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Drug Retail Industry Analysis

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on 19 June 2014

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Transcript of Drug Retail Industry Analysis

Drug Retail Industry Analysis
Team 5

Economic Features
Market Info -
Porter's 5 Forces
Team Members:
Wannee Panmunin

Ryan Seibold

Valerie Stephen

Olga Starodubtseva

Paul O'Connor


Agenda
1. Industry’s Dominant Economic Features

2. Porter's Five Forces

3. Drivers for Change in the Broad Environment

4. Companies in the Strongest/Weakest Positions

5. Key Success Factors For Competitive Success
(KSFs)

6. Analysis - Industry’s Prospects for Long-Term Profitability
Threat of Potential
New Entrants
Competitive Rivalry
Power of Buyers
Power of Suppliers
Threat of Substitutes
Industry -
Pharmacies & Drug Stores
Drivers of Change

Companies in the Strongest and Weakest Positions

Key Factors for Competitive Success
Analysis and
Summary
Any Questions??
Power of substitutes is fairly high
Wide Range of Products-
Companies (Walmart/Publix) sell similar products for cheaper prices
Healthy eating/drinking can be just as beneficial as industry's products
Switching costs for buyers is low
Threat of rivalry is high
"Big Three" hold most of market
Customer can jump ship easily to other competitors
Numerous suppliers
McKesson/Rite-Aid relationship by choice
Walgreens wouldn't be affected by loss of 1 supplier
55.7% of suppliers feel they are not in equally beneficial relationship, indicative of retail pharmacy buying power
Low
Moderate
Not so many clients for low power
Not so few for high power
Avg. 97% clients are PBMs, Employers, Insurance co., healthcare program
3 components of brand advocacy: Choice, Service, Trust
Low
Heavily regulated
Difficult for new entrants to secure large clients
Individual clients not enough to sustain business
Successfully appealing to elderly consumers
Taking advantage of newly implemented healthcare laws
Integration of technology and business
“Prescription drugs are considered an essential health benefit under Section 1302 of the Act… Generic drugs will become even more affordable for consumers because of lower out-of-pocket expenses.”
- Kyle Colona,
Obamacare is Good Medicine for Retail Pharmacies
North America # of internet users has grown 153.3% from 2000-2012
Companies like CVS are implementing text message and online programs as well as apps to create greater convenience for consumers in a business environment centered around technology.
Top 3 companies hold ~90% of market
Mature life cycle stage
Growth -
Industry enterprises -2.1%
Revenues +2.6%
Disposable Income -
As per capita disposable income increases,
it improves the industry
Forward Integration -
Health care reform
PBM consolidation
Scope of Rivalry -
High competition between supercenters, grocery stores, mail order services, etc.
Consolidation intensifies rivalry
Expanding industry
Future increase in competition
Key success factors will increase profitability
CVS will see an increase in strategic position
Insulate from unattractive forces through adaptation of technological, legal, and socio-cultural changes
Firms that find large-scale innovations to enhance consumer health are more lucrative
Attractive industry
pharmaceutical medications, natural remedies and various consumable goods
Global Variation
Economic
Technological
Political & Legal
*To a lesser extent; socio-cultural and environmental
Economic Examples
Health Insurance

Federal Funding

Foreign Exchange Rate
*Industry specific- increase in generic drug prices
Political & Legal Examples
Healthcare Reforms

Global Political Influence

New Legislation
Technological Examples
More Efficient Logistics
*tracking
*fresher products
Production Capabilities

Packaging Resources
CVS Caremark Brands
CVS Strategy
Mission Statement:
Staying healthy isn’t easy these days. Health care costs keep rising. People are overwhelmed and confused by all the changes. They’re looking for help. They’re looking for solutions that make a difference. At CVS Caremark, we know that to make a difference, you have to do things differently. So we’re reinventing pharmacy to help people on their path to better health.
Offering services:
flu shots
mini clinics in urban areas
PBM
DIFFERENTIATION THROUGH
7,625 stores
Walgreens Strategy
Mission Statement:
To be the most trusted, convenient multichannel provider and advisor of innovative pharmacy, health and wellness solutions, and consumer goods and services in communities across America. A destination where health and happiness come together to help people get well, stay well and live well.


8,385 locations
Differentiation through strategic geographic easy accesssibility.
Rite Aid Strategy
Mission Statement:

To improve the health and wellness of our communities through engaging experiences that provide our customers with the best products, services and advice to meet their unique needs.
4,623 stores
Differentiation through health and wellness niche, and loyalty membership program.
Strategic Partnership
Full transcript