¶ … Cardinal Health, its mission and its current situation. An environmental analysis is presented to analyze the current environment in which the company operates. A SWOT analysis summarizes the company's internal strengths, weaknesses, potential opportunities, and potential threats. The issue in the case study is overviewed, and supporting facts and significant factors are presented that support the problem. Three potential alternative solutions are given, with an evaluation of each solution's strengths and weaknesses. Lastly, a potential solution will be presented, as well as how Cardinal Health can monitor the solution for its effectiveness.
Cardinal Health
Cardinal Health is a primarily American health care services organization. Headquartered in Dublin, Ohio. The company provides services and products to hospitals, pharmacies, physician offices, and ambulatory surgery center. Cardinal distributes a wide range of products including over-the-counter products, pharmaceutical, radiopharmaceutical, surgical, medical, and laboratory products. With approximately 31,200 employees, the company reported revenues of $98,502.8 million for their fiscal year ending June 2010 ("Company profile," 2010). This paper explores the background of the company, its mission and its current situation. An environmental analysis is presented to analyze the current environment in which the company operates. A SWOT analysis summarizes the company's internal strengths, weaknesses, potential opportunities, and potential threats. The issue in the case study is overviewed, and supporting facts and significant factors are presented that support the problem. Three potential alternative solutions are given, with an evaluation of each solution's strengths and weaknesses. Lastly, a potential solution will be presented, as well as how Cardinal Health can monitor the solution for its effectiveness.
Company & Case Study Background:
In 1971, company founder, Robert Walter, borrowed $1.3 million to purchase Cardinal Foods, a wholesale food distributor in Ohio. The company grew into a strong, regional food wholesaler. However, the food industry was changing and there were barriers to national expansion for Cardinal. The fragmented pharmaceutical distribution industry, with a high growth rate, showed Walters a new path of opportunity for his company. In 1979, Cardinal began evolving into Cardinal Distribution, with a migration to pharmaceutical distribution. In 1983, the company was renamed Cardinal Health, Inc. As the company went public and focused all of its attention on the healthcare industry. In five years, the company had completely exited the food business (Pearce & Robinson, 2004, p. 18-5).
By 2006, Cardinal, McKesson and Amerisource controlled 90% of the industry. Unlike their other competitors, Cardinal realized a large portion of their operating income from non-distribution activities. As Pearce and Robinson (2004) note, "Their diversified operating income strands included distributing pharmaceutical dispensing through their Pyxis subsidiary, and providing pharmacy services through outlets like Medicine Shoppe" (p. 18-7). The company competed in four segments: medical-surgical products and services, pharmaceutical distribution and provider sales, automation and information services, and pharmaceutical technologies and services. It was effective in cross-selling, as well as bundling services and products and made the company an indispensable partner to healthcare providers and pharmaceutical companies. In 2006, the company considered reorganizing into two operating units: Health Care Supply Chain and Clinical and Medical Products (p. 18-8).
Cardinal Health had built their value to customers through four operational drivers. These included: "A relentless pursuit of growth, a total focus on customer needs, a continual push toward operational excellence in everything they do, and, finally, recognition that leadership development is critical to Cardinal's future success" (cited Pearce & Robinson, 2004, p. 18-9). The company also selectively used co-branding to enhance their image and value. Training their employees helped align their employees activities with the company's mission. Through these strategies, Cardinal was able to leverage their unique market knowledge to meet the needs of customers and suppliers.
Cardinal helped hospitals and pharmacies meet the challenges of growing cost pressures, with a need to maintain quality care. These organizations were also challenged by the need to manage increasingly complex patient and financial information. Cardinal's automated ordering and dispensing technology helped reduce loss and theft for hospitals and pharmacies. In addition, Cardinal offered a franchise option to pharmacists that included marketing resources, information systems, and purchasing power. Pharmaceutical manufacturers benefited from Cardinal's ability to design and product customized packaging for their products. In addition to these values, the company has facilitated growth through acquisition, absorbing more than 50 companies since 1980 (Pearce & Robinson, 2004, p. 18-12). Acquiring well-run companies in adjacent markets expanded the company's economic horizons.
Today, the business world was plagued by companies that had grown too fast, had high levels of debt and had unfocused strategies. In contrast, Cardinal Health had grown slowly, had a low 16% of capital debt level, and had a structured acquisition strategy from which the company had never strayed. In a growing and changing healthcare industry, Cardinal's...
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