McKesson, a large, diversified drug distribution and health care IT company, is considering development of new business offerings to help private practice physicians remain independent. The company, with $122 billion in 2010 revenues, just made its first foray into health care services with the acquisition of U.S. Oncology, an integrated cancer care company, whose expertise it could leverage in offerings catered to other physician specialties. With a vast portfolio of products and services serving a wide spectrum of health care stakeholders, McKesson appears uniquely positioned to understand and capitalize on the needs of health care businesses. With the recent passage of health care reform adding to the pressures already squeezing the health care industry-including new payment models requiring significant coordination and IT capabilities-independent physicians are migrating in droves to large health care organizations, abandoning the private practice model. McKesson could potentially provide them with an alternative. McKesson is an exceedingly large company with somewhat autonomous business units, making the prospect of collaborating to create a "cross-disciplinary" offering for independent practices difficult. Moreover, doing so would potentially extend McKesson into the clinical health services (and potentially risk-sharing) business, the strategic merits of which can be debated. Given the uncertainty surrounding the physician practice environment, the ideal shape of a solution to help these customers remains unclear, and competitors with a different product mix could be better positioned than McKesson to provide it. Finally, it could be too late altogether to reverse the trends eroding the private practice model.
Swot Analysis of "McKesson" written by Regina E. Herzlinger, Natalie Kindred includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Mckesson Care facing as an external strategic factors. Some of the topics covered in McKesson case study are - Strategic Management Strategies, Change management, Collaboration, Disruptive innovation, Entrepreneurship, Health, IT, Marketing, Operations management, Strategy execution and Strategy & Execution.
Some of the macro environment factors that can be used to understand the McKesson casestudy better are - – cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , increasing energy prices, challanges to central banks by blockchain based private currencies,
central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in McKesson case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Mckesson Care, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Mckesson Care operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of McKesson can be done for the following purposes –
1. Strategic planning using facts provided in McKesson case study
2. Improving business portfolio management of Mckesson Care
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Mckesson Care
Strengths McKesson | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Mckesson Care in McKesson Harvard Business Review case study are -
Analytics focus
– Mckesson Care is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Regina E. Herzlinger, Natalie Kindred can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Mckesson Care digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Mckesson Care has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Successful track record of launching new products
– Mckesson Care has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Mckesson Care has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Superior customer experience
– The customer experience strategy of Mckesson Care in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management
– Mckesson Care is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Strategy & Execution industry
– McKesson firm has clearly differentiated products in the market place. This has enabled Mckesson Care to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Mckesson Care to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Mckesson Care has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in McKesson HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Strategy & Execution field
– Mckesson Care is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Mckesson Care in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Mckesson Care is one of the leading recruiters in the industry. Managers in the McKesson are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the McKesson Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Diverse revenue streams
– Mckesson Care is present in almost all the verticals within the industry. This has provided firm in McKesson case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High switching costs
– The high switching costs that Mckesson Care has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Weaknesses McKesson | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of McKesson are -
Low market penetration in new markets
– Outside its home market of Mckesson Care, firm in the HBR case study McKesson needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Mckesson Care is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Mckesson Care needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Mckesson Care to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Mckesson Care has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - McKesson should strive to include more intangible value offerings along with its core products and services.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the McKesson HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Mckesson Care has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the segment, Mckesson Care needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study McKesson, is just above the industry average. Mckesson Care needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow decision making process
– As mentioned earlier in the report, Mckesson Care has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Mckesson Care even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Slow to strategic competitive environment developments
– As McKesson HBR case study mentions - Mckesson Care takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study McKesson, it seems that the employees of Mckesson Care don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Aligning sales with marketing
– It come across in the case study McKesson that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case McKesson can leverage the sales team experience to cultivate customer relationships as Mckesson Care is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study McKesson, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Opportunities McKesson | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study McKesson are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Mckesson Care can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Mckesson Care can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Mckesson Care in the consumer business. Now Mckesson Care can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Mckesson Care has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study McKesson - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Mckesson Care to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Mckesson Care can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Better consumer reach
– The expansion of the 5G network will help Mckesson Care to increase its market reach. Mckesson Care will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Mckesson Care in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at Mckesson Care can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Buying journey improvements
– Mckesson Care can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. McKesson suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Leveraging digital technologies
– Mckesson Care can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Mckesson Care can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Mckesson Care to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Learning at scale
– Online learning technologies has now opened space for Mckesson Care to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Manufacturing automation
– Mckesson Care can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats McKesson External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study McKesson are -
Environmental challenges
– Mckesson Care needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Mckesson Care can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Mckesson Care will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Mckesson Care can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Mckesson Care demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Shortening product life cycle
– it is one of the major threat that Mckesson Care is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Mckesson Care with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing wage structure of Mckesson Care
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Mckesson Care.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Mckesson Care in the Strategy & Execution sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Mckesson Care has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Mckesson Care needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Mckesson Care in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study McKesson, Mckesson Care may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Weighted SWOT Analysis of McKesson Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study McKesson needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study McKesson is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study McKesson is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of McKesson is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Mckesson Care needs to make to build a sustainable competitive advantage.
