McKesson Corporation (Mckesson) is an American pharmaceutical distributor with operations mainly in the U.S. The firm has been in operation since 1833, and boasts extensive market share, robust financial strength, and strong market power. The firm has built strong relationships with its key stakeholders, which adds to its strengths. Nonetheless, limited diversification and market focus as well as the threats of competition, unfavourable regulatory changes, and counterfeits present significant concerns for the company. To enhance its competitive advantage in the rigorously competitive pharmaceutical landscape, it is imperative for the firm to take advantage of consolidation, strategic partnerships, increased healthcare expenditure, and emerging markets.
Introduction
McKesson Corporation (Mckesson) is an American health care company involved in the distribution of pharmaceutical productions as well as provision of health information technologies and care management tools majorly in the U.S. With a history that stretches back to close to two centuries, the organisation has grown to be the fifth largest company and the largest pharmaceutical distributor in the U.S. in terms of revenue, making it a Fortune 500 company. This paper provides a comprehensive analysis of Mckesson. Keen on examining the company's corporate strategy and its ability to increase competitive advantage, the analysis particularly focuses on internal and external stakeholders as well as the internal and external environment (SWOT analysis).
External Stakeholders
Competitors
Competitors comprise an important stakeholder group for any business organisation. They largely determine the degree of rivalry as well the extent to which new entrants can enter the industry (Prasad & Warrier, 2016). As a pharmaceutical distributor, Mckesson faces stiff competition from Amerisourcebergen Corporation and Cardinal Health. These are the two major competitors for the company, representing approximately 30% and 22% of the total market share in the U.S., respectively (MDM, 2016). Besides these two, there are other significant competitors, including Morris & Dickson, H.D. Smith, Smith Drug, Curascript Specialty Distribution, Anda Distribution, North Carolina Mutual Wholesale, and Rochester Drug Cooperative. Mckesson faces further competition from thousands of small and mid-sized regional and specialty wholesalers spread across the U.S. In spite of an intense threat of rivalry, Mckesson is the largest pharmaceutical distributor in the U.S., representing about one third of the total market share (MDM, 2016). This is a significant source of competitive advantage for the company.
Industry
The pharmaceutical distribution industry comprises two categories of players: full-line wholesalers and speciality distributors (MDM, 2016). The former distribute manufacturers' products to diverse outlets including outpatