CVS Caremark Business Analysis Part I
University of Phoenix

CVS Caremark Business Analysis Part I
Investing mutual funds involves many aspects of confidence and knowledge when considering potential companies. One must know a company from the inside and out so they know exactly what their money is being used for. Having this knowledge means investors will not think twice about investing because they will feel confident that the company will provide a return on their investment. By performing a SWOT Analysis and examining how a company will fulfill the needs of internal and external stakeholders, investors will see what the current state of company is and what the foreseeable future holds.
SWOT Analysis
A SWOT Analysis is a planning tool used to analyze an organization’s strengths, weaknesses, opportunities, and threats (Nickels, McHugh, & McHugh, 2010). CVS Caremark is the potential client that this SWOT Analysis will be conducted on in order to determine if they are the proper suitor for investors.
Company Overview
CVS was founded in 1963 as a company that specialized in health and beauty products. Over time pharmacies were added, and CVS quickly grew in store locations over the next 4 decades by buying smaller pharmacy chains (“Our Company,” 2012). The big change in CVS occurred in 1997 with the purchase of the Revco pharmaceutical chain. Revco and its 2,500 store chain was now a part of the CVS brand and this quickly established CVS as a powerhouse in the pharmaceutical industry. Up until 2006 CVS focused on purchasing smaller pharmacy chains, by this time CVS began to focus on a different market segment, retail health clinics. With the purchase of the 500 location Minute Clinic Company, CVS now branched out into a new market segment that focused on patients getting quick and affordable healthcare which combined with getting their prescriptions filled all in one place (2012).
Perhaps the biggest acquisition for CVS came 4 months later, with the purchase agreement and merger with Caremark, a pharmaceutical insurance company. CVS and Caremark merging created CVS Caremark and a major increase in revenue. With the merger, CVS now has control of customers with Caremark insurance. CVS has grown substantially since 1963, but while CVS has grown the company as a whole still needs to be dissected in order to determine if whether or not they are suitable for investors.
Strengths
CVS Caremark has the benefit of having a strong brand. CVS has the most stores among all other pharmacy companies with well over 7,000 stores with the next closest pharmacy company with that many stores is Walgreens with a little over 6,000 stores (“Top Retailers,” 2012). With having Minute Clinic and Caremark affiliated with CVS, this allows consumers more options to at CVS compared to other retail pharmacies. CVS has the most revenue among all retail pharmaceutical companies. CVS Caremark has risen to power by purchasing small retail pharmacy companies and eliminating the competition. Other companies like Walgreens are trying to grow by using the same strategy. CVS Caremark in most instances has out bid Walgreens and other companies for the smaller retail pharmacy companies, preventing them from growing and using the same strategy CVS Caremark used (“CVS Caremark,” 2012).
CVS Caremark has a highly regarded loyalty card program. The ExtraCare card is a loyalty based program that promotes customers to maintain a record of continuous shopping at CVS Caremark. Over time customers receive coupons, free products and other incentive based benefits. The ExtraCare card is used by more than 66 million customers. With the variety of products available to customers like food, beauty products and healthcare products, CVS along with its ExtraCare card promotes loyalty and it also has become a one stop shop for consumers nationwide.
CVS Caremark has utilized how the store is laid out so it is accommodating to consumers. Every shelf in CVS Caremark is designed so the top shelf is at eye level for the consumer. Not only does it make it inviting for consumers to see everything that is in front of them, but it also makes sure consumers do not miss any items they might have missed if the item was on a too high up for them to see. Customer service is an aspect of the CVS Caremark brand that has made them very reputable in retail. Under no circumstances can the floor not have an attendee to help the customers. Having an employee on the floors will promote customers to ask for help, and employees can approach customers to inquire if they need assistance. Many customers are reluctant to ask for help, so having employees ask for help could induce customers buying more.
Weaknesses
Like many companies, they are expected to comply with government regulations and laws so that all businesses are on a level playing field. Not every company is perfect though, and CVS Caremark is no different. In 2010 CVS Caremark was fined 75 million dollars for not providing enough safeguards to monitor how much pseudoephedrine someone was buying. By not monitoring this, many individuals can take pseudoephedrine medications and turn them into methamphetamine (“CVS Fined,” 2010).
Pharmacies have controlled substances and narcotics and must be safeguarded so they do not fall into the wrong hands. Not to single out CVS Caremark, but all pharmacies are vulnerable to those who want to steal medications and store products. In some cases employees of CVS Caremark are those who are involved in these unethical and illegal acts (Fard, 2012). It is important that CVS Caremark use more extensive means of security and background checks. Security parameters need to be increased as well within the stores to prevent theft from products on the store floor. This is a major weakness within CVS Caremark, one that leads to losses in profit and potentially could get employees hurt.
Opportunities
CVS Caremark has a market that does well with consumers, but the company hasn’t really grown this particular market in recent years. The photo development market that CVS Caremark has with the company is something that hasn’t been tweaked with in recent years. While the capabilities are useful to those with SD cards and other formats, CVS Caremark hasn’t made any upgrades to the photo development system in their stores in years. Upgrading this system to offer more features like panoramic photos, HD photos and the ability to print photos from video are just a few features that are available in other photo development companies that CVS Caremark can utilize.
Discussed earlier was how CVS Caremark leads all retail pharmacy chains in revenue. Having the flexibility of having more revenue and profits means a company can add more stores and spend more on advertising and marketing. CVS Caremark can also use their money to purchase other smaller pharmacy chains. By purchasing other pharmacy chains, CVS Caremark can expand their brand and also prevent other companies like Walgreens and Rite Aid from growing their brand.
Threats
A major threat to CVS Caremark is the online counterfeiting of prescription medications. Counterfeit medications is a billion dollar industry, and not only is this dangerous for the consumers who purchase them, it is also a danger to retail pharmaceutical chains. Online pharmacies that produce these medications promise cheaper prices for medications that could potentially have dangerous and deadly ingredients in these counterfeit medications (Toscano, 2011). Online pharmacies take customers away from CVS Caremark and it also puts customers in harm’s way, and this industry isn’t going away.
Another threat that effects CVS Caremark and most retail pharmacy chains is the shortage of pharmacists. More pharmacy students are dropping out of school or simply not passing and less and less students are graduating. Pharmacy chains are growing, and the amount of pharmacists that are graduating and searching for work is decreasing by the year. The amounts of pharmacists that retire versus students that graduate are two to one since 2009. CVS Caremark is growing yearly, and there may be at time when their simply isn’t enough pharmacists available to meet the demand of store openings (Payne, 2012).
SWOT Determination
Upon reviewing the SWOT analysis, to invest in CVS Caremark would prove to be profitable for any investor that decided to put invest their money in the company. CVS Caremark is doing everything necessary to prevent other companies from growing at the rate that CVS Caremark is. With the acquisition of Caremark and the customer loyalty programs that are in place, CVS Caremark as a brand stands above all others in the retail pharmaceutical market.
Internal and External Stakeholders
In order for a business to thrive, a company must take into consideration their internal and external stakeholders. If a company is not successful, this can greatly affect those who have a vested interest in a company. Internal stakeholders for CVS Caremark are store employees, pharmacists, management and the board of directors. External stakeholders for CVS Caremark are suppliers, shareholders, consumers and the media. Store employees and pharmacists expect CVS Caremark to be given competitive wages compared to other retail pharmacies. CVS Caremark does its part to make sure they hear the opinions of employees by offering surveys and focus groups to them so there voices can be heard. CVS Caremark expects employees and pharmacists to be enthusiastic and stay true to the CVS Caremark brand when working. Keeping the companies ideals when working makes the company look good and represents what the company stands for to the consumer.
Management and the board of directors make very important decisions that have an effect on employees and pharmacists. These decisions also affect CVS Caremark from a store stance and also from a corporation stance. Management needs stores to do well because they run these stores. The employees have an impact on how well the stores do because they do a lot of work to make sure the stores are in top shape. The board of directors needs stores to do well and for the company as a whole to do well because a lot of their decisions ultimately affect store policies and how they are run. As a whole CVS Caremark are fulfilling the needs of all internal stakeholders.
Shareholders and consumers have felt fulfilled by CVS Caremark because the company has grown substantially since its inception in 1963, and consumers are a big reason for the success of CVS Caremark because of how loyal they have been. The wants and needs of shareholders are to receive annual reports, conference calls and quarterly updates. CVS Caremark provides all of these to its shareholders, and shareholders have to be pleased with how CVS Caremark is a top of the retail pharmacy industry. Consumers receive great deals from CVS Caremark and are fulfilled because they are loyal to the brand and according to the better business bureau, CVS Caremark has received an A rating since the BBB was established.
The media needs press releases and access to those high up within the company when it comes to situations that need comment. CVS Caremark makes these individuals available to the media and also has press releases monthly in newsletters that are available to the media. Suppliers are responsible for getting products and medications to CVS Caremark so they can have them available to the consumer. Without suppliers, CVS Caremark cannot sustain a profitable business, and CVS Caremark fulfills the needs of suppliers by having orders in at certain times so products can be shipped on time.
Conclusion
Any investor who decides to put their money into CVS Caremark will not be disappointed with the end result. CVS Caremark is a strong company that fulfills the needs of its stakeholders, utilizes the strengths that have got them to the top of the pharmaceutical industry and take advantage of the opportunities that are presented to them. With a loyal customer base and a brand that stands out against others in the market, CVS Caremark will return any invest that is put into the company and will exceed investor’s expectations.

References
Nickels, W. G., McHugh, J. M., & McHugh, S. M. (2010). Understanding Business (9th ed.). New York, NY: McGraw-Hill/Irwin.
Cvs. (2012). Retrieved from http://info.cvscaremark.com/our-company http://articles.nydailynews.com/2010-10-14/news/27078211_1_cvs-caremark-cvs- locations-meth-production http://www.drugstorenews.com/top-retailers http://www.forbes.com/companies/cvs-caremark/ http://www.washingtonpost.com/blogs/crime-scene/post/police-cvs-robberies-were-an- inside-job-three-suspects-arrested/2012/04/13/gIQA3zZpET_blog.html http://www.usatoday.com/money/industries/health/drugs/story/2011-10-09/cnbc- drugs/50690880/1 http://www.bhfglobal.com/pharmacist-shortage-holds-back-retailers-29052012 http://info.cvscaremark.com/our-company/corporate-responsibility/corporate- governance/stakeholder-engagement