy
  • Omnicare currently has the following characteristics, which are found in a Blue Ocean Strategy:
conclusions of pest and industry analysis
Conclusions of pest and industry analysis
  • Technological opportunities and threats are most important for Omnicare
  • The drug wholesale industry has a…
    • Low…
      • Threat of new entrants
      • Threat of substitutes
      • Supplier power
      • Buyer power
    • High…
      • Intensity of rivalry
  • Omnicare could easily use a true Blue Ocean Strategy in the pharmaceutical industry
omnicare s competitive positioning
Omnicare’s Competitive Positioning
  • Omnicare uses a differentiation strategy to compete
    • Omnicare has many diverse services
      • Omnicare is the only provider of any kind to offer a full range of systems to operate a long-term care facility
      • Omnicare has specialty pharmacy and compounding operations, enabling Omnicare to distribute drugs that require special handling
  • Omnicare also uses a cost leadership strategy to compete
    • Omnicare provides its clients with opportunities to improve the quality of care for the residents they serve while reducing overall healthcare costs
market growth opportunity
Market Growth Opportunity

Pharmaceutical market share by drug type

  • Growth opportunity:
    • Specialty distribution will play an increasing role as newer biotechnology drugs, typically requiring refrigeration and special administration, come to market
    • RxCrossroads, an Omnicare company, provides solutions enhancing pharmaceutical and biotechnology manufacturers' product success.

Other, 19%

ConventionalDrugs, 72%

size of drug wholesale market
Size of Drug Wholesale Market

In 2010 the United States’ drug wholesale industry totaled $602 billion, which was up 7% from the previous year

key trends in drug wholesale market
Key Trends In Drug Wholesale Market
  • Structural changes
    • The majority of companies generate high returns
    • Excess cash for further rapid growth is available and used for mergers and acquisitions
  • Emphasis on research and development
  • Future growth
future growth in drug wholesale market
Future GrowthIn Drug Wholesale Market
  • The baby boomers will soon reach age 65 which will increase the number of people who need long term care services.

Number of individuals needing long term care

Year

product service types in drug wholesale market
product & Service types In Drug Wholesale Market
  • Medications and drug distribution services
  • Infusion therapy
  • Pharmaceutical care guidelines
  • Pharmaceutical consulting
  • Clinical programs
  • Clinical trials management
  • Data analysis and submission
social media in drug wholesale market
Social Media In Drug Wholesale Market
  • How can companies improve their services by listening to online blogs?
    • If you have an insight about what your customers want through the blog, companies can serve the customers.
  • What are the risks associated with using social media in the drug wholesale industry?
    • The industry has to figure out what tools actually work for certain kinds of communications.
    • We have to decide whether to passively or actively monitor social-media activity.
  • Omnicare introduced “Omniview” in 2001
    • A web-based customer site that provides access to
      • pharmacy information
      • extensive array of on-line resources
  • As of 2010 there were 9 drug wholesale companies with blogs
conclusions of competitor and market analysis
Conclusions of Competitor and Market Analysis
  • Omnicare’s main competitors
    • PharMerica (Publicly Traded)
    • Option Care (Privately Held)
    • Covenant Care (Privately Held)
  • Competitors compete with...
    • Trust
    • Experienced companies with loyal customers
    • Focus on low cost
  • Key trends for the drug wholesale market
    • Structural changes
    • Future growth
    • Emphasis on research and development
  • Market segmentation includes…
    • Industry segmentation by products
    • Industry segmentation by distribution
omnicare s current business model
Omnicare’s Current Business Model
  • Omnicare currently operates as a service-driven company
omnicare s future business model
Omnicare’s Future Business Model
  • Omnicare wants to transitionas a operations-driven company by taking the following steps:
omnicare s performance o ver p ast 5 years
Omnicare’s Performance Over Past 5 Years

Numbers in thousands

2005-2006: 22.4% increase in sales

Sales peaked in 2006

2006-2007: 4.12% decease in sales

2007-2008: 1.73% increase in sales

2008-2009: 0.64% decrease in sales

There was a 0.14% overall increase in profit from 2007 to 2009

omnicare s key assets
Omnicare’s Key Assets
  • Cash
  • Accounts receivable
  • Unbilled receivables
  • Inventories
  • Goodwill
  • Properties and equipment
  • Identifiable intangible assets
  • Rabbi trust assets for settlement of pension obligations
bcg matrix
BCG Matrix

Stars

Question Marks

HIGH MARKET SHARE:

Omnicare holds 80% of the market share

HIGH

MARKET GROWTH RATE

LOW MARKET GROWTH:

There is little opportunity for growth in the market in the U.S.

