cvs company analysis

Introduction CVS is one of the places consumers head to often if they get sick. The pharmacy chain has its perks as being the largest pharmacy chain in the United States. As of December 31, 2012 there were 7,458 stores operating nationwide of which 7,402 had a pharmacy, filling nearly 10% of every prescription in the United States, CVS holds the top position in having most number of stores and number of prescriptions filled each year even though the company earns lower revenues than its competitors. (CVS Corporation History) Founded in 1963 under the name of Consumer Value Store, CVS is incorporated in Delaware.

The company’s mission statement is “ to provide innovative pharmaceutical solutions and quality client service in order to enhance clinical outcomes for our clients’ health benefit plan members while assisting our clients and their plan members in better managing overall health care costs”. (CVS Annual Report , 2011) The company is currently in the maturity stage of its life cycle with constant growth observed in sales and size. In 2012, the company generated net sales of $123 billion and earned about $3. 8 billion in net income.

CVS’s total assets exceed $65 billion of which about $24 billion is tied to property, plant and equipment (CVS 10-K Report, 2012). CVS employs approximately 26,000 full time pharmacists and 77,000 part time employees where the pharmacists are legally licensed. As a growing retailer, The CVS envisions being the safest retailer and strives to provide great service to its customers and being sustainable regarding their operations. They also want to increase their market share by being the most convenient and go-to pharmacy in the United States. (CVS Annual Report , 2011)

Financial Strength For the fiscal year ending December 31, 2012, CVS saw a growth in revenues and market share. During 2012, CVS’s revenue increased by 14% from 2011 and the overall market share increased to $67. 7 Billion. Net earnings of $3. 8 billion were reported by CVS in 2012, generating earnings of $3. 03 per share. CVS also paid dividends of $0. 90/share in 2012 to its investors (CVS Annual Report , 2011). CVS states in the 10-K that growth in sales is credited to the expansion of stores in 2012. CVS’s outstanding debt in 2012 was reported about $9. billion which could limit them to acquire more financing from banks and inhibit in achieving their business goal of expansion and growth. With retained earnings of $36 billion reported on their balance sheet, CVS could internally finance their expansion operations, but would risk increasing their leverage. Getting financed externally by issuing new shares would be costly and could indicate to investors that their stock is overvalued (Macke, 2013). CVS is actively traded on the New York Stock Exchange (NYSE) with a ticker symbol of CVS.

As of March 27, 2013, the stock price was $54. 99 (CVS Caremark Corporation, 2013). When compared to other industry leaders, CVS’s performance relative to the industry is better than most of the companies but stills lags behind supercenters such as Wal-Mart (CVS Caremark Corporation, 2013) Main Issue According to the 10-K, certain economic factors have been enlisted that could affect operations and limit sales for CVS. Firstly, economic uncertainties such as availability of credit, and rising unemployment rates have led the consumers to be more cautious about prices.

With customers spending less and switching towards cheaper product lines, CVS could experience loss in sales and operations. Second, new entrants in the market, rising operating cost, and inflation on the economy have caused all businesses in this industry to focus and compete primarily on product price. This had made harder for CVS to compete against the giant rivals and small grocery stores who relatively strive on being conveniently located to consumers. Finally, businesses need to expand as they grow in sales and retail businesses expand by increasing the number of operating stores.

CVS has grown in sales in 2012 by 14% and management intends to grow by expansion in the upcoming. However, according to CVS statements, outstanding debt totals about $9. 1 billion which could reduce their ability to obtain additional financing for expansion purposes (CVS 10-K Report, 2012). Also, there is a high risk of pension funds being underfunded for employees as interest accumulated on the funds is almost nothing and could force management to invest their securities in riskier investments or inject the fund with companies’ own resources and/or income.

Success Factors/Implementation As stated earlier in the economic factors section of the paper, competitive pricing is a key to excelling in an industry such as CVS’s. CVS is one of the largest retailer- pharmacy chains in the US contending in the top three after Walgreens, Wal-Mart etc. CVS saw 14% growth in revenue which came second to industry leader, Wal-Mart. This increase in market share and revenue in such a competitive environment can be characterized as true price wars with the leaders of the market and other competitors.

Price positioning is not merely generated by selling goods at a cheaper price, but also by producing products of high quality. Quality and price are the two components that attract the average customer from all walks of life to the air conditioned aisles of any retail store, big or small. As stated in the nature of business provided by CVS, they are able to establish the fact that they also provide pharmaceutical goods. The essential key to success to create brand loyalty in this area is to maintain quality products offered at affordable prices.

With a diversified range of quality products offered at a considerable price, CVS is also successful in building customer loyalty and brand image. Building a loyal customer base helps the business to grow by word-of-mouth and good personal experiences are great, free marketing tools. In return, good customer service provided by a business helps in strengthening and sustaining the loyalty of customers and lets the management delegate authority to the employees, thus empowering them. The overall effect of such a business model provides maturity to the company and helps the business improve economically and financially.

To integrate smooth flow of information across the company hierarchies, retail businesses greatly depend on the information technology for their products and customers. Information systems for a retail business such as CVS help retain and store customer information and their medical supplies history, they could share information with suppliers and vendors about purchases and sales, store data pertaining to products sitting on the shelf and warehouses, and are instrumental in counting inventory perpetually.

All of which are great tools in achieving a healthy supply chain management. Works Cited CVS Annual Report . (2011). Retrieved March 10, 2013, from http://media. corporate-ir. net/media_files/IROL/99/99533/CVSCaremark2011_AR. pdf CVS 10-K Report. (2012). Retrieved March 10, 2013, from http://www. sec. gov/Archives/edgar/data/64803/000110465913011354/a12-28799_110k. htm#Item1a_RiskFactors_225916 CVS Caremark Corporation. (2013, March 27). Retrieved March 27, 2013, from Yahoo Finance! : http://finance. yahoo. com/q? s=CVS Interest Rate Stats. 2013, March 20). Retrieved March 20, 2013, from U. S Department of the Treasury: http://www. treasury. gov/resource-center/data-chart-center/Pages/index. aspx CVS Corporation History. (n. d. ). Retrieved March 10, 2013, from Funding Universe: http://www. fundinguniverse. com/company-histories/cvs-corporation-history/ Macke, J. (2013, January 2). If a Company Is Buying Back Shares, Sell Them the Ones You Own. Retrieved March 11, 2013, from Yahoo, Finance: http://finance. yahoo. com/blogs/breakout/company-buying-back-shares-sell-them-ones-own-184038666. html

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