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 - – banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, geopolitical disruptions, increasing commodity prices, there is backlash against globalization, increasing energy prices,
competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
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.
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.
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.
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.
High switching costs
– The high switching costs that Cvs Redefining 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.
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.
High brand equity
– Cvs Redefining has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Cvs Redefining to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Learning organization
- Cvs Redefining is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Cvs Redefining is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in CVS Health: Redefining the Value Proposition Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
Organizational Resilience of Cvs Redefining
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Cvs Redefining does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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 -
High bargaining power of channel partners
– Because of the regulatory requirements, Michael E. Porter, Jorge Ramirez-Vallejo, Alexandra Houghtalin suggests that, Cvs Redefining is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
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.
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.
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.
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.
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.
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.
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.
Slow decision making process
– As mentioned earlier in the report, Cvs Redefining 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. Cvs Redefining 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.
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.
Capital Spending Reduction
– Even during the low interest decade, Cvs Redefining has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
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 -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Cvs Redefining can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, CVS Health: Redefining the Value Proposition, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Cvs Redefining to increase its market reach. Cvs Redefining 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.
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.
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.
Developing new processes and practices
– Cvs Redefining 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.
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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Cvs Redefining can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– Cvs Redefining has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, 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. Cvs Redefining can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Cvs Redefining to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Cvs Redefining to hire the very best people irrespective of their geographical location.
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.
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.
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.
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.
High dependence on third party suppliers
– Cvs Redefining high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
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.
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 Cvs Redefining in the Strategy & Execution sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Cvs Redefining can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study CVS Health: Redefining the Value Proposition .
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 .
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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Cvs Redefining 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.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Cvs Redefining business can come under increasing regulations regarding data privacy, data security, etc.
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.
