CVS HEALTH COMPANY Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

CVS HEALTH COMPANY Case Study Solution

Investors are very conscious about their investments. They want a complete knowledge about the company before investing in it and invest in that company which matches their risk appetite. To measure a company that how risky it is we need to analyze its internal as well as external environment along with its sustainability. Our team analyzed CVS Health Company’s internal environment, external environment and its sustainability.

To analyze and evaluate the company we need the good understanding of the company that how big the company is, in what environment it operates, the growth of the company and the interest of different stakeholders. In our analysis of CVS Health Company, we have used different models to capture a true view of the company.

We use PESTEL model to evaluate the external environment of CVS Health Company. SWOT and Ratio analysis to evaluate its internal environment. And for the valuation purpose we used Free Cash Flow method. We also determined the sustainability of the company through ratio analysis of five years and different strategies adopted by the company.

After a complete analyzation, we conclude that the company is well diversified, well maintained and has enough resources to operate which makes CVS Health Company a low risk company.

Introduction

The basis of CVS Company was incorporated in 1963 by two brothers Stanley and Sidney Goldstein and Ralph Hoagland a partner of a store. It operates in entire US. The ticker CVS means Consumer Value Store. The company sells health and beauty products. The first store was founded in Lowell. After a year, they expanded themselves and incorporated 16 other stores. After 3 years, in 1967, the owners start to operate in pharmacy products at the stores in Warwick and Cumberland. But, after two years in 1969, the company is sold to Melville Incorporation. Now the company is an international company. (company website)

After the acquisition by Melville Incorporation, the company expands itself through acquisitions. It used to acquire others continuously. The first acquisition took place in 1972 of 84 stores of Clinton Drug and Discount Stores. Then it acquired 36 other stores in 1977. In 1990, it acquired other 500 stores from Peoples Drug and marked its presence in new mid-Atlantic Markets. In 1997, CVS Company made a history in the acquisition at US retail pharmacy industry by acquiring 2500+ stores from Revco. This acquisition gave the company the key location in Midwest and Southeast. The company did not stop here. After a historical acquisition in 1998 from Arbor Drugs of Michigan it acquired other 200 stores. In the era of 2000 other four acquisitions tookplace. First in 2004 of 1268 stores of Eckerd stores and Eckerd Health Services. Second is at 2006 from Albertsons which is of 700 stores of Sav-On and Osco Drugstores. Then in 2008 of 541 stores and last in 2015 of a leading pharmacy company Omnicare.

CVS Company acquires the companies which provide different products. Hence it has diversified range of products which decrease its overall risk.

In 1996, there was a restructuring of Melville Incorporation and it resulted in CVS Company declaring itself as a standalone company. Melville Incorporation operated in New York Stock Exchange with the first chairman Stanley Goldstein. However, the current CEO is Larry Merlo.

In 2014, CVS stopped the sales of cigarettes and tobacco products and changed its name from CVS Health to CVS Caremark.

PESTEL Analysis

Political:

CVS Health Company operates in US. While US has a stable political environment. But the politics of US is dominated by just two political parties which is quite unfavorable for businesses because at the time of biasness it is the business who has to suffer a lot. CVS is a pharmacy company so chances of biasness increases due to its nature of operation.

Along with this US has strong legitimates. But the ultimate power is in the hand of President. So any bill passed by congress which is in the favor of pharmacy industry can be veto by President. and hence the pharmacy industry has to suffer. This concludes that the political environment of US is quite risky. (Political Outline, 2017)

Economical:

US has the strongest economy in the world. In the last few years, there were some disasters happened in the US which affected US economy very drastically like debt ceiling, wars and etc. Due to these the investors’ confidence agitated which caused the increase in inflation, interest rate and others. Meanwhile major catastrophes occurred in US like Enron due to which the laws on business become more strong and hence the investors tried to withdraw their investment from US. Meanwhile international investors also hesitated in investing in US companies. These all affect adversely to US economy.

CVS HEALTH COMPANY Harvard Case Solution & Analysis

Social:

US locals have their own values and rights. If any one goes against their rights they start to protest against it. It’s their culture that they help other people and even love animals. Pharmacy industry is very sensitive in this case because they have to test their products on animals. So if CVS Health Company goes against the domestic values and culture of US then it may have to face people offences which will damage its goodwill drastically...............

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