LOW

Cash Cows

Dogs

HIGH

LOW

RELATIVE MARKET SHARE

overview of omnicare s
Overview of Omnicare’s…
  • Generic strategy
    • Overall cost leadership
  • Grand strategy
    • Organic development
  • Strategic clock
    • Low cost
    • High perceived service benefits
omnicare s generic strategy
Omnicare’s Generic Strategy

LOW COST COMPETITIVE ADVANTAGE:

Omnicare competes by reducing client’s overall healthcare costs.

Competitive Advantage

Low Cost

Higher Cost

Overall Cost Leadership

Differentiation

Broad

Competitive Scope

BROAD COMPETITIVE SCOPE:

Omnicare focuses on a broad spectrum of services in the drug wholesale industry.

Differentiation Focus

Cost Focus

Narrow

omnicare s grand strategy
Omnicare’s Grand Strategy
  • Transition to an operations-driven company
    • A focus on organic development
    • Enhance the customer experience
      • Align customer retention with incentive programs
      • Reposition leading technology offering
      • Invest in new technologies closer to the customer
    • Improve selling effectiveness
      • Re-engage sales consulting group
      • Improve coordination of selling process
      • Revamped incentive programs
omnicare s strategy clock
Omnicare’s Strategy Clock

High

Differentiation

LOW PRICE:

Omnicare focuses on low cost overall and differentiation

HIGH PERCIEVED SERVICE BENEFITS:

Omnicare does have competitors but their service benefits stand out to competitors with 80% of the market share!

Focused Differentiation

Hybrid

Perceived Service Benefits

Low Price

No Frills

Strategies Destined for Failure

Low

High

Price

omnicare in international markets
Omnicare in International Markets
  • Omnicare Clinical Research (OCR)
    • A division of Omnicare
    • A contract research organization specializing in Phase I to Phase IV trials for bio-pharma and medical device companies
  • OCR opened two offices in China in 2001
    • Offices in Shanghai and Beijing
  • Why China?
    • Phase I trials can be conducted in China for around 1/15th of the equivalent cost in a Western country
    • Phase II studies cost 1/20th of the price in the west
  • Omnicare also have other offices located in the Asia Pacific including…
    • Australia
    • India
    • Japan
ansoff growth matrix
Ansoff Growth Matrix
  • Omnicare should focus on Market Penetration
    • Existing Products- continue to focus on the same services offered in the U.S. globally
    • Existing Markets- focus on the already existing drug wholesale market globally.
  • The services Omnicare offer are needed globally, not only in the U.S.
  • Omnicare should consider using acquisitions in the global drug wholesale market.
    • They have already mastered the U.S. market and know what to do to succeed.
omnicare s value chain
Omnicare’s Value Chain
  • The service activities is where the value of Omnicare is created!
  • The value is created among the patients, physicians, payers, and pharmaceutical manufacturers.
omnicare s possibility of adding value
Omnicare’s Possibility of Adding Value
  • Generic drugs dispensed have increased from 62.5% of total scripts to 75.6% within the past 3 years
  • With more and more generic drugs, Omnicare may soon be capable of creating their own drug, resulting in cutting out the middle man (the drug manufacturing companies)

Generic Dispensing Rate

% of generics of total scripts

Quarter

conclusions of internal analysis swot strategies
Conclusions of Internal analysis, SWOT, & Strategies
  • Omnicare’s business model
    • Current: operate as a services driven company
    • Future: Omnicare wants to transition to an operations-driven company
  • Omnicare’s grand strategy
    • Organic development
      • Enhance the customer experience
      • Improve selling effectiveness
  • Omnicare’s strategic clock
    • Low cost
    • High perceived service benefits
  • Omnicare in international markets
    • Currently has offices in…
      • Australia, India, Japan, Shanghai, Beijing
suggestions for omnicare
Suggestions for Omnicare
  • Omnicare should focus on market penetration in the global drug wholesale markets
    • Omnicare already has 80% of the U.S. market share
    • They should focus on the European Union since the EU makes up the 2nd to largest percentage of the drug wholesale industry
      • U.S. makes up 37% of industry
      • European Union makes up 20% of industry
  • Omnicare should look into production of their own generic drugs
    • Generic prescription sales have increased overall within the past three years
  • Omnicare needs to focus on biotechnology since this is on an up rise in the industry