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CVS HealthMGMT 485Brianna WilsonKyleigh FlookAlexis DwemohNatalie JohnsonGodfrey WilliamsFrostburg State UniversityContents TOC \o "1-4" \h \z \u Introduction PAGEREF _Toc532236661 \h 5Internal Environment PAGEREF _Toc532236662 \h 9Resources PAGEREF _Toc532236663 \h 9Tangible Resources: PAGEREF _Toc532236664 \h 9Long-term Care PAGEREF _Toc532236665 \h 9Specialty Pharmacies PAGEREF _Toc532236666 \h 10Allocation of Store Importance PAGEREF _Toc532236667 \h 10Intangible Resources PAGEREF _Toc532236668 \h 11Employees PAGEREF _Toc532236669 \h 11Creating Customer Value PAGEREF _Toc532236670 \h 12Value Chain Analysis PAGEREF _Toc532236671 \h 12Inbound Logistics PAGEREF _Toc532236672 \h 12Operations PAGEREF _Toc532236673 \h 13Outbound logistics PAGEREF _Toc532236674 \h 13Sales and Marketing PAGEREF _Toc532236675 \h 13Customer analysis PAGEREF _Toc532236676 \h 14Services PAGEREF _Toc532236677 \h 14Procurement PAGEREF _Toc532236678 \h 16Research and Development PAGEREF _Toc532236679 \h 17Technological Development PAGEREF _Toc532236680 \h 18Activity map PAGEREF _Toc532236681 \h 18Finance/ Accounting PAGEREF _Toc532236682 \h 20Leverage Ratios: PAGEREF _Toc532236683 \h 21Activity Ratios: PAGEREF _Toc532236684 \h 22Total Assets Turnover: PAGEREF _Toc532236685 \h 22IFE PAGEREF _Toc532236686 \h 22External Environment PAGEREF _Toc532236687 \h 23General Environment PAGEREF _Toc532236688 \h 24Political PAGEREF _Toc532236689 \h 24Influence of Politics PAGEREF _Toc532236690 \h 24Taxes PAGEREF _Toc532236691 \h 24Economic PAGEREF _Toc532236692 \h 25An Expanding Industry PAGEREF _Toc532236693 \h 25Commodity Controlled Markets PAGEREF _Toc532236694 \h 26Sociocultural PAGEREF _Toc532236695 \h 27The Need for Comfort PAGEREF _Toc532236696 \h 27Increased Desire for Connection PAGEREF _Toc532236697 \h 28Customization PAGEREF _Toc532236698 \h 28Living Cleaner PAGEREF _Toc532236699 \h 29Technological PAGEREF _Toc532236700 \h 29Digital Marketing and Social Media PAGEREF _Toc532236701 \h 29Implementing Innovations PAGEREF _Toc532236702 \h 30Legal PAGEREF _Toc532236703 \h 31Risk of Lawsuits PAGEREF _Toc532236704 \h 31Unruly Regulations PAGEREF _Toc532236705 \h 32Environmental PAGEREF _Toc532236706 \h 33Climate Changes PAGEREF _Toc532236707 \h 33Living Greener PAGEREF _Toc532236708 \h 34Retail Pharmacy Industry (Porter’s Five Forces) PAGEREF _Toc532236709 \h 35Bargaining power of Suppliers PAGEREF _Toc532236710 \h 35Bargaining power of buyers PAGEREF _Toc532236711 \h 35Threats of New Entrants PAGEREF _Toc532236712 \h 35Threat of substitution PAGEREF _Toc532236713 \h 36Rivalry PAGEREF _Toc532236714 \h 36Competitor Environment (Retail Pharmacy) PAGEREF _Toc532236715 \h 36Walgreens PAGEREF _Toc532236716 \h 36Rite Aid PAGEREF _Toc532236717 \h 39Walmart PAGEREF _Toc532236718 \h 42Ratio comparison PAGEREF _Toc532236719 \h 44CVS Heath and Aetna Merger PAGEREF _Toc532236720 \h 46Insurance Industry Environment(Porter’s Five Forces) PAGEREF _Toc532236721 \h 47Bargaining power of buyers PAGEREF _Toc532236722 \h 47Threat of New Entrant PAGEREF _Toc532236723 \h 47Threat of Substitution PAGEREF _Toc532236724 \h 47Rivalry PAGEREF _Toc532236725 \h 48Competitor Environment (Insurance) PAGEREF _Toc532236726 \h 48Aetna PAGEREF _Toc532236727 \h 48UnitedHealth Group PAGEREF _Toc532236728 \h 49Anthem PAGEREF _Toc532236729 \h 50Ratio Comparison PAGEREF _Toc532236730 \h 51CPM Matrix for CVS Health, Rite Aid, Walgreens and Walmart PAGEREF _Toc532236731 \h 53Purpose of the Firm PAGEREF _Toc532236732 \h 54Mission Statement PAGEREF _Toc532236733 \h 54Vision Statement PAGEREF _Toc532236734 \h 55Conclusion PAGEREF _Toc532236735 \h 60Summary and Evaluation of Current Strategies PAGEREF _Toc532236736 \h 60Summary of Report 1 PAGEREF _Toc532236737 \h 60Retail Pharmacy PAGEREF _Toc532236738 \h 60Pharmacy Services PAGEREF _Toc532236739 \h 61CVS Health’s Current Strategies PAGEREF _Toc532236740 \h 61Matching Stage PAGEREF _Toc532236741 \h 64SWOT Matrix PAGEREF _Toc532236742 \h 64SPACE Matrix PAGEREF _Toc532236743 \h 67BCG Matrix PAGEREF _Toc532236744 \h 69QSPM and Strategic Evaluation PAGEREF _Toc532236745 \h 72The Reason Behind MinuteClinics: PAGEREF _Toc532236746 \h 73The Reason Behind Technology Innovations: PAGEREF _Toc532236747 \h 74Based on the QSPM PAGEREF _Toc532236748 \h 76Strategic implementation PAGEREF _Toc532236749 \h 79Current Technological Implementations PAGEREF _Toc532236750 \h 79About the App PAGEREF _Toc532236751 \h 80Overcoming App-stacles PAGEREF _Toc532236752 \h 81Impact on the Overall Business PAGEREF _Toc532236753 \h 83NPV PAGEREF _Toc532236754 \h 85Financial Analysis PAGEREF _Toc532236755 \h 86Income Statement PAGEREF _Toc532236756 \h 89Balance Sheet PAGEREF _Toc532236757 \h 90Historical ratios PAGEREF _Toc532236758 \h 91Projected Ratios PAGEREF _Toc532236759 \h 92Strategy Evaluation and Contingency Plans PAGEREF _Toc532236760 \h 92IntroductionIn 1963, the first CVS opened up in Lowell, Massachusetts selling health and beauty products. Brothers Stanley and Sidney Goldstein and partner Ralph Hoagland created Consumer Value Stores (CVS) Health. By 1964, the creators of CVS grew to 17 stores and displayed their original logo for the first time on the exterior. Four years after opening their first store, they decided to start a pharmacy department within their stores. When the stores in Warwick, Cumberland, and Rhode Island opened they debuted the new pharmacy portion. Melville Corporation then bought CVS in 1969. CVS Health decided to differentiate themselves from their competitors by opening small stores in malls.1 Throughout the 1980s, co-founder of CVS Stanley Goldstein went through the ranks of Melville Corporation and ending up as CEO in 1987.1By 1990, CVS acquired People’s Drug and established the company in the new mid-Atlantic adding 500 stores to their corporation. CVS Corporation became independentits own company when Melville Corporation restructured. Throughout the late 1990s, CVS acquired Revco and Arbor Drugs, expanding itself CVS to 4,100 locations in 24 states. In 1999, CVS advanced into the new age by launching . It was the first online pharmacy in the United States. Rick Krieger, Douglas Smith, Steve Pontius, and Kevin Smith found QuickMedx, which later became CVS’ Minute Clinic. After CVS took over Stadtlander Ppharmacy, that made CVS ProCare became the largest specialty pharmacy in the US.1In 2001, CVS released the ExtraCare cCard, a loyalty card program. CVS was the first national pharmacy retailer to release a loyalty card. In 2002, it was announced itstheir plans to enter the Texas market, in Dallas and Houston, and also Phoenix, Arizona and Las Vegas, Nevada. In 2005, CVS partnered with MinuteClinic to opening locations inside its their stores. In 2007, CVS Corporation and Caremark Rx, Inc. merged together to create CVS Caremark. CVS Caremark acquired 541 locations from Longs Drug expanding more into California, Hawaii, Nevada, and Arizona. MinuteClinic starts affiliating with major health systems to create an affordable, high-quality health care services.1In 2011, CVS Caremark’s revenues exceeded $100 billion. In February 2014, CVS announced that they will be removing cigarettes and tobacco from their locations. Seven months later, CVS followed through with their announcement and removed those products and launched a national smoking cessation program. 2014 was a big year for CVS because they changed their name to CVS Health and purchased the largest Hispanic-owned drugstore chain located in the United States, Navarro Discount Pharmacy. In December 2015, both Target and CVS Health announced the merger between Target Pharmacy and CVS Pharmacy. In addition, CVS Health would take over the Target Clinics they had and turn them into MinuteClinics. As this merger would happen they would also open up more MinuteClinics.1 In 2016, they started the initiative to help create the first generation to be tobacco free. In December 2017, Aetna and CVS Health announced the mergeraquisition between the two companies. By combining the two companies, they are planning to create quality health care that is easier to use and less expensive. While profits will be greater for both companies, it may not be best for consumers. The merge could cause patients to be limited on how and where they can be treated and receive prescriptions. With how small the medical retail industry is this could cause a bigger monopoly in the pharmaceutical industry. In the last year, CVS Health has joined the fight against the opioid crisis. They designed programs to reduce the abuse and misuse of prescriptions drugs. CVS Health added 750 safe medication disposal sites into pharmacy locations to reduce the chances of drug misuse in homes from unwanted/unused drugs. CVS Health has started a program to increase access to naloxone, a life-saving opioid overdose-reversing drug, in 48 states. They are also supporting addiction recovery programs by providing grants to community health centers across the United States. Today, there are 246,000 employees,125 suppliers, there are 9,800 stores in 49 states, including DC, Puerto Rico, and Brazil. There are 1,100 Minute Clinics in 33 states and DC and 22 distribution centers. CVS Health has many wholly owned subsidiaries. Some of CVS’s subsidiaries are CVS Pharmacy, MinuteClinic, CVS Caremark, Drogaria Onofre, CVS Specialty, Longs Drugs, Navarro Discount Pharmacies, Coram, SilverScript , Omnicare, and Accordant. CVS is broken down into three reportable segments.CVS Health is working towards affordable prescription drugs. With the creation of the CVS Pharmacy Rx Savings Finder, pharmacists can find lower cost options by confirming the insurance plans and looking at saving options. In 2018, they introduced the CVS Beauty Mark, a watermark to signify that the image has not been altered in any way. This campaign is to make customers feel good when searching the beauty isles in the store. By 2020, CVS health is hoping to have all beauty isle images to have the CVS Beauty Mark creating full transparency. CVS Health is in the industry as a pharmaceutical, retail, and now health insurance industries. CVS Health is all about living a better and healthy lifestyle. They are all about being innovative and keeping up with technological advances. They are using the forward integration strategy. They are merging with other companies to keep creating the best care for patients, while also trying to beat out competitors. In a wayMany fear that, CVS Health is starting to create a monopoly in the industry. They are taking over smaller companies to compete with Walgreens, who is merging with Rite Aid. Internal EnvironmentResources Tangible Resources: The three reportable segments are Retail, Long term Care(LTC), and pharmacy services. The retail/LTC segment of CVS operates in the entire top 100 drugstore markets in the United States. CVS also has a global presence, CVS acquired Brazil’s 8th biggest Brazilian drug chain in 2013. Additionally, the retail/ LTC segment of CVS includes 9,803 retail locations (8,060 were CVS stores operating a pharmacy and the remaining 1,695 were pharmacies located within “Target” stores), CVS online retail pharmacy websites, , and .br, 37 onsite pharmacy stores, long-term care pharmacy operations, and CVS retail health care clinics. CVS Retail/ LTC segment filled over 1.2 billion prescriptions in 2017, and held approximately 23.6 % of the United States retail pharmacy market. CVS also acquired Omnicare, which allowed their pharmacy care to reach another dispensing channel, the long-term care pharmacy. Long-term CareLong-term care operations deal with the distribution of “pharmaceuticals, related pharmacy consulting and other ancillary services to chronic care facilities and other care settings”. CVS uses Omnicare as a way to connect with an increasing aging population through senior care. CVS Pharmacy Services segment provides a wide variety of pharmacy benefit management (PBM) solutions to clients. Consisting primarily of employers, insurance companies, unions, government employee groups, health plans, Medicare Part D plans, Managed Medicaid plans, plans offered on the public and private exchanges, other sponsors of health benefit plans, plans offered on the public and private exchanges, other sponsors of health benefit plans and individuals throughout the United States . CVS also uses their insurance subsidiary “SilverScript” to nationally provide drug benefits to eligible customers under the federal government’s Medicare part D program. Specialty Pharmacies The CVS Pharmacy services segment operates under 23 retail specialty pharmacy stores, 18 specialty mail order pharmacies and four mail order dispensing pharmacies, and 83 branches or infusion and external services, including approximately 73 ambulatory infusion suites and three centers of excellence, located in 4 states, Puerto Rico and the District of Columbia. PBM (Pharmacy benefit management) filled approximately 1.8 billion prescriptions on a 30-day equivalent basis. CVS Corporate segment provides management and administrative services to support the overall operations of the company. The Corporate Segment of CVS is composed of executive management, corporate relations, compliance, human resources, information technology and finance departments.Allocation of Store Importance Pharmacy sales consist of 75% of net revenues for 2017 and 2016 net revenues (Pharmacy includes LTC sales, and CVS health pharmacies operated in Target stores), and the remaining 25% of net revenues in each year belongs to the “front store and other”. Front store is classified as over-the-counter drugs, beauty products and cosmetics, personal care products, convenience foods, photo finishing services, seasonal merchandise, and greeting cards. In 2015, pharmacy was 72.9 % of CVS’s net revenue. “Front Store and other” was only 27.1% of net revenues. Pharmacy services are detrimental to the success of CVS. In 2017, CVS opened 175 new retail locations, relocated 30 stores and closed 81 locations. In the last 5 years CVS opened approximately 1,000 new and relocated locations, and acquired 1,880 locations including the pharmacies acquired from target. CVS continuously opens stores because their retail pharmacy drugstore development strategy involves continuously growing their store base. As a result of CVS’s retail pharmacy development strategy, CVS will continue to open new shops, and relocate stores. CVS currently employs over 246,000 employees as of the end of 2017. Additionally, CVS has a reward program that is one of the largest and most successful retail loyalty programs in the United States. CVS places importance on their ExtraCare program because it improves customer loyalty. CVS ExtraCare program allows them to balance marketing efforts so we can reward our best customers by providing them automatic sale prices, customized coupons, ExtraBucks rewards and other benefits. Intangible ResourcesEmployees CVS has a multitude of intangible resources that help them obtain competitive advantages. CVS employees provide a lot of intangible value to the business. In 2017, CVS Health was selected as the winner of the Society for Human Resource Management impact award. CVS human resource practices showed immense evidence that new employee hire tactics were increasing employee performance. CVS Health used a multimedia pre-hire screening assessment that utilizes realistic job previews in order to improve new employee performance. CVS was also able to track the cost effectiveness and customer satisfaction to improve efficiency. CVS used evidence-based HR strategies to improve new employee productivity. CVS continues to develop employees through workforce programs such as regional learning centers. Creating Customer Value There are four regional learning centers that provide operational store and pharmacy training to develop colleagues and partnering communities. “According to the HR department CVS believes their retail pharmacy business benefits from their investment in both technology and people. Customers need medication management programs to get better information to help get the most out their health care dollars. CVS also values customer service and believes their success as a business is partially reliant on their superior customer service. CVS’ information system incorporates an architecture that centralizes data filing prescriptions to help improve customer service and other operations of the company. Value Chain AnalysisInbound LogisticsCVS sells makeup, office supplies, prescriptions, food, and other pharmaceutical services (such as their MinuteClinic). They also have a photo center for customers to custom print their photos to their preference. Their makeup section sells higher quality products than Rite aid. CVS sells basic office supplies such as pencils, pens, folders and staplers. CVS also sells food such as chips, chocolate, ice cream, and other convenient products. CVS has a reputation when it comes to customers getting what they need when it comes to the convenience and quality of their products, which adds value to their brand and customers. OperationsCVS Health provides different health plans to best suit their customers. CVS has specialty clinics that carry prescriptions for chronic and genetic diseases. There is an option to get prescriptions mailed to your house through their pharmacy application. CVS in-store retail operations consist of making sure the store is in its best shape. They also have a better store layout than competitors like Rite Aid whose setup makes it harder for customers to shop. CVS ensures their employees are giving the customers a great experience while shopping in the store with close personal relationships. Outbound logisticsCVS having a strong relationship with their suppliers, makes it easier to have multiple walk in clinics, specialty pharmacy stores. CVS keeping a strong relationship with their suppliers, will allow them to give their customers a variety of products for them to choose from. They evaluate their suppliers so their customers get the best products by having requirement forms such as product liability requirements and other required new supplier setup forms. They also provide purchase order terms and conditions, import requirements and other general terms and conditions for their suppliers to follow. Sales and Marketing CVS Health supplies customers with what they need for their path to better health. Their customer analysis helps them with marketing because CVS has a mobile app where customers can use to order and shop online. The company can use that data to help the company see what the customers like.Customer analysis Although CVS may be the close second to Walgreens in customer satisfaction, they have improved more than Walgreens did from the years of 2005 to 2017 with a 2.6% increase and Walgreens with a 1.3% increase. CVS has the extra care program and the CVS mobile app for their customers. Allowing their customers to use the extra care program has given CVS an opportunity to gain their customer loyalty. This also allows their customers to gain a certain amount of points, depending on what they buy, they can get free items or items at a reduced price. Services CVS decided to stop selling tobacco because they realized selling tobacco products was inconsistent with the purpose of the company. The tobacco sales have declined by one percent in retail stores across the states. Another study shows that consumers purchased fewer cigarette packs and consumers purchased a total of four percent more nicotine patches. CVS has set an example for other retail stores to stop selling tobacco products. Due to over 95 million fewer packs of cigarettes being sold, their market share has increased by fifteen percent. With this being successful helping the community in the direction of living a better and healthier life, CVS has started collaborating with Scholastic. Together they integrated the risks of using tobacco into teacher’s lessons plans. CVS also gives back to the community by providing charitable events such as hosting a 5K, providing colleague programs such as volunteering, and having a CVS Health employee relief fund. The relief fund provides assistance with home catastrophe and natural disasters, funeral and emergency travel expense, military deployment, and personal or medical emergencies.Another community program would be their disaster relief program, their community heroes grant program, and Project Health. Project Health helps qualified patients gain access without an appointment to free health screenings events. The project focuses on communities with substantial multicultural and uninsured communities. Another significant aspect of CVS Health is their national partners: The American Cancer Society, American Lung Association, National Association of Community Health Centers, National Association of Free and Charitable Clinics, Stand Up to Cancer, and Truth Initiative. These national partners are nonprofit organizations that help CVS Health maintain its purpose. Other ways CVS gives back to the community are their scholarships and the CVS Health Foundation which gives support for their nonprofit partners, pharmacy schools, and their colleagues. CVS Health diversity management focuses on workforce representation, colleague engagement, talent systems, supplier diversity and marketplace diversity. In addition to their diversity management policy, CVS states they are an equal opportunity employer which states they will not tolerate harassment and being discriminated against when it comes to job treatment, recruiting, training, hiring, compensation, benefits, transfer, and promotion. Compared to their competitors CVS is right behind Walgreens with customers satisfaction, but CVS has been increasing their customer satisfaction by catering to their customer’s needs. CVS has been doing that by keeping track of what their customers order through their app, allowing customers to have a recommended shopping list. By making sure their customers are satisfied, compared to their competitors, CVS make their customers feels welcomes by treating them to a higher standard, by offering promotions such as their loyalty program, and by measuring the progress that they make. ProcurementCVS Health strives to keep their suppliers diverse. The Billion Dollar Roundtable has recognized CVS Health for attaining their goal of spending over $1 billion to have diverse suppliers. ,This will help CVS by allowing certified diverse suppliers (a majority of whose owners are minorities and women) into their supply chain which will help add distinctive goods and services to the business to enhance their brand among customers. Their commitment to supplier diversity program is acknowledged for being the most active and progressive program among corporations. The program is strategic and has an ongoing initiative to help with meeting fair Pharmacy Benefit Management (PBM) client requirement by providing diverse supplier solution to help add value to differentiate them from their competition.The company’s commitment to supplier diversity increases the competitive advantage not only with competition, but by doing business with Minority and Women Owned Businesses. This increases economic growth, and allows customers to have more disposable income. CVS Health maintains and manages their supplier diversity by having a commitment to include Minority and Women Owned Enterprises (M/WBEs), Veteran and Service Disabled Veteran Business, Small Business Enterprises, Small Disadvantaged Business Enterprises, Disability Owned Business Enterprise, Disadvantaged Business Enterprises, and Lesbian, Gay, Bisexual and/ or Transgender Business Enterprises.Research and DevelopmentCVS Health continuously researches and develops innovative ways to widen their plethora of skill sets to generate more profit, products, services, and customer satisfaction. Research and development helps CVS make decisions such as investing in Aetna. A weakness of research and development is the increasing debt. “Further, we may incur and assume significantly more debt in the future, including in connection with the Aetna Acquisition or other acquisitions, strategic investments or joint ventures. For example, in connection with the Aetna Acquisition, if it is completed, we expect to incur approximately, $45.0 billion of new indebtedness and assume approximately $8.2 billion of existing indebtedness of Aetna. If we do not retire our existing debt or debt we assume in acquisitions or other strategic transactions, the risks described above could increase. We also could be adversely impacted by any failure to renew or replace, on terms acceptable to us or at all, existing indebtedness when it expires, and by any failure to satisfy applicable covenants.” Human Resource Management CVS does a custom built customer care pre hiring screening assessment with a realistic job preview that includes an applicant tracking system. This assessment has lowered costs, increased new hire performance such as reducing the amount of time customers are on hold for being transferred, waiting on someone to answer the phone, and calling the customer back. Due to the assessment CVS has seen performance increase to have better efficiency, better customer experience and profitability. CVS doing the prescreening assessment correlates back to their mission statement as serving their employees and customers by improving their lives to whom they serve. Technological Development CVS has a mobile app that patients can use to manage prescriptions, mobile payment, Extra Care offers, and curbside pickup. CVS Pay allows them to earn Extra Care savings and pay with one scan at the checkout. CVS having the mobile app to for customers to place their orders is a convenience that customers will appreciate. Activity map Their core competencies are related to the company’s ethics. Their mission and vision statements are about bettering the quality of human lives. Some of their core competencies are corporate social responsibilities (CSR), human resources, diverse suppliers and innovations. CVS is affordable by allowing their customers cheaper medicine alternatives and they are constantly looking for cheaper prices. The CVS pharmacy app and direct consumer telehealth are two ways of showing their innovations. As their diverse suppliers they work with women and minority owned company’s and they have a reward for suppliers who meet their requirements. CVS’ corporate social responsibility has a huge impact on the community, due to reducing waste and increasing environmental sustainability, which benefits the earth. The company having a strong CSR creates value for their stakeholders to develop, execute, and evolve.Activity MapTable 1.1-36195046291500Finance/ Accounting Table 1.2Ratio Calculations2017201620152014Current RatioCurrent assetsCurrent Liabilities1.021.181.261.37Quick RatioCurrent Assets-InventoryCurrent Liabilities .52 .62 .65.74 Debt-to-Total assets ratioTotal DebtTotal Assets .60 .61.60.49Debt-to-equity ratioTotal DebtTotal SE1.521.561.49.95Long-term-debt-to equity ratioLong-Term DebtTotal stock. Equity.59 .70.71.31 Times-interest earnedProfits before interest and taxesTotal interest charges 8.949.1611.28 13.80Inventory TurnoverTotal RevenueInventory 12.0812.0310.9511.68Fixed Asset turnoverSalesFixed Assets 17.9517.4515.5515.76Total assets turnoverSalesTotal Assets 1.941.881.661.88Gross Profit MarginSales – COGSSales .15.16.17.18 Operating Profit Margin EBITSales5.04%5.46% 6.17%5.94%Net Profit MarginNet Income Sales3.58%3.00%3.41%3.33%Return on total assets Net Income Total Assets 6.96%5.63%5.67%6.26%Return on stockholders’ equity Net Income Total shareholder equity 17.57%14.44%14.08%12.23%,,, Current Ratio: CVS Health’s current ratio was 1.37 in 2014, 1.26 in 2015, 1.18 in 2016, and 1.02 in 2017. CVS Health’s current ratio is slowly declining every year, but their current ratio is still over 1 so they will be able to pay any short term obligations if necessary. The steady decrease in their ability to satisfy short-term debts with their current assets is a cause for concern. CVS continuously grows their store base, which makes it harder to pay off short term debts using current assets. Quick Ratio: In 2014, CVS had a quick ratio of .74, in 2015 CVS had a quick ratio of .65, in 2016 CVS had a quick ratio of .62, and in 2017 CVS had a quick ratio of .52. As time progresses the quick ratio of CVS is declining. CVS Health’s declining quick ratio indicates that CVS can’t meet its short-term obligations without relying upon the sale of its inventories. Leverage Ratios: Debt-to-total assets ratio: CVS health’s 2014 debt-to-assets ratio was 49%, in 2015 it was 60%, in 2016 it was 61%, and in 2017 it was 60%. A debt-to-total assets ratio of over 100% is bad, and indicates that a company has more liabilities than assets. CVS debt-to-total asset ratio has been good for the past four years. This ratio is important because investors and creditors prioritize this type of ratio when making a decision about a company. Good debt-to-total assets ratios result in more financing from investors and creditors which helps expand CVS’s possibilities. Debt-to-equity ratio: CVS Health’s debt to equity in 2014 was .95, in 2015 it was 1.49, in 2016 it was 1.56, and in 2017 1.52. CVS is generally staying around the 1.50 range, and is highly leveraged. Activity Ratios: Total Assets Turnover: Total asset turnover is how much business a firm is getting relative to its asset investment. CVS total asset turnover ratio was 1.88 in 2014, 1.66 in 2015, 1,88 in 2016, and 1.94 in 2017. CVS Health’s asset turnover ratio is gradually increasing. CVS health manages its assets well in operations because as of 2017, every 1$ of assets generated $1.94 of sales. IFEThe IFE matrix shows how effectively a company's current strategy responds to strength and weaknesses. The key for the IFE consists of four major strength and weaknesses. We took the strengths and weaknesses of CVS and ranked them based on which factor weighed the most. Looking at CVS’ strengths, they had two factors that they ranked highly in, one being that they’re an experienced retailer with a strong stance in their industry and their incorporation of tech has improved their industry rank. CVS does things like adding innovative implementations such as the convenience vending machine to stay at the top. Unfortunately, they need to improve the technology they have implemented because it received negative reviews. And if CVS isn’t careful their high debt can hurt how much the company can really progress with trends. IFE TableTable 1.3?KEY FACTORS ?WEIGHTRATINGWEIGHTED SCORESTRENGTHS Incorporate technology for higher industry ranking.153.45Positive customer satisfaction.104.40Present healthy living in health-conscious society.103.30Experienced retailer with strong position within industry and diverse suppliers .154.60WEAKNESSES Has a weak global presence.152.30Need more effective technology .152.30Mass customization can be grounds for challenges regarding satisfying demand .052.10High long-term debt associated with company.154.60TOTAL SCORE1.00 3.05External EnvironmentThe industry that will be the focus of for the environment is retail pharmacy or pharmaceutical retail. CVS Health is considered a convenience store by many but in all actuality is considered a part of the retail pharmacy sector. This industry is a bridge between traditional pharmacies and small retailers. Since they provide the service of distributing medication on top of selling convenience items, it is qualified to be in that industry. Both parts of this industry play a huge part in the company's success. With the pharmaceutical side, we will look at how to maneuver through challenges with regulations and culture and with the retail sector we will focus on consumer spending and how brand presence affects the market. Both halves will be analyzed for changes in technology and how other factors interact with the industry. Within this section, the effects of Porter’s five forces will also be analyzed and implemented for the retail pharmacy section. General EnvironmentPolitical Retail pharmacies, like other industries, can become wrapped up in politics. Politics can have a hand to whether the business succeeds or not. Research showed that “historically, political advocacy has not been a major part of pharmacy practice, or even viewed as a necessary”. Although it is not too significant