CVS Health: Redefining the Value Proposition SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of CVS Health: Redefining the Value Proposition
"CVS Health: Redefining the Value Proposition" explores how a company can use shared value as a lens to think about competition and strategy choices in a challenging and evolving industry. The case takes a historical look at the structure of the retail pharmacy industry and the changing nature of rivalry among competitors. The case examines how CVS was able to surpass the long-time industry leader, Walgreens, and highlights CVS Health's shift in strategy starting in the mid-2000s.
Authors :: Michael E. Porter, Jorge Ramirez-Vallejo, Alexandra Houghtalin
Swot Analysis of "CVS Health: Redefining the Value Proposition" written by Michael E. Porter, Jorge Ramirez-Vallejo, Alexandra Houghtalin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cvs Redefining facing as an external strategic factors. Some of the topics covered in CVS Health: Redefining the Value Proposition case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the CVS Health: Redefining the Value Proposition casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, there is backlash against globalization, talent flight as more people leaving formal jobs,
banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, etc
Introduction to SWOT Analysis of CVS Health: Redefining the Value Proposition
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in CVS Health: Redefining the Value Proposition case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cvs Redefining, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cvs Redefining 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 CVS Health: Redefining the Value Proposition can be done for the following purposes –
1. Strategic planning using facts provided in CVS Health: Redefining the Value Proposition case study
2. Improving business portfolio management of Cvs Redefining
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 Cvs Redefining
Strengths CVS Health: Redefining the Value Proposition | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cvs Redefining in CVS Health: Redefining the Value Proposition Harvard Business Review case study are -
Ability to lead change in Strategy & Execution field
– Cvs Redefining 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 Cvs Redefining in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Cvs Redefining is one of the most innovative firm in sector. Manager in CVS Health: Redefining the Value Proposition Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Training and development
– Cvs Redefining has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in CVS Health: Redefining the Value Proposition Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Superior customer experience
– The customer experience strategy of Cvs Redefining in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Cvs Redefining 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 Michael E. Porter, Jorge Ramirez-Vallejo, Alexandra Houghtalin 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.
Strong track record of project management
– Cvs Redefining 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
– CVS Health: Redefining the Value Proposition firm has clearly differentiated products in the market place. This has enabled Cvs Redefining to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Cvs Redefining to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Cvs Redefining is present in almost all the verticals within the industry. This has provided firm in CVS Health: Redefining the Value Proposition 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.
Ability to recruit top talent
– Cvs Redefining is one of the leading recruiters in the industry. Managers in the CVS Health: Redefining the Value Proposition are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Cvs Redefining 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 CVS Health: Redefining the Value Proposition HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Cvs Redefining has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study CVS Health: Redefining the Value Proposition - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the CVS Health: Redefining the Value Proposition 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.
Weaknesses CVS Health: Redefining the Value Proposition | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of CVS Health: Redefining the Value Proposition are -
Interest costs
– Compare to the competition, Cvs Redefining has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High cash cycle compare to competitors
Cvs Redefining has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High operating costs
– Compare to the competitors, firm in the HBR case study CVS Health: Redefining the Value Proposition has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Cvs Redefining 's lucrative customers.
Need for greater diversity
– Cvs Redefining has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study CVS Health: Redefining the Value Proposition, is just above the industry average. Cvs Redefining 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 to strategic competitive environment developments
– As CVS Health: Redefining the Value Proposition HBR case study mentions - Cvs Redefining 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.
Lack of clear differentiation of Cvs Redefining products
– To increase the profitability and margins on the products, Cvs Redefining needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Cvs Redefining is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Cvs Redefining needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Cvs Redefining to focus more on services rather than just following the product oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Cvs Redefining supply chain. Even after few cautionary changes mentioned in the HBR case study - CVS Health: Redefining the Value Proposition, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Cvs Redefining vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study CVS Health: Redefining the Value Proposition, it seems that the employees of Cvs Redefining 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.
Low market penetration in new markets
– Outside its home market of Cvs Redefining, firm in the HBR case study CVS Health: Redefining the Value Proposition needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities CVS Health: Redefining the Value Proposition | 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 CVS Health: Redefining the Value Proposition are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Cvs Redefining can use these opportunities to build new business models that can help the communities that Cvs Redefining operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
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 Cvs Redefining in the consumer business. Now Cvs Redefining can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Cvs Redefining can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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. Cvs Redefining 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. Cvs Redefining 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.
Leveraging digital technologies
– Cvs Redefining 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.
Learning at scale
– Online learning technologies has now opened space for Cvs Redefining 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
– Cvs Redefining 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Cvs Redefining is facing challenges because of the dominance of functional experts in the organization. CVS Health: Redefining the Value Proposition case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– Cvs Redefining can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. CVS Health: Redefining the Value Proposition 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.
Creating value in data economy
– The success of analytics program of Cvs Redefining has opened avenues for new revenue streams for the organization in the industry. This can help Cvs Redefining to build a more holistic ecosystem as suggested in the CVS Health: Redefining the Value Proposition case study. Cvs Redefining can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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 Cvs Redefining 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Cvs Redefining 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.
Using analytics as competitive advantage
– Cvs Redefining 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 CVS Health: Redefining the Value Proposition - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Cvs Redefining to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats CVS Health: Redefining the Value Proposition External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study CVS Health: Redefining the Value Proposition are -
Environmental challenges
– Cvs Redefining 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. Cvs Redefining 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. Cvs Redefining 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study CVS Health: Redefining the Value Proposition, Cvs Redefining 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 .
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Cvs Redefining.
Shortening product life cycle
– it is one of the major threat that Cvs Redefining is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Cvs Redefining has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Cvs Redefining 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.
Stagnating economy with rate increase
– Cvs Redefining can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Consumer confidence and its impact on Cvs Redefining 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Cvs Redefining 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 Cvs Redefining
– 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 Cvs Redefining.
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. Cvs Redefining can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Cvs Redefining needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Weighted SWOT Analysis of CVS Health: Redefining the Value Proposition 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 CVS Health: Redefining the Value Proposition 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 CVS Health: Redefining the Value Proposition 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 CVS Health: Redefining the Value Proposition 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 CVS Health: Redefining the Value Proposition 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 Cvs Redefining needs to make to build a sustainable competitive advantage.