The external environment of CVS Caremark Corp. is a very reaching and
impactful environment. There are several different companies that are large
competitors and have a large impact on the pharmaceutical environment. CVS also
has a couple of pretty big rivals within the environment that have pretty large
impacts on the industrial environment. This industry is very competitive and it is
hard for new entrants to survive.
CVS has quite a few competitors that have fairly large impacts on the
industrial environment. A couple of the biggest competitors are Express Scripts
Holding Co., Cardinal Health, Inc., and Wal-mart Stores, Inc. CVS’s largest competitor
though is Walgreen Co. CVS trails only Walgreen Co. as the #2 drugstore chain, and
they are the leader in pharmacy benefits management with greater than 60 million
members. CVS trails Walgreen by close to 600 stores across the country.
There is an existing rivalry among a couple of the firms in this industry. The
big rivalry is between CVS and Walgreen, the two largest drugstore chains in the
country. Walgreen announced that they would not be a prescription drug provider
for any customer in the drug benefit plans administered by CVS Caremark. While at
the same time CVS made a counter move saying that anyone enrolled in their drug
benefit plans could no longer fill prescriptions at Walgreen. Another example is with
any move one of these two companies makes, the rival company feels tremendous
amounts of pressure to make similar moves. An example of this was when CVS
recently decided to take tobacco products off its shelves and Walgreen was soon
being pressured to follow in their footsteps. These two top companies are large
rivals who impact largely each other’s operations.
Entrance into this market for new companies has some of the same threats as
entrance into any other market. Some of these threats include the competition that
is already in place. It is hard for a new company to enter the market and to be
competitive right away. Other threats to new entrants in this particular industry
include, the need for capital and financial resources. Companies in this field need
large amounts of capital in order to survive. New entrants also need regulatory
things such as, patents and regulatory standards. It is hard for new companies to get
a hold of such things because the top competitors in the industry already hold most
of them. There are a lot of threats and obstacles to overcome for new entrants into
this industry.
In the pharmaceutical industry, there is a medium to high level of threat that
comes from substitutes products. The threats come from the generic branded drugs
when patents run out or expire. Other threats in this industry come from alternative
medicines and treatments that may be in existence. Although this is a new threat, up
until the mid-1980’s there were very little substitutes and patent laws prohibited
companies from replicating name brand drugs. The threat of substitutes in this
industry has become more prevalent in recent years.
In the industry today customers possess quite a bit a power. With the
internet and with the use of health care organizations customers have a greater
knowledge of the different types of drugs that are available, and with that they also
know the difference in prices of the different drugs which gives them a bigger role to
be able to decide what types of drugs they are willing to purchase. The suppliers on
the other hand have little to no power in this industry. Because the suppliers’
products have such a long shelf life and are so readily available from several
different companies they have to rely on pricing and delivery. Customers are quite
powerful in this industry while on the other hand suppliers have very little to no
power at all.
The world pharmaceutical industry is a growing industry. Since 2010 this
industry was predicted to grow by 4-6%, and close to $300 billion in the subsequent
5 years resulting in a $1.1 trillion dollar industry by 2014. It is also predicted to
grow by 5-8% in 2014 alone. The United States is the single largest market growing
by 3-6% annually and are expected to reach $360-$390 billion in 2014. China is the
third largest market in the world.
This industry has several different environmental factors that affect the way
that CVS Caremark and any other company in the industry operate. Some of the
factors that have the biggest impact are political, economic, socio-cultural, and
technological. Each of these factors impacts this industry in many ways.
CVS Caremark Corp. is not in any danger at all. CVS is the second largest
company in this industry. Their net income is in the positives at about $4.6 million.
Their assets also easily cover their liabilities by almost $40 million. CVS is doing
very well financially. They also have a large amount of store across the country and
come only second behind Walgreen Co.
CVS Caremark is not the leader in this industry. Walgreen Co. is the leader of
this industry. CVS is the second largest in this industry. These two companies are
very large rivals with each other. There are also several other companies that are
fairly close in size with these two companies but they are the standing leaders in the
industry.
The government has a very large impact on this industry. In today’s world
with all the new laws and regulations on healthcare the government has a very large
impact on the industry and how they operate. The government also has a lot of
different programs that help patients and customers to be more aware of the variety
of drugs that are available to them. The biggest impact the government has by far is
the Obamacare. This helps the government to have their hand in this industry.
CVS Caremark Corp. has an interesting external environment. There are so
many competitors in their industry that affect them but they also have one large
rival that affects them the most. There are also other factors such as new companies
trying to enter the industry and also the threats of customers using substitute
products. The external environment has a large impact on the way CVS operates its
day to day activities.
Citations
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[Web log message]. (2014). Retrieved from http://www.hoovers.com/companyinformation/cs/competition.Cvs_Caremark_Corporation.e8a792978e23c42d.html
Britt, R. (2014, February 12). Pressure builds on walgreen to follow cvs and drop
tobacco. Retrieved from http://blogs.marketwatch.com/healthexchange/2014/02/12/pressure-builds-on-walgreen-to-follow-cvs-and-droptobacco/
Castner, M. (2007, April 19). The global pharmaceutical industry . Retrieved from
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