in impacting an industry, adapting to politics can be effective. Influence of Politics Politics is not important to the stance of the business because many people choose to stay neutral when combining business and politics. It might have a small effect on the industry but it can still affect the customers coming there for their retail pharmacy needs. If an industry or influential figures within that industry side with a political candidate that consumers do not agree with, companies can lose customers. Many companies feel that the best way to avoid getting paired with an unattractive candidate is to remain neutral in political affairs. TaxesOne thing that legally impacts the environment is taxes. Taxes also are an everlasting “threat” to companies. The reason threat is quotes is because it is not necessarily a threat, just an inconvenience. Based on Sean Ross, US retailers pay the highest corporate tax. CVS Health falls within the pharmaceutical retail industry, meaning that it is still affected by things in the retail sector. Since taxes are mandatory, companies have no choice but to pay. Disagreeing to pay for taxes can cause legal issues so to avoid it industries pay within their tax bracket. EconomicThe economy can play a major role in the destruction or growth of a business. This can be caused by a variety of factor including things like inflation, purchasing power of stakeholders and other financial factors. The economy is reflective of how much consumers are spending, how valuable the dollar is and how far it can go. Through various trends, we are able to study economic occurrences that could affect the stability of a business. Although a lot goes on within the economy, there are a couple key trends that could play a role in the success of fall of an industry. An Expanding IndustryOne trend that has been observed within the economy is the stage the economy currently sits at. Kimberly Amadeo wrote in her article that “currently in the expansion phase. The economy can remain in this phase for several more years. But at some point it will go into the peak phase”.4 This could mean an increase in consumer spending and that can be an opportunity for lot of companies to grow at a rapid rate. The issue with society being in the expansion phase is it can be grounds for inflation. Towards society’s climb to the peak stage, there is a rise in inflation which can be harmful to consumers who already have tight pockets. The rising cost of living can be a threat to the pharmaceutical retail industry especially if clients cannot afford the price of their medication. According to Researchers at PWC Health Institute, “Retail pharmacies face shrinking margins in their core business and tougher competition in a shifting health industry”. Saying this is implying that pharmacies must do more to get the same results. Commodity Controlled Markets Another economic factor that has the potential to impact an industry is shift in focus to a more commodity-controlled economy. Markets are traditionally impacted by a supply and demand run economy. Based on that an article from Amedeo, markets are more controlled when it comes to gas, oil, and food. When the price of any of those three products increases or decrease it affects the volatility of the economy. A volatile economy can mean that the economy could risk facing changes at a rapid and lasting rate. This can be bad for a company since there is not any stability when it comes to finances. ?At this current time, America is losing its stance on the market as an economic powerhouse. Since the recent recession it has been hard to gain capital and it has taken a toll on the home front. Because of these two corresponding factors, industries might have to adjust to the changing economy in order to cope with all that is occurring. And although supply and demand aren’t the leading factor to controlling markets at the moment, they still play a large part in price variances. According to Specialty Pharmacy Times Editor-in-Chief & Executive Vice President, Dr. Dan Steiber claims that “some high-cost disease areas include Pompe disease, T-cell lymphoma, hyperammonemia, and myasthenia gravis. Covering the cost of these products includes a combination of payer, manufacturer, and government programs. Larger patient populations, such as those with hepatitis C, and their treatments have had a large impact on budget, with the trade-off of offering a cure for a lifelong debilitating illness”. This can mean that if the demand for a drug for a high-risk disease is high and the economic state is not in the best shape, it can impact those who need the drug. McDermott Will & Emery put out an article and stated that the margin for traditional retail pharmacies are shrinking while specially pharmacies are rising. This can be a risk to the growth and expansion of retail pharmacies. And if they are unable to afford their medication, it can affect the industry negatively. Sociocultural ???????????Sociocultural factors have to deal with how consumers interact with each other and how businesses are impacted by trends stakeholders created. ?Consumer trends are constantly changing because of innovations with technology, a changing economy, and various other factors. When it comes to the retail pharmacy industry, stakeholders have molded the culture for the industry. Based on trends and buying patterns, companies and marketers are able to analyze the markets and proceed accordingly. The Need for Comfort ????????????A trend shaping the social environment of the retail pharmacy industry is that consumers want to feel comfortable while they shop. This refers to buyers having more of a concern for the atmosphere they purchase in. PBA published “5 Consumer Trends Your Pharmacy Should Know”, where one of the trends listed says “37 percent of consumers said they’re more likely to make impulse purchases when they’re in the right mood”. For a retail pharmacy this means, appealing to a consumer’s senses and establishing relationships as they browse. Increased Desire for Connection ???????????Another factor on PBA’s list is that consumers are craving some attention.7 According to the article, the “need for emotional connection is particularly strong in millennials. Research shows that millennials are drawn to brands that are more humanized”.7 Since the new group of consumers consists of millennials, it’s important to consider what they would like to see within the markets. In the retail pharmacy industry, it’s essential to establish a bond with the consumer being that they distribute products that are somewhat personalized. Tom McGee’s article list various trends within the retail industry; one being “manpower”. This supports the consumers need for human interaction with their shopping experience. ?Creating customer value can start with greeting. Customization ????????????Speaking of customization, it has become a growing interest for consumers and companies are starting to comply. There has been an increasing need for convenience when it comes to society. Customers want products or processes to be personalized for them. Chloe Bryne says how this is a continuing trend as the years go by. She also talks about customization “consumer[s] want something that fits their lifestyle and is unique to them”. By catering to this trend, industries might face either growth of consumers or a deficit in funds. The retail pharmacy industry is somewhat standardized currently. ?And in this industry, companies have already taken the steps to customize the way they produce and distribute drugs. But if they customize the whole industry, it could pose problems for the businesses that fall within it by increasing costs and slowing down the speed of operations. Living CleanerAnother trend observed for creating consumer value is the increase in living cleaner. Many people are making it a goal to live a cleaner life. Retail pharmacies can exploit this by catering to the need to be healthy. According to Onshelf, “Natural food products that provide health and medical benefits will become more common in pharmacy”. The article also touches on how consumers are living longer10 and loving it. There has been an expansion in market of health-conscious consumers. Catering to the health needs of consumers is logical to increase the company’s stance within the industry. Since the retail pharmacy industry, has a vast market, they can effectively cater to this need while being convenient for the consumer. Technological ???????????Amongst the various factors affecting an industry, technology is one of the most influential factor. Innovations with technology can shift an industry’s culture, impact how a company performs and it can also influence whether or not a consumer will use your service. ?Society today is mostly dominated by technology and it also runs many businesses. Since it is all around, an industry that neglects the influence and prominence of technology will miss it on all the things it has to offer. Digital Marketing and Social Media ?????????Digital marketing is a growing trend has consumed the business world. OnShelf claims digital marketing is “very operationally intensive and execution-ally demanding, leaving professionals spread thin as they aim to rein in, a dynamically changing environment”. The benefits include an increased e-commerce presence online and when it comes to social media. That can call for more business for a company and it also allows companies to communicate to consumers online. Being able to answer any concerns a customer through any channel can increase the value to the consumers. ?One trend that goes hand and hand with digital marketing is social media. Social media can be a way of getting the company a name out there without all the extra cost. Companies in almost all industries are getting into social media as a form of both marketing and communication. Byrne stated that social media has gotten a strong influence over the retail industry and that companies should engage customers via social media. In the retail pharmacy industry, answering questions concerning medication and other concerns. Industries must be careful when using digital means of marketing for consumers with a high concern for security. Using personalized ads for segments needs information that could be compromised and stolen by a hacker. If a company were to get their customers information compromised, it could taint the way consumers perceive them. Implementing. Implementing InnovationsMcGee tells readers that “Around 45% of retailers are set to use some type of artificial intelligence (AI) technology between now and 2020”. Businesses are taking steps to improve and innovate how they fulfill their duties. Incorporating technology into the industry has become a great way to engage with technology and in OnShelf’s article they talked about a study that was conducted at the University of Glasgo where they found that people used social media as a channel to understand their condition and what was wrong with them.By using social media as a new piece of tech may come with its advantages. Along with the integration of social media, companies are using AI to do things like optimize logistics, recognize the face of significant customers and other things. Using data can be a step forward for an industry if used in the right way. Legal ???????????Laws and regulations assist in navigating markets and can also hinder the growth of a business. While laws and regulations are around for the protection of stakeholders, it can sometimes pose an industry due when it comes to operations and prices. Political factors within an industry can also help decide if a company can either start up, keep running or if they have to close their doors. The company that is being researched is CVS Health which falls between both the retail and pharmacy industry (or the retail pharmacy industry). When dealing with people and laws, politics is bound to play a role. Political views can alter how a person may persevere a brand or a certain industry. Industries are mainly affected by four factors. Based on the pestle analysis, in the political factor, the effect on the economy, regulation changes, political stability and when weighing risk. Risk of Lawsuits Another trend that has made an appearance within the legal sector is the risk of getting sued. Consumers today are ready to sue over any discrepancy they might face when dealing with a business. Consolidation is something that has been buzzing around in the retail pharmacy industry as well. According to Specialty Pharmacy Times Editor-in-Chief & Executive Vice President, Dr. Dan Steiber claims that “large business-to-business play direct with manufacturers in the specialty distribution space as traditional drug distributors continue to see margin erosion and new models emerge. We are seeing PBMs being bought by specialty pharmacies in an effort to expand their access and we’ll see more consolidation between PBMs and payers”. With more consolidations, players within the industry are able to cut down cost and raise revenues and that's where legality comes into play. When cutting costs, businesses tend to cut corners and that can pose issues regarding the brands credibility and the consumer can sue. Avoiding unethical practices is the best way to combat this issue. Unruly Regulations When it comes to the economy, both politics and laws have a hand in the ups and downs that are seen throughout history. ?It’s been an ongoing trend that government regulations tend to affect industrial growth. With laws that prevent businesses from participating in certain practices, they are forced to adjust to comply with said laws. In the retail industry, he FTC controls and regulates the market for retailers. When dealing with the pharmaceutical industry, the FDA regulates and monitors the industry. And with all industries, the Department of labor laws always play a part. ?In the retail sector, then FTC can set price ceilings and floors and has the power to influence to consumer-company relationship. The FDA sets the standard for effectively manufacturing, selling and distributing drugs. An article on Investopedia stated that “government regulation of the drug sector has resulted in a longer, more-expensive product development process that favors treatments for rare illnesses”. By prolonging and extending the drug approval process, it causes a hiccup in operations of this industry. They make sure their employees get the pay that they are rightfully owed and that they are treated fairly by employers. Patrick McLaughlin wrote “this regulatory accumulation is hurting the U.S. economy”. If the government gets too involved with the market, they could hold businesses back in terms of what they can do legally.Environmental The actual environment of the areas we reside in factor into how industries operate. Nature is an uncontrollable obstacle all companies have to overcome. Changes in the environment can happen suddenly and have lasting effects. Factoring in that nature might affect the industry would help reduce the amount of damage mother nature might express. There are currently a couple environmental factors affecting the retail pharmacy industry. By monitoring and taking preventative measures towards changes in nature, is the best way deal with what might come. Climate Changes An environmental factor that could shape the way retail pharmacies operate are climate changes. In recent years, the climate has been changing due to an increase in greenhouse gas release. With consumers with serious medical issues, this could pose a huge issue. Iain Davidson states that “climate change could also exacerbate the health impacts of aero-allergens” and that changing weather can change pollen production as well. He also goes on to talk about how climate changes can affect the growth of mold. Essentially he is saying that changing climates can mean an increase of airborne allergens and many of those require medication for relief. By being prepared and having what consumers need for their changing environment, an industry may be able to experience growth. This can give retail pharmacies an opportunity to grow their customer value. Living GreenerIn addition to adapting with climates, an ongoing trend is the need to switch to cleaner methods. People are living longer10 and although it is a positive thing, it can pose a number of issues. Davidson brought up the idea of overpopulation and the issues that could rise from that. Issues like an increase in generic drugs was one concern. With the increase of people in the population, by default, society will take more medication to help treat whatever health issues they have. With the growth of medicine dispensed, it increases the carbon footprint that the pharmaceutical industry has already created. This footprint can threaten creatures in nature if the medication is ingested and can pollute drinking water. In retaliation to the growing pollution, the pharmaceutical and retail pharmacy industries both have a commitment to disposing of drugs properly and with as little waste as possible. Doing things like this are great ways to adapt to the ever-changing environment.In conclusion the retail pharmacy industry has a good amount of threats but also it has a large variety of opportunities. Even with the chance of them losing customers to new competitors, they can gain them back by repositioning themselves in a way that’s attractive to their consumers. Political and legality do come into play with the industries external environment such as laws hindering the acquisition and the growing price of medication. They do, however, have the chances to grow along with their industry by using social media to its fullest to connect with customers, promoting a healthier lifestyle and by being connecting customers overseas with the company through service. Retail Pharmacy Industry (Porter’s Five Forces)The Retail Pharmacy Industry offers both retail items as well as pharmaceutical services. Bargaining power of Suppliers“All most all the companies in the [Retail Pharmacy] Industry buy their raw material from numerous suppliers. Suppliers in dominant position can decrease the margins CVS Health Corporation can earn in the market.” This strong bargaining power of suppliers has a negative effect on the industry as it lowers the possible profit margin.Bargaining power of buyersThere are 5 million customers from all walks of life served by CVS Pharmacy each day. These customers want high quality products at the lowest price available. This desire does put some pressure on CVS to an extent. However, these products are more inelastic than they are elastic, which means customers will continue to buy them. “The smaller and more powerful the customer base is of CVS Health Corporation the higher the bargaining power of the customers and higher their ability to seek increasing discounts and offers.”Threats of New Entrants“New entrants in Health Care Plans brings innovation, new ways of doing things and put pressure on CVS Health Corporation through lower pricing strategy, reducing costs, and providing new value propositions to the customers. CVS Health Corporation has to manage all these challenges and build effective barriers to safeguard its competitive edge.”Threat of substitution“When a new product or service meets a similar customer needs in different ways, industry profitability suffers.” A potential threat of substitution for CVS Pharmacy is online drug ordering. Another threat is if their customers switch to a chemical-free lifestyle. RivalryCVS Pharmacy’s main competitors in the retail pharmacy industry include Walgreens, Rite Aid, and Walmart. Walgreens and Rite Aid have the highest market and resource commonality with CVS Pharmacy. They are both involved equally in the retail and pharmacy services industry. Their tangible and intangible resources align as well. Walmart also competes with CVS, but on a different scale. Walmart sells a larger variety of products and goods. Competitor Environment (Retail Pharmacy) WalgreensWalgreens Boots Alliance strives to be the first choice for pharmacy, wellbeing and beauty. They are a company who cares for people and communities around the world. They state their purpose as being there to help people across the world lead healthier and happier lives. Their core values include trust, care, innovation, partnership, and dedication. “Walgreens was the first global pharmacy-led, health and wellbeing enterprise. They serve 8 million customers in stores and online daily. As of June 28, 2018, they operate approximately 9,800 drugstores in all 50 states, Washington D.C, Puerto Rico and the U.S Virgin Islands. They also have 400 stores that offer a Healthcare Clinic or other provider retail clinic services.” Walgreens has partnered up with Kroger as of October 2, 2018. They are collaborating on an exploratory pilot with a new format and concept that will combine Kroger’s grocer and food authority with Walgreens global expertise in pharmacy, health and beauty. Walgreens executive vice chairman and CEO said, “We continue to evolve our offerings to meet the changing needs of our customers and provide a more differentiated shopping experience. We’ve been implementing new approaches to promotions, product selection and other areas to deliver greater value in our store.” There have been 13 Walgreen stores chosen to pilot the combined format. Walgreens received a U.S patent for a new propriety technology called Connected Care? Oncology in January of 2018. This technology helps guide interactions with patient to help them stay on their treatment plan. This technology is focused to patients prescribed oral oncology medications. Since this oral oncolytic medication is self-administering, Walgreens needed to find a way for providers to monitor the patients possible side effects and if they are taking their medication as prescribed. In 2017, Walgreens and Prime Therapeutics formed AllianceRx Walgreens Prime. Specialty pharmacists from AllianceRx will use Connected Care? Oncology. This patented technology gives Walgreens and AllianceRx the ability to serve their patients with the upmost attention and care. They are ready with a set of questions and informational script to ensure the patients information is retained. Walgreens launched their “#ItEndsWithUs” campaign as they sponsored WE Day in Garland Texas. Their objective is to provide teens with resources and positive steps to take in their community. They are encouraging conversation about the epidemic in hopes of tackling this issue head on. “They have started new programs to help curb the misuse of medications and reduce the rise in overdose deaths. In the first ongoing national effort by a retailer, Walgreens has installed safe medication disposal kiosks in over 1,000 pharmacies across 45 states including Washington D.C.”Walgreens has continued their partnership with LabCorp? as they added ten new LabCorp patient service centers into Walgreen stores in April and May of this past year. There will be four in the Gainesville, two in Palm Beach County, two in Pasco County, and two in the Orlando area. These co-branded sites offer a relaxing environment for patients. For the initial cites, 93% of surveyed customers said they would recommend LabCorp at Walgreens to a friend. Birchbox is an online company that delivers a monthly supply of makeup and beauty supplies directly to your home. Walgreen has invested in this company in efforts to compete with online sellers. Walgreens is bringing a segment of Birchbox into their stores as a “build your own Birchbox”. Walgreens is starting with 11 locations in the U.S. to include this Birchbox pilot. “These in-store Birchbox shops are designed to encourage people to try out new things in an accessible comfortable setting.” The shops have enough space to allow customers to try out new products and build their own customized version of the traditional monthly Birchbox. Birchbox says they have 2.5 million active customers and over one million subscribers of the monthly box worldwide.9 Walgreens announced they want to be the everyday drugstore and makeup supplier. They want to compete with online merchants by enticing shoppers into their store for the Birchbox experience.Rite AidRite Aid Corporation operates retail drugstore with two segments’ retail pharmacy and pharmacy services, across the United States. They sell household items, food and beverages, greeting cards, cosmetics, personal care items, health and beauty aids, over-the-counter medications and prescription drugs through their retail pharmacy segment. Rite Aid also operates retail clinics that serve customers on a daily basis. Customers can visit a Rite Aid clinic to seek treatment for common conditions, preventative services, medical tests, immunizations and physical exams. “The Pharmacy Service segment provides pharmacy benefit management (PBM) services and a range of pharmacy-related services. This segment also performs prescription adjudication services for other PBMs; and offers integrated mail-order, specialty and compounding pharmacy, and infertility treatment services, as well as drug benefits under the federal government’s Medicare Part D program.”Rite Aid recently announced on September 20, 2018 that is has established a company chemical policy which has greatly expanded the restricted substance list. This policy is there to ensure that these drugstore chain products are safe and healthy for their customers. Rite Aid recently added parabens, phthalates, formaldehyde donors, nonylphenol ethoxylates and triclocarban. Rite Aid has a cross-functional team that holds the responsibility of its chemical policy strategy and planning. Rite Aid’s long term goal is for its chemical policy to cover all of the products sold in its stores. Rite Aid will further their focus to over the counter medications, vitamins and supplements, and food and beverages.Rite Aid is also joining efforts to address the Opioid issue in our county. The Rite Aid foundation created a prescription drug safety program in the state of Washington. They created an innovative digital course, teaching drug prevention tactics to high school students. In Washington State, two people die each day from opioid overdoses. They teamed up with EVERFI, a technology innovator whose programs are in schools across the country. Rite Aid feels it is important to reach out to students and give them the knowledge of how to protect themselves from harmful situations. As of August 2018, Rite Aid has sold almost 2,000 stores to Walgreens Boots Alliance. They have also been discussing a merger with Albertsons company. Rite Aid was facing financial troubles recently and were hoping this merger and sale would help them recover. However, with almost half of their store sold to their competitor, they are struggling to compete. In addition to this set back, Rite Aid and Albertsons Company announced a mutual back out of their merger agreement. Back in 2015, Walgreens wanted to buyout Rite Aid for $9.4 billion. In 2017 Rite Aid backed out of that agreement. So now they ended up selling half of their locations to Walgreens and giving them a huge advantage. Since the Albertsons merger fell through, Rite Aid’s share have dropped almost 40%. Rite Aid is not totally to blame for their misfortune. Several institutional and retail investors were not backing this merger. Since the Albertson company is a supermarket giant, some investors were against this corporate combination. With online threats sneaking into the industry, Rite Aid needs to form a new competitive strategy to respond to this new situation. Their stock is at an all-time low, so there is obvious room for growth. Rite Aid needs to act on their opportunities to become competitive again.WalmartWalmart is already one of the leading pharmacies in the nation. Their CEO, Greg Foran, said they’ve decided to put more focus on their Health and Wellness business in the near future. Walmart has the opportunity to expand by providing more low-cost health services and even basic medical care by nurse practitioners or physician assistants. Walmart is monitoring the Medicare and Medicaid markets. Walmart’s low prices are appealing to those that are using these programs. Senior citizens and lower-income Americans make up a large amount of Walmart’s customer base. On August 20,2018, Walmart announced they are forming a program with Anthem to make over-the-counter medications more affordable. Anthem is a leading health insurance company that delivers services to over 73 million customers. Walmart is teaming up with Anthem to tackle a shared goal of providing customers reduced healthcare costs. Consumers that are enrolled in Anthem’s affiliated Medicare Advantage (MA) plans will be able to use over the counter plan allowances to purchase over the counter medications. Nearly half of married seniors and four out of 10 unmarried older adults rely on the Social Security benefit, with that being said, this program will serve a much needed duty.Walmart started their Wellness event back in 2014 and since then it has provided over 2.5 million free screenings to people across the country. These screenings have detected undiagnosed high blood pressure and diabetes in customers. With the help of these screenings these customers can now manage their conditions with the help of Walmart’s Health and Wellness center. Walmart offers flu shots, low-cost immunizations, and free vision screenings. Their most recent Wellness event was this past September. For the first time, they offered free total cholesterol screenings. They also gave out apples and mandarin oranges from their produce department to help promote a healthy lifestyle. The also provided the ability to check your body’s true age based on health factors with Sharecare Real Age and Fresh Tri. This activity will help customers see how their daily eating habit are affecting their overall health. Having this measurement provides more of a reality to customers. Rather than providing them with their screening results and different numbers that represent parts of their health, this gives an overall result. Walmart is also stepping up to the opioid epidemic our country is currently facing. Walmart is distributing DisposeRx at all locations. DisposeRx is a dissolvable solution that will responsibly dispose leftover medication. More than 65 percent of misuse of prescription drugs if due to passed down medication. DisposeRx is an easy way for patients to dispose their leftover medications to relieve themselves from the risk of it ending up in the wrong hands. The remaining medication can stay in its original pill bottle, all you need to do is add warm water and DisposeRx and the prescription is safely eliminated. Walmart is also expanding the availability of this product to their Sam’s Club pharmacies as well. Walmart is very supportive of education as they fund numerous programs to help educate kids about the serious dangers that come with misuse of prescription medication. Ratio comparison Table 1.4,According to Walgreens ratios, the company is performing consistently well. Their ROA ratio is maintaining from 5% - 6%. This ratio measures the net income that is produced by Walgreens total assets. Their ROE is also maintaining. There was a slight decrease down to 9.43% in 2014 but it picked back up to 13% and maintained that for the next three years. The ROE measures how much profit a company generates from the money the shareholders have invested. Their gross profit margin has slightly decreased over the past five years but has overall been maintained. This ratio measures Walgreens financial health by noting the amount of money left over from revenues after accounting for cost of goods sold. Their quick ratio has experienced some fluctuation. It measures Walgreens’ short-term liquidity. This ratio has not changed too dramatically over the five years. Their debt to equity ratio has gradually increased over the past five years. This indicates improvement in the company’s financial leverage. Overall, according to Walgreens’ financial ratios it seems the company is performing well. Table 1.5,Table 1.6Rite Aid is clearly struggling from the looks of their ratios. Their ROA and ROE are both so low in 2017 and 2016 because their net income were below one billion dollars. This company has had their net income over one billion dollars in just one out of the four years we analyzed. Rite Aids revenues are in the high billions, yet their net income and shareholder’s equity is not reaching it. That is why their ratios are so unordinary compared to the market. On the other hand, their gross profit margin has slightly decreased but for the most part it has maintained over the four years. Their quick ratio has grown substantially from 2016-2017. This may be a result of their pending merger and buyout that was taking place in 2017. As you can above, these ratios are also thrown out of proportion because of the low values of the shareholder’s equity. Table 1.7Walmart’s ratios look as expected. They are all maintaining over the years. There are not drastic outliers. Their ROA and ROE are barely decreasing from 2014-2017. While this isn’t a significant change, this is something that should be monitored. CVS Heath and Aetna MergerIn December of 2017, CVS Health agreed to buy Aetna for almost $69 billion. This deal would bring one of the biggest health insurers in the U.S to join the Drugstore giant. A combined CVS-Aetna would be dominant in the health care industry. Aetna could be used to provide care directly to patients while CVS continues their retail clinics and pharmacy. There have been many red flags raised by those who are worried this merger would limit the publics choices. For instance, it could limit where someone can receive care or get prescriptions if they are an Aetna customer. Patients and physicians should be very engaged in this merger. Just because it won’t necessarily increase costs, it will restrict access. For this project, we need to consider the possibility of this major merger going through. It is important for us and CVS Health to understand the new industry they may be entering as it is different that the retail pharmacy industry. Insurance Industry Environment(Porter’s Five Forces)Bargaining power of buyersPhysicians have a huge bargaining power over insurance companies. If they are not affiliated with certain insurance companies, they will not be able to accept those companies’ policies. If they cannot accept those policies, their patients will have to switch to a different provider. Thus insurance companies are dependent on these contract with health care providers. In conclusion, the importance of these contracts secure the opportunities to sell policies to neighboring companies and individual customers. Threat of New EntrantThe threat of new entrants is fairly limited. This is because there are many federal and state guidelines that these insurance companies must follow to remain open. These policies make it very difficult for a new company to start up in this industry. Said company would need a significant amount of capital to be able to attract physicians away from their current networks. 47Threat of Substitution“Substitutes do not really affect the health insurance industry. In America, most individuals obtain healthcare insurance from their employer. Most companies only offer certain types of HMO or PPO plans.”47 An issue that this industry could face is if our government here in the United States switched to a free health care system like some European countries and Canada. Rivalry“Competition within the health insurance industry is very intense. Every insurance company is continuously bidding with competing companies to sell their service and maintain customers. Most companies only select one insurance company to provide its services to all of their employees. So securing contracts with major organizations and firms is an important way these insurance companies stay competitive. There is strict competition in the sense that each company wants one of their policies chosen by the company.”47Competitor Environment (Insurance) Aetna“Aetna Inc. operates as a health care benefits company in the United States. It operates through three segments: Health Care, Group Insurance, and Large Case Pensions. The Health Care segment offers medical, pharmacy benefit management service, dental, behavioral health, and vision plans on an insured and employer-funded basis. It also provides point-of-service, preferred provider organization, health maintenance organization, and indemnity benefit plans, as well as health savings accounts and consumer-directed health plans. In addition, this segment offers Medicare and Medicaid products and services, as well as other medical products, such as medical management and data analytics services, medical stop loss insurance, workers' compensation administrative services, and products that provide access to its provider networks in select geographies.”Aetna has created the new regional Aetna Whole Health located in Southern California. There will be four locations, one in San Diego, Orange County, Los Angeles County and certain portions of the inland Empire. With Aetna Whole Health, members will have access to 1,400 primary care doctors, 8,300 specialists, 51 hospitals, and 122 urgent care facilities. Aetna Whole Health provides employers with better health care choices for their employees. This new solution will offer “cost savings to employees who use providers in their selected network; A more coordinated, personalized experience for patients ;and better health care outcomes.”On September 7, 2018 Aetna announced they will divest all of their standalone Medicare Part D business to a subsidiary of WellCare Health Plans, Inc. This Divestiture is dependent on the CVS/Aetna deal. This agreement involves both Group Standalone Part D and Individual members. Pending the deal, there will be no changes in Aetna’s service until 2019. UnitedHealth GroupUnitedHealth Group is a diversified health care company operating in the United States. It has four segments of operation including; UnitedHealthcare, OptumHealth, OptumInsight, and OptumRx. Its UnitedHealthcare segment provides consumer-oriented health benefit plans, including services for national employers, public sector employers, mid-sized employers, small businesses and individuals. UnitedHealth Group Inc. has comprised a roster of tens of thousands of physicians to defend against invaders. They are preparing for relationship reconfiguration between patients, doctors, drugmakers and insurers. They have been strategizing and arming themselves with ample staff. They are hoping that by controlling many doctors, they can provide patients better care at a lower cost, which is what every customer desires. They are hoping to steer customers away from overnight hospital stays as they can be pricey. They plan to provide in-house care that will give them an upper edge to competitors and create a barrier for new entrants.AnthemAnthem Inc. operates as a health benefit company across the United States. It has three segments of operation; Commercial & Specialty Business, Government Business, and Other. Anthem offers a range of network-based managed care health benefit plans to large and small groups, individuals, and Medicare and Medicaid markets. They have preferred provider organizations (PPO) and health maintenance organizations (HMO). The company also provides managed care services to self-funded customers. It offers a number of specialty insurance products like dental, vision, life and disability insurance benefits. Ratio Comparison Table 1.8Table 1.9Table 2.0Table 2.1,Table 2.2,Table 2.3,CPM Matrix for CVS Health, Rite Aid, Walgreens and WalmartCVS HealthRite AidWalgreensWalmartTable 2.4?Critical Success FactorsWeightRatingWeighted ScoreRatingWeighted ScoreRatingWeighted ScoreRatingWeighted ScorePromotions.253.752.5041.001.25Expansions.203.602.404.801.20Financial Position.152.301.153.454.60Price Competitiveness.151.154.603.452.30Customer Loyalty.104.401.103.301.10Product Quality.103.302.201.104.40Market Share.053.151.052.104.20Total1.00?2.65?2.00?3.20?2.05,,,,,,,,,,,Purpose of the Firm Mission Statement CVS Health’s mission is stated as “Above all else … our mission is to improve the lives of those we serve by making innovative and high-quality health and pharmacy services safe, affordable and easy to access.” The mission statement should answer the question “Wwhat is our business about?” For CVS Health’s answer is , they are working to improve the lives of their patients by innovating the medical and prescription world. They want to provide safe pharmacy services and easy and affordable medicine at high quality. CVS Health is working towards reinventing pharmacy to be more active and support in a patient’s health care. They want it be a positive experience and shape health care for the future by making it affordable and effective. All throughout their website they talk about “path to better health” and “health is everything.”Vision Statement CVS Health’s vision statement is stated as “We strive to improve the quality of human life.” The vision statement is to answer the question: what do we want to become? For CVS Health, they want to be the company that creates a better quality of life standard. Every initiative they create is just a stepping stone to creating their vision. They value all humans and believe everyone should have an equal chance. CVS Health realizes that medical care is not feasible for everyone and is are finding ways to make it affordable and help those need. They are constantly changing their ways to integrate technological advances to either better their services or reach more people.On their “Our Story” page on their website it shows this picture shown below. It shows what they are, their strategy, purpose, and values. CVS Health works every day to make the healthcare world more affordable, and easy to use/access. As technology and the world changes they are innovating their process and reinventing a new health standard. They are constantly finding new ways to help the less fortunate and giving grants to other companies and schools to support their initiatives that match CVS Health’s. They continue to help making get medical assistance easier to create healthier lives. INCLUDEPICTURE "" \* MERGEFORMATINET 01923415As an innovation, CVS Health has come up with a direct-to-consumer telehealth for minor health concerns. A patient will go to the CVS Pharmacy app and complete a health questionnaire and then be matched with videos and the care they need. If the person should receive help from a qualified professional the app will give them information to schedule an appointment. If the person needs a prescription for their problem, the telepath program will send an electronic prescription to their pharmacy. The telepath visits costs $59 and is currently available in some states, but is expected to be available in all 50 that it is allowed by the end of 2018. While this telepath program is convenient for busy people, there is uncertainty on if it is covered by insurance. In the last year, CVS Health has joined the fight against the opioid crisis. They designed programs to reduce the abuse and misuse of prescriptions drugs. CVS Health added 750 safe medication disposal sites into pharmacy locations to reduce the chances of drug misuse in homes from unwanted/unused drugs. CVS Health has started a program to increase access to naloxone, a life-saving opioid overdose-reversing drug, in 48 states. They are also supporting addiction recovery programs by providing grants to community health centers across the United States. Their fight against opioid addiction is just another factor of how they are working towards a better health for people. In 2014, CVS Health removed tobacco from their stores. CVS Health worked with Truth Initiative and the American Society to get an idea of what people think about tobacco use. 80% said younger people smoking and using tobacco is becoming a public health problem and 75% say that the health problem is also a problem with college students. Majority of the people who did the survey said that campuses with tobacco free policies help the growing health problem. CVS Health believes youth is using tobacco products because of the amount of advertising there is and social media. CVS Health has committed to help make the first generation of non-tobacco users. They have started an initiative to create more tobacco-free campuses. CVS Health has funded the initiative with $50 million and funded millions of that to colleges campuses (63 major academic institutions, 34 historically black colleges and universities, and 49 community colleges). Another way CVS Health stays true to their mission and vision is by granting money to free and charitable clinics. By giving these clinics money, they are opening the door to help people aren’t insured or don’t have enough coverage for what they need. CVS Health also funds Community Bridge which works with these clinics to provide a safety net. They help patients who need assistance with food, a place to live, rights, and domestic violence. This is helping create a better quality of life for people who do not have a lot or need safety. In 2016, CVS Health started an award to reward suppliers who help them meet their Corporate Social Responsibility (CSR) strategy. Colgate-Palmolive was awarded the Sustainable Supplier Partner of the Year in 2017. They were chosen for their initiative of providing children with oral health education. They also met the three key CSR pillars. Another reason is “Like CVS Health, Colgate prioritizes product sustainability, values diversity within its supply chain.” There is also a plan for partnership on a recycling initiative in 2018.As a part of improving access to affordable health care and quality care for Americans, CVS Health started an annual Project Health in 2006. Project Health is a program that offers free health and wellness screenings in U.S. communities. In 2018, the event started on September 6th in 11 communities and there will be 528 more events over the next 4 months in more communities with a large number of Americans who are not insured or underinsured. The screenings are looking for chronic diseases. Some tests they run are blood pressure, glucose level, cholesterol, and BMI. Once the screens are complete, patients will have access to their results from nurses in their native language. These nurses will explain if they require more care and will then give then no cost to low cost options. The vision statement reflects the goals a company hopes to accomplish. CVS has a goal to “improve the quality of human life”. When taking a closer look at CVS and their capabilities, they are living up to their vision statement. By improving the community in all aspects (fight against opioids, greener practices, etc.), they are improving the quality of life for the people they cater to. The statement also is representative of the brand’s personality and how they would want consumers to see them, thoughtful and caring. The firm’s external motives are to create a healthier environment for the consumers they care for. By improving the lives of consumers through safe innovative practices, prestige healthcare and consideration of who they serve, CVS is able to combat the environmental factors that affect operations. External threats of the retail pharmacy industry deal mostly with relationships with consumers, integrating tech and a constant changing environment. Focusing on the main issues within the industry will assist in maintaining a strong stance in the market.The purpose of CVS Health is to cater to the needs of the consumers they encounter. Their mission and vision statements correspond with the needs of the world today in terms of providing assistance to their stakeholders. Since trends are always changing the nature of an industry’s environment, CVS Health still has to monitor and adjust their statements. Conclusion?In conclusion the capabilities of CVS would be their capability to run a smooth company. They do that by making sure their customers are satisfied through their apps and through their customer service. Another capability would be their strong connections with their suppliers. Without the strong connection with their suppliers they wouldn’t be able to provide for their customers according to their mission and vision statement. The resource that they have that helps in the long run is their research institute. They use that to research outcomes that can improve health overall. Additionally, ratios such as the current ratio, debt to equity ratio, and total assets turnover ratio show that CVS can sustain successful operations and growth. ?Summary and Evaluation of Current Strategies Summary of Report 1Retail PharmacyCVS Health is a pharmacy innovation company that operates in three reportable segments. The three reportable segments of CVS are Retail/Long-term care, Pharmacy services, and corporate segment. The Retail/Long-term care (LTC) segment of CVS operates in all top 100 drugstore markets in the United States. Pharmacy sales consisted of 75% of net revenues for 2017 and 2016 net revenues, and the remaining 25% consisted of front store. CVS pharmacy services creates the most value for CVS’s retail health pharmacy operations. CVS used the success of their retail pharmacy to create their retail pharmacy drugstore development strategy. CVS Retail Pharmacy Drugstore Development strategy is to enter new markets, add stores in current markets, and relocate current stores to more convenient locations. In the past five years, CVS has opened over 1,000 new and relocated locations, and acquired approximately 1,880 locations (target pharmacies included). ??In 2017, CVS held approximately 23.6% of the United States retail pharmacy market. Pharmacy Services CVS Health’s pharmacy services provides a wide range of pharmacy benefit management to their clients. CVS has a pharmacy services business strategy that focuses on providing innovative tools and strategies, and quality client services, in order to maximize clinical outcomes for clients and manage pharmacy and healthcare costs. CVS has almost 36,000 pharmacists, nurses, etc. in order to assist plan members through fully integrated pharmacy services systems. The pharmacy services strategy also provides multiple programs and tools along with their fully integrated pharmacy services. The goal of the strategy is to improve engagement between clients and CVS and provide a multitude of convenient options to solve a wide range of adverse problems clients may face.CVS Health’s Current StrategiesOne strategy CVS Health has been using is removing tobacco products from all retail stores. They strive to help people maintain a healthier lifestyle and tobacco products does not follow that path. Tobacco products cause different problems with extended use: a few examples are COPD, cancer, and heart problems. They have been doing this since 2014 since their announcement.In 2017, CVS Health released a statement about CVS Health vending machines. They are starting with 25 locations in the New York and New England area. Each vending machine location is customized to that area. The vending machine is set to have beauty products, vitamins, supplements, office essentials, over-the-counter prescriptions, and healthier food and drinks. These vending machines are reaching out to people who may not step into CVS Health store and are now open to using their products. The vending machines areoffering healthier options and medicine to busy people on the go. They are looking to expand this strategy by adding more locations and including college campuses and hotels for vending machine sites.CVS Health launched the Formulary Management Strategy in 2018. This strategy is to keep medicines at the lowest cost they can for customers. In 2018, CVS Health removed 17 medicines from their standard control formulary, a list of their medicines they provide, to make over a $13 million in saving to their pharmacy benefit management clients. They removed those drugs from the list by looking at what they treat, how clinically appropriate it is, and the cost-effectiveness of the drug. They also work with manufacturers to make the prices as low as they can for customers.With the merger with Aetna, CVS Health is working towards becoming more than just a retail outlet. CVS is developing their urgent care facilities to model a primary care facility. They don’t want to be an urgent care but a retail clinic. Also by combining CVS Health and Aetna, CVS Health is cutting out a middleman and gets medicines cheaper. CVS Health’s Minute Clinics can provide healthcare to patients with chronic diseases to cut down on the doctor office visits. Aetna could make it cheaper to go to Minute Clinics rather than the doctor’s making it cheaper for customers and giving CVS Health more business.CVS Health has revealed a new store design to better customer’s experiences with new products. They are bringing in healthier options and expanding their in-store beauty section. The change in front store layout and addition to healthier products is to promote growth within their health-focused purpose. They did research to find more people are taking a proactive approach to their health. They will continue to research so they can evolve their stores, so they aren’t “one-size-fits-all”. These changes have brought in new merchandise and an easier way to find what customers are looking for. Along with the new products, CVS is adding more lines of vitamins to their stores to create healthier options. They made changes in the beauty sections as well. They brought in new trends and introduced a trending make-up wall in some stores. They also got more make up that is better for the skin and all around healthier. Along with a new design they are removing products that aren’t good for you. They are hoping by the end of 2019 any beauty products that contain parabens, phthalates, and formaldehyde will no longer be sold in their stores. They have created new standards for their vitamins and will do third party testing on them. In their own store brand, they are removing artificial trans fats from those products.After looking at all their current strategies, they all revolve around their mission and vision statements. CVS Health is putting in healthier options in stores and in their vending machines, making healthy options more accessible to everyone. They are also working to make medicines customers need more affordable for everyone. In the end, CVS Health is working towards creating healthy lives at an affordable cost through their current strategies being used.Matching StageSWOT MatrixThe opportunity-strength for CVS is they can increase number of consumers using technology to help market and connect various consumers. In this expanding industry the use of technology gives them advantage over competition. CVS continues to connect with consumers through positive relationships, as the need for relationship selling grows. This can increase their already positive customer satisfaction. This also aligns with consumers need for a healthy lifestyle such as focusing their business around health. CVS opportunity-strengths came from looking at how well their app for mobile devices are ran and looked at the reviews of about the app to see what customers wanted to see. The weaknesses-opportunities are CVS needs to limit cost associated with lawsuits. CVS is currently caught in some lawsuits that are incurring cost. But abiding by laws saves money. The industry is expanding globally and they need to focus on expanding outside US borders to gain a prevalent global presence. CVS combats the growing need for convenience by being ahead of trends. They also considered having a pharmaceutical vending machines in areas such as subways, college campuses, and airports for consumers always on the go. Before CVS can expand globally with the vending machines, they will have to follow certain trade and tariffs laws for that specific region. CVS can sell their over the counter prescriptions in the vending machines when expanding globally. The strength-threats for CVS would be that although the industry is expanding, CVS has a strong position within that market. Expanding the industry means there will be more competition and there will be more effort to hold a strong position in the industry. The industry expanding would mean that CVS would be having more competitors which will allow CVS to work even harder to maintain their status. CVS is catering to the growing need for convenience with quick, and efficient shopping experience. CVS publicly discloses political activities and contributions for stakeholders to see. CVS disclosing their political influence can be negative because some people may not agree with them, but it is a good way to show stakeholders what their investments are going towards. According to the CVS website, the purpose of CVS disclosing their political activities are, “CVS Health participates in the political process to help shape public policy and address legislation that has a direct impact on the company. The engagement ensures that the interests of our business, customers, shareholders and employees are fairly represented at all levels of government”.The weakness-threats for CVS would be that government regulations could disrupt the Aetna merger. Government regulations can stop the growth of CVS and Aetna merger in borderline of antitrust laws. CVS’ growing long term debt could risk the health of their company. CVS has high long-term debt and potential legal issues associated with failure to pay debt. Based on the factors of the SWOT, we came up with four strategies which are, CVS shows consumers they care with social media campaigns for social issues, add more channels that allow customers to get prescriptions overseas, also to add 200 Minute Clinics nationwide, which aligns with the company’s values and growing health trends, and to improve their current digital health services. These strategies are helpful to the company because having a social media presence about social issues is great social responsibility. CVS adding more channels to get prescriptions to customers and adding 200 more Minute Clinics nationwide will increase their profitability and awareness for the brand. CVS improving their current digital health services will help improve the accessibility to their customers. This will also allow them to look at the customer buying trends so they can keep catering to what their customers want. ?INTERNAL FACTORS EXTERNAL FACTORS STRATEGY SOCVS already has high customer satisfactionUsing social media to satisfy the need for relationship selling Show consumers they care with a social media campaign for a social issue WOCVS has a weak global presence There is a growing need for convenience and different methods to receive products Add more channel that allow customers to get prescriptions overseas STThey are experienced and have a strong position within industry Not up-to-date on the latest consumer trends Add 200 MinuteClinics nationwide; aligns with company values and growing health trend WT Have tech implementation but need more effective onesSince the industry is expanding, more competition will be able to make their way in Improve their current digital health services Table 2.5SPACE MatrixCVS Health has a good financial position internally. They have great leverage and liquidity. They have the money to open up more CVS Health stores and Minute Clinics. There are already 1,100 Minute Clinics in existence. More clinics can be opened to reach more people and also become more competitive in the market. More Minute Clinics will open up more opportunities for customers to have access to them. Customer loyalty is something we considered while measuring CVS’ competitive position. CVS Health needs to work on this factor within its industry. Although their customer loyalty is low within their industry, CVS still has a high retention rate. CVS has 5 million customers a day and Walgreens has 8 million a day. That is a 3 million difference and they need to be more competitive of getting customers. They don’t want their customers going to their rivals. They were ranked -3 in customer loyalty. CVS Health struggles with technological changes (stability position) and technological knowhow (competitive position) they scored -6 and -5, respectively in their positions. The more changes they do technologically the more they keep up with advancements, the less major changes will need to be made keeping the company stable. The better technological knowhow, the more efficient and effective CVS Health can be against competitors. Technology can be used as an asset to their success. Keeping their app updated and user friendly is another strategy to keep customers and gain new ones. An easy to use app is going to keep customers coming back and happy. Also an organized app to get to where they want to be specifically will satisfy customer needs. They don’t want ads popping up for things they don’t need, when they are trying to refill a prescription.They should update their app that users can get to the pharmacy resources without getting involved in the retail side of the app and vice versa. The app should pop up with the option to go to the pharmacy, retail, or med visit options. It should not be a jumbled mess that anything involved in CVS Health pops up to the customer. Most customers just want to go in to the app do what they need to and get out and go about their daily lives. Updating the app to do that capability or just separate them all together could be a vital technological change to improve CVS Health. The industry position shows they have the financial stability, ranked at 7, to put money in their app. The financial position shows they are stable and compared to the industry they are higher than their competitors.Joining Always’ with their #EndPeriodPoverty on social media can up customer loyalty. Women who support the campaign will be more likely to shop at CVS Health because of their support for the campaign. CVS Health sells pads and tampons, so the campaign matches products they sell. With joining the campaign, they can lower their prices compared to their competitors to entice women to for the products there. They can also strategic place products that go with female needs near pads and tampons to increase their spending.Table 2.2676525552450-7625015475706 & 2.7The SPACE matrix above suggests that CVS implements a competitive strategy. Since CVS is a firm with major competitive advantages in a high-growth industry, their strategy could include market penetration, market development, product development, and backward, forward, horizontal integration. BCG MatrixThe first thing looked at when making the BCG Matrix was the division in a growing field or not. After research, comparing to different companies and how much the market growing mail order pharmacy was growing decently not really high to be stars. Retail pharmacy wasn’t growing as much as mail order and health insurance. There was not a lot to go from for the health insurance division because it was newly acquired in October 2018. The health/pharmacy side of CVS Health is getting more attention than retail pharmacy. They are focusing on making technological changes with health care services and making get prescriptions easier. Retail pharmacy isn’t getting the complete attention it needs.From the BCG Matrix, CVS Health should invest more into retail pharmacy. They could change the layout of their stores and add more brands/products. They should bring in an operation manager to make sure the layout of the store has the best flow to improve profits. Moving products around more for a given season would increase sales because customers might realize they need it. CVS Health could also work with YouTubers or celebrities to work with or sell their products. They could reach out to Jeffree Star to put his product cosmetic lines in their stores. He has millions of followers on social media and could boost CVS Health’s popularity. CVS Health could work with Roman Atwood. He has an online store that sells clothes, school supplies, and accessories. They could make a deal to sell some of his products in the store for a change. Anybody with a huge following would be acceptable to bring in new customers and maybe up old customer’s interests.CVS Health should also look at how the merger with Aetna could benefit them as well. Right now, with in the BCG Matrix, the health insurance division is in the question mark category. CVS Health and Aetna can make an agreement that gets Aetna customers who are not already with CVS Health to switch. Customers with Aetna could get their prescriptions cheaper and maybe earn rewards faster. That would bring more customer into stores and hopefully spend more. CVS Health’s mail order sector is barely in cash cows. More advertising could be what makes the sector go further in cash cows. Their biggest competitor in mail order pharmacy is Express Scripts. With more advertising, CVS Health could attract new customers with mail order pharmacy and also get current customers to stay instead of going to Express Scripts. Mail order pharmacy is just another way of integrating them into digital health. Customers already use the CVS app and if more people know about the mail order part it could make it easier for those customers. They refill their medications on the app, so for them mail order could be even more convenient than the walk-in pharmacy. CVS Health is already trying to do direct-to-consumer telehealth with minor concerns. They should advertise this feature more and make it more user friendly for older generations because it is new technology. Busier people might be attracted to using telehealth if they have something wrong than scheduling a doctor’s appointment and waiting hours. Some people don’t go to the doctor for a common cold because of the time wasted. But with telehealth, they can put their symptoms in for a diagnosis and then get the proper medicine they need. Telehealth would be a huge innovation in the medical world. It is so new it hasn’t caught on in the world. With more advertising and improvements, it could change daily lives. Technology isn’t going anywhere, so using it to their best abilities is a long-term asset for a successful future.,,Table 2.8990600164147500QSPM and Strategic EvaluationThe QSPM allows sets of strategies to be examined at the same time. There is no limit to the amount of strategies that can be examined at once by a QSPM. It requires the integration of external and internal factors to determine the right strategy. A QSPM draws attention to necessary relationships that affect strategic decisions. By drawing conclusions from opportunities and threats that impact the industry and the strengths and weaknesses, we created possible strategies that could improve CVS Health and their position within their industry. The four strategies that were mentioned included showing consumers they care with a social media campaign for a social issue that aligned with their values, adding more channels to allow customers to get and order prescriptions overseas, Add 200 MinuteClinics nationwide since it corresponds with company values and the growing health trend and improving their digital health services due to customer complaints. We then narrowed down those four by what would have a better impact on the company and decided upon two main strategies. The attributes were than ranked and weighted to come up with a total weighted score. Coming to the end of the decision stage, we decided that the best strategies for CVS to pursue included adding more Minute Clinics and integrating more technological innovations into their services. The Reason Behind MinuteClinics:There are 17 states where CVS does not have MinuteClinics. We decided to add 200 MinuteClinics in retail stores in the next five years because it is a great way for CVS to expand to areas that don't have them. This is a way for CVS to maintain their strong position in the market by maintaining customers and healthy lifestyles. CVS adding more Minute clinics will also allow CVS to reach more customers and to expand their customer loyalty. This will also be great for customers because they tend to go to retail clinics rather than the doctor's office due to having minor symptoms and the cost to visit being a lot cheaper. Going to CVS rather than going to the doctor’s office for doctoral services would be cheaper because for customers who don’t have insurance, it would be able affordable. Another thing they wanted in the retail pharmacy industry were more channels for healthcare by having more flexibility for customers. Therefore, CVS could turn the added minute clinics into 24-hour locations. ?Some problems CVS would have opening more minute clinics would be spending more money from hiring new employees to the upkeep of the building. CVS will also have competition with Walgreens as they have a similar clinic. CVS would have to research the location of the Walgreen clinics so CVS isn't entering an unattractive area. There would be more logistics costs such as paying more to the distribution centers. The Reason Behind Technology Innovations:When researching different opportunities within the retail pharmacy industry, the need for integration of technology into health services was a constant factor that was repeated. ?Consumers felt that companies needed to find a more convenient and effective way to take care of their health. That means being able to access medical files whenever the customer pleases. It can also involve more ways of accessing medication. Customers also feel that businesses should stay up to date on trends that are currently arising. One rapidly increasing trend is the fact that the technological wave is taking over almost every industry. Companies have found new ways to connect with consumers using innovations that excite customers such as drone delivery, online ordering, and the ability to access information anywhere at any time. And since technological implementations can also connect various groups of people, it has become a favorable chance to increase their rank in the industry. CVS is currently riding the wave of this trend because of its growing interest. With more people of different demographics wanting more technological innovations, they have a chance to maximize profit and their stance in the market. ?Consumers are also looking for life-changing innovations that they can rely on. Since they are a leading retail pharmacy business as well, they have the chance to create an innovation that can change the way the industry operates. When it comes to life-changing innovations, they had an idea to have pharmaceutical vending machines that cater to convenience and healthy living. CVS is a company that profits off their concern for the health of their consumers. Their implementations help to represent their values but they can still do more to stay relevant in the eyes of consumers. connect with tech. They have created the CVS Caremark app helping connect customers of different needs with the company. They also adjusted their labels making it more user-friendly.?So they already have some digital implementations that are helping to increase profits. The app and labels are a good start but to really connect with their customers they need to do more to make sure their innovations they add are actually utilized. There are barriers that limit this strategy from being successful such as the cost of implementations. This can come in many forms but it mainly is represented by the cost of training employees on implementations and the time that has to be dedicated to it. Another cost of this strategy includes the segment of users that are not tech-savvy. Older generations have a harder time adjusting to new technological implementations. If CVS were to come up with an implementation that is too complicated for users, it can turn them off to the company as a whole. That can result in a loss of members committed to the company. Luckily, CVS tries to make every innovation they add user-friendly to limit this. Another possible issue with integrating technology into health services is the fact that consumer data might be leaked to third-party sites or vendors. This can make customers reluctant to use CVS’ technological services. Based on the QSPMThe QSPM helps us measure and weight various attributes that affect the strategy. These attributes that are being observed are based on the opportunities, threats, strengths and weaknesses of CVS Health. The independent variables within the four attributes were drawn from extensive research of CVS and the industry it lies within. We then took the two strategies and went through each variable, ranking it based on how well it supports the given variable. The total average score of both was then calculated and the strategy with the higher weight was chosen. Table 2.9 INCLUDEPICTURE "" \* MERGEFORMATINET INCLUDEPICTURE "" \* MERGEFORMATINET When looking at the variables for opportunities, we observed key trends that could interrupt how CVS operates. When it came to the four opportunities that were taken from research, the most influential were the chances to offer new ways of filling prescriptions and the increasing demand for e-commerce. These two trends are really big at the current time and as stated before, more people want multiple channels to get their items and both strategies of adding 200 MinuteClinics and integrating technology into health services support this current movement relatively well. The reason they both scored a 3 in this opportunity is because they both are options being offered by various competitors at this moment. Adding MinuteClinics offers more ways to receive medication but it is not an innovative strategy that would elevate the company. They do currently disperse medication through their CVS Health and Pharmacy apps but they can always do more than just the minimum. If the strategy suggested a new way to fill prescriptions it would be ranked higher. Since CVS is still a retail business partially they have to look at trends in both retail and the health service industry. In both there is a growing trend of more people shopping and selling online. This opportunity ranked higher with the digital services strategy than the 200 MinuteClinics just because of the fact that more people are switching to online retailers instead of brick-and-mortar. When weighing the threats extracted from the research, the major threat that impacts CVS was the merger between Walgreens and Rite Aid. The merger threatened the CVS’ current position within their industry since it would increase Walgreens’ already high market stance. Adding more MinuteClinic’s does little to combat this issue. Simply adding more clinics is not going to help CVS regain customers lost by the merger. Walgreens merger can mean that more customers are checking out the newer features have to offer and they are paying less attention to CVS. They would have to do offer additional services with the additional clinics such as making them 24-hours. Integrating technology into their services might do a little more to help because it might attract the interest of a more tech-savvy segment. Examining CVS’ internal factors meant looking at their strengths and weaknesses. The major advantage that CVS has over competitors, deals with their connections with their diverse group of suppliers. Other companies have a large range of suppliers but have a positive relationship with the majority of suppliers as well as the same range of products. Unfortunately, neither strategy does much to support it. Adding 200 MinuteClinic’s would allow for CVS to bring more business to their suppliers but that is the only advantage of it. Implementing technology does not do much to further strengthen the already positive connection between suppliers and CVS. The main weakness on the other had was CVS’ lack of tech-fluency. They are slowly catching up to other businesses within the retail pharmacy industry but they have a chance to be innovative with the technology they introduce. By implementing innovations, they are able to strengthen that area where they lack and increase revenues in the process. Increasing the numberamount of clinics does not help this CVS’ lack of tech competency, instead it enables it since it does not add any solution to the issue. After referring to the SWOT matrix, Space matrix, and the BCG matrix we comprised a QSPM that allowed us to conclude that our chosen strategy is to integrate digital health. It was ranked the highest of the two strategies when we examined the four factors and how they interact. Compared to the Minute Clinic’s, it has a higher payoff in terms of financial projections and it does not have as large of a cost than MinuteClinic’s. It also stratifies most of the opportunities and trends that affect both CVS and their consumers. It also is better in terms of combatting threats like them needing stand out in a growing market and focuses on a major weakness they have, improving their innovations. Integrating technology into health services would have a higher benefit than cost overall. Strategic implementation ?????????CVS’ current strategies include some tech implementations, the launching of the CVS Pharmacy apps, the retail pharmacy drugstore development strategy/growing store base and the front store strategy, which innovates with new and unique products and services. Those strategies had been successful but they also had lost their impact on consumers. Current Technological Implementations ???????????As stated previously, CVS is one of the leading retail pharmacy business there are. It has a strong stance in an already challenging industry. Currently they use their innovative app to provide a more efficient and quick way to fill and request prescriptions. Not only is the app used for the use of getting prescriptions but information on medication, past refill history and to pay for their medication. They have the anticipation of implementing CVS vending machines meant to be more accessible for customers to provide basic needs like food, over-the-counter medication and other personal items.These machines are going to be located in high traffic generated areas such as airports, malls, and other public areas. These innovations are great for connecting CVS’ core values of promoting a healthy lifestyle for their consumers with the growing need for tech implementations. Although they have all these ideas for improving the way they integrate technology, they need to focus on improving the main implementation they have currently, the pharmacy app.About the App The focus of the CVS Pharmacy apps provides customers with tools to monitor and stay on top of their health. The CVS’ app allows users to request, fill and pay for prescriptions, take a virtual tour of the store, connect ExtraCare card to app, print photos, locate a MinuteClinics and more. The app is meant to be the consumers one-stop shop for all of their health needs. The application also includes barcode-based pay which allows for consumers to add new medication to their list as well as request a refill for it. By making life convenient for consumers, they are able to connect them to CVS’ value of providing a healthy life for all. The app runs relatively well and is actually compatible with baths Apple Watch. As you can see CVS is headed in the right direction when it comes to the idea of it. Unfortunately, the app is not as easy to use as it seems. Overcoming App-stacles ??????????The key issues the CVS applications face are that it is not they are most user-friendly. it can segment consumers in a way they don’t want and it is also disorganized. Back when the applications first were launched, they were innovative in the sense that CVS was the main one to introduce the integration digital services and store operations within that industry. But in recent years the apps have struggled a little. Based on customer reviews and CVS’ less than satisfactory Consumer Report score (1.4) the conclusion that the apps need to be reevaluated was drawn. They both different features that allow the customer to do virtually anything that relates to their health, but people still miss the benefits of it because of the clutter. ???????Having a cluttered app can cause information overload, meaning some of the information taken in, is not being processed. This is an issue because CVS bombards consumers with random coupons, flyers and shortcuts not allowing them to fully process all the ads they see. If CVS times their incentives between major events, it might not turn as many consumers off. The home page of the app also is hard to read which leaves a dissatisfied taste for consumers. To deal with the troubling readability of the home page, we would reorganize and the features so the page would visually flow better and we would create a list of popular shortcuts that would be stored in a dropdown menu. Reducing the amount of clutter on the page can get people less reluctant to not only download but use the app ??????Another issue with this app is the need for organization. The CVS Pharmacy app includes items from the retail section, cosmetics, pharmacy and more. There are also two applications that include pharmacy help, the CVS Caremark app and the CVS Pharmacy app. The issue is that they are trying to be a one stop shop and that makes it hard to maneuver around the app. If they were to separate the various features into separate applications, they could improve the amount of people using the app. Allowing for users to switch between departments would also be another option for reducing the confusion caused by the app. We would also consider condensing all CVS pharmacy needs with the pharmacy app and keep the retail side in the Caremark app. We would keep the sections separate so consumers know for medical needs, appointments and medication they’d go to the CVS Pharmacy app. The Caremark app would include the rest of the stores departments such as health and beauty, food and other retail items. Both applications would advertise based on the contents of the app. CVS recently added a feature that allows consumers to price match prescriptions. This is a great new feature but some customers might not be able to grasp the complexity of it if there are too many things occurring at once. Even though separation within the app isn’t all that is needed, organizing the app can make it more attractive to customers. The pharmacy app would also be inclusive for members without a member ID. Exclusivity can turn consumers away from the company. ???????Based on an article published by the New York Times, ?many “people already use laptops and tablet computers, studies show, but use of newer mobile gadgets like smartphones is lagging among the 60 and older cohort”. The reason many elders are not in tune with technology is because they didn’t grow up in a tech-fluent atmosphere so it is hard to learn about it. Another fact that makes learning about technology difficult is the complexity of it. Since there are a lot of components going into the app, they need to take the time and make sure that each addition to the app is beneficial without adding extra stress for new users. Also, the addition of “app guides” to teach older consumers how to navigate it would help. Impact on the Overall Business Renovating CVS’ app wouldn’t be the biggest technological innovation that they’ve had but it would have an impact on different aspects within the company. This implementation would change the way CVS functions and would impact them financially and their position within the industry. It allows for the company to strengthen their position in their market while not increasing their long-term debt significantly. When it comes to marketing, CVS would have to invest $10 million into promoting the renovation of the app. They would feature both digital and television advertisements to raise awareness of the renovation. By putting up banner ads and utilizing SEO, younger consumers are able to be reached easier. TV ads would be for older consumers who are not as connected to the internet. Advertisements like this have the ability to increase the amount of exposure the app would get. Aside from the financial aspect, more exposure can lead to more downloads and more activity within the app. To enforce exposure, we would allow an incentive for customers for downloading and using the apps the first time. This incentive would let consumers get a coupon for using the app and could include extra loyalty points for members that use the apps frequently. The renovation of the apps would scrap the old version and rebrand it. And hopefully as more people use the apps, CVS will have the chance to increase store operations; more customers using the app means more in-store traffic. When developing an app, the company has to make sure there is a version for IOS, Android/Windows and which device will it support as in the different types of iPhone and Androids/Windows phone. Since various operating systems are needed and need to be monitored, this would impact operations and how things are run. Technological implementations can allow for CVS to gather data on consumers through the application and adjust it suited to their preferences. This would mostly deal with image management in terms of how well CVS understands their customer. The downside to data sharing through technology is the risk that information would get out. This can be a negative impact for management if a situation where information was hacked, was released illegally. Because CVS is not a company centered on technological innovations, they might need to assemble a team on individuals specifically for the app. This team would consist of 2o employees who make sure that the application runs as smoothly as possible and troubleshoots possible issues they could encounter. Management is needed for this new department of employees. Since employees need to be up-to-date on the app, HR would have to update them on any training needed. This would include training to both use and the teaching of customers when dealing with how to use the applications. Management would also have an increased ease of communication between management, other sectors of the business and with stakeholders. Finances are one department that will be impacted the most from the renovation of the CVS apps. ?The first real impact will come with the initial cost to revamp the applications which would be $14 million. This cost would be enough to recreate the applications and since this is being financed through loans, we did not put a strain on their already high debt. When dealing with the development cost of the app updates, that would be a recurring cost CVS would need to pay to maintain the functionality of the app. Training costs would also be another way finance will be impacted. Since we would like to help older adults with using the app, they would need to consider the price it takes to make sure those employees are properly trained. The ending benefit for the finance department would be an increase in revenues due to high traffic.NPVTable 3.0Time012345Initial cost($14,000,000)Inflows$5,500,000$6,500,000$6,500,000$7,500,000$7,000,000Outflows$3,250,000$3,350,000$2,300,000$2,500,000$2,225,000Net Inflows$2,250,000$3,250,000$4,200,000$5,250,000$4,775,000Salvage$0Net cash flow($14,000,000)$2,250,000$3,250,000$4,200,000$5,250,000$4,775,000PV at 10%($14,000,000)$2,045,455$2,685,950$3,155,522$3,585,821$2,964,899NPV$437,647For the NPV, we would invest an initial cost of $14,000,000 in the renovation of the app. The initial cost is comprised of the price to renovate the pharmacy and retail app ($500,000 each), maintenance cost ($1.25 million) and marketing cost ($10 million), and the cost to run the app department ($1.75 million; cost for employees and workspace). We are expecting our inflows to be lower initially and then slowly increase. We expect the renovation of our app to slowly add value to the company. Our outflows consist of the marketing cost, maintenance cost, and employee salaries. The marketing cost for year one and two is expected to be $1 million. Then year three, four, and five, we expect the maintenance expense to decrease to $500,000 because as the app develops and updates, it should not require as much maintenance. We will initially start with 20 employees making a $50,000 salary. Ten employees developing the pharmacy app and ten employees developing the retail app. Once the app is developed we feel that we will be able to maintain functionality with 12 employees total after year two. This will decrease our outflow expense by $400,000 for the last three years. Maintenance expense for year one and two is $250,000. In year three it will decrease down to $200,000, $150,000 in year four, and $125,000 in year five. At a discount of 10% there is a positive NPV of $437,647, meaning that this investment could have a positive payoff in the end.Financial AnalysisTables 3.1-3.6Amount of capital needed$14,000,000Interest rate10%Tax rate20%Stock price$80.86Number of shares outstanding 1,020,000,000.00Recession Scenario 100% debtNormalcy Scenario 100% debtBoom Scenario 100% DebtEBIT8,813,025,000EBIT9,792,250,000EBIT10,771,475,000Interest1,400,000Interest1,400,000Interest1,400,000EBT8,811,625,000EBT9,790,850,000EBT10,770,075,000Taxes1,722,605,000Taxes1,958,170,000Taxes2,154,015,000EAT7,089,020,000EAT7,832,680,000EAT8,616,060,000# of Shares1,020,000,000.00# of Shares1,020,000,000.00# of Shares1,020,000,000EPS6.95EPS7.68EPS8.45Recession Scenario 75-25Normalcy Scenario 75-25Boom Scenario 75-25EBIT8,813,025,000EBIT9,792,250,000.EBIT10,771,475,000Interest1,050,000Interest1,050,000Interest1,050,000EBT8,811,975,000EBT9,791,200,000EBT10,770,075,000Taxes1,762,395,000Taxes1,958,240,000Taxes2,154,015,000EAT7,049,580,000EAT7,832,960,000EAT8,616,060,000# of Shares1,020,043,285# of Shares1,020,043,285# of Shares1,020,000,000EPS6.91EPS7.68EPS8.45Recession Scenario 50-50Normalcy Scenario 50-50Boom Scenario 50-50EBIT8,813,025,000.00EBIT9,792,250,000EBIT10,771,475,000Interest700,000Interest700,000Interest700,000EBT8,812,325,000EBT9,791,550,000EBT10,770,775,000Taxes1,762,465,000Taxes1,958,310,000Taxes2,154,155,000EAT7,049,860,000EAT7,833,240,000EAT8,616,620,000# of Shares1,020,086,569# of Shares1,020,086,569# of Shares1,020,086,569EPS6.91EPS7.68EPS8.45Recession Scenario 25-75Normalcy Scenario 25-75Boom Scenario 25-75EBIT8,813,025,000.00EBIT9,729,250,000EBIT10,771,475,000Interest350,000Interest350,000Interest350,000EBT8,812,675,000EBT9,791,900,000EBT10,771,125,000Taxes1,762,535,000Taxes1,958,380,000Taxes2,154,225,000EAT7,050,140,000EAT7,833,520,000EAT8,616,900,000# of Shares1,020,129,854# of Shares1,020,129,854# of Shares1,020,129,854EPS6.91EPS7.68EPS8.45Recession Scenario 100% equityNormalcy Scenario 100% equityBoom Scenario 100% equityEBIT8,813,025,000.00EBIT9,792,250,000EBIT10,771,475,000InterestInterest0Interest0EBT8,813,025,000.00EBT9,792,250,000EBT10,771,475,000Taxes1,762,605,000.00Taxes1,958,450,000Taxes2,154,295,000.00EAT7,050,420,000.00EAT7,833,800,000EAT8,617,180,000.00# of Shares1,020,173,139# of Shares1,020,173,139# of Shares1,020,173,139EPS6.91EPS7.68EPS8.45We calculated the 5 varying debt-equity levels for recession, normalcy, and boom scenarios. As expected, Financing through 100% debt had the highest EPS for all three scenarios. While this is not much of a difference, we still want to choose the highest EPS for all scenarios to ensure our project has the best potential. We found the EBIT by averaging out the past 5 years of EBIT from the income statement. That average is the normalcy scenario EBIT. To calculate the recession scenario EBIT, we decreased it by 10%. Then for the boom scenario EBIT we increased it by 10%. I found the tax rate by referring to last year’s income statement and calculating the rate from the revenues and tax expense.Income StatementTable 3.7Our strategy affects multiple balances in CVS’s income statement. Our investment of $14 million mainly affects the following accounts: revenue, Selling general and administrative expense (SGA), and interest expense. The revenues for year 1 (2019) will increase by an additional $5.5 million in year 1, and in Year 2 (2020) our strategy will increase total revenues by an additional $6.5 million. SGA expenses will increase due to marketing costs, maintenance costs, and other costs related to marketing and improving the app. As a result, SGA expense will increase in both the projected years. We will be buying computer software for $750,000 with a 10-year useful life. Dividing the investment of $750,000 by ten leads to there being a $75,000 amortization expense. Due to amortization of the computer software there will be an $75,000 amortization expense for the next ten years on the income statement. This amortization expense also reflects the amount the investment in computer software decreases each year. Lastly, interest expense will be affected in both the projected years because we are financing our strategy using a loan. We are funding are strategy through a loan because we found in our EBIT-EPS calculations that the highest earnings per share is under the debt financing method. Additionally, CVS generally finances their operations and strategies through long-term debt. The strategy will cause an increase in interest expense. In year 1 interest expense increased, and in year 2 interest expense deceased because of how CVS plans to pay back their debt. The strategy wasn’t large enough in relation to the company to cause an increase in both years. Most numbers on income statement will go through regular growth/decline from regular operations. Balance Sheet Table 3.8Our investment of 14 million dollars is being funded through a loan because our EBIT-EPS number was highest under debt financing.. As a result of our investment, long-term debt increases by an additional 14 million dollars, and intangible assets increases by an additional $750,000 dollars. It’s impossible to accurately value how much intangible assets will actually increase or decrease due to our strategy, but intangible assets will at least increase due to the direct investment in computer software. A contra asset account titled accumulated amortization is created to decrease the amount of the asset “intangible goods”. Amortization is used instead of depreciation because we’re investing in computer software and other intellectual property. We calculate Amortization using a useful life of 10 years. Calculation: (750,000/ 10 years’ useful life) =75,000 yearly amortizations. This 75,000 amortization is expensed each year, and the accumulated depreciation increases as the amortization expense is recorded. Intangible assets and accumulated amortization are key figures because they represent how much value the investment carries at a given time. The book value of the investment would be equal to the initial investment in computer software subtracted by the accumulated amortization account. The current value of the investment can be used to gauge how good inflows related to the project are. Historical ratiosTable 3.9Projected RatiosTable 4.0These ratios reflect our projected income statement and balance sheet. As you can see, compared to the past 5 years, our projected ratios are increasing gradually each year. These projected ratios support our recommendation for CVS Health. With the ROA, ROE, debt to equity ratio, and inventory turnover increasing, the gross profit margin only decreases by .02, which is basically maintaining. The quick ratio decreases slightly. The quick ratio, indicates a company’s ability to instantly liquidate their assets to pay off current liabilities. Ideally, the quick ratio should be greater than 1.0, for a company to sufficiently meet their short term obligations. We recommend CVS Health monitor this value, as over the past 5 years it has been less than 1.0.Strategy Evaluation and Contingency PlansThe projected figures help give an idea of the outcome of the strategy. The strategy we plan to implement for CVS is to improve their app. Through our investment we believe we’ll have an increase in revenue growth as we will have an increase in customers. As a result of the strategy, the projected revenue of CVS was above the average revenue increase. The issue we face regarding assumptions would be that financial statements don’t capture the full effects of intangible assets. CVS places more importance on customer retention instead of relying on assumptions from projected figuresIf CVS technical implementations fall through, the first step we would do is to get feedback from throughout the first year from the customers and use it to fix the issues accordingly. The second step would be to ask a third-party application service to take over operations and give advice on what else may be missing. The third step would be to redistribute funds according to what would be best for the strategy. The fourth step would be to reassess the risks and environment, and to monitor the fluctuations in the application activity. The last step would be to give incentives for customers to download the app which will increase application traffic. ................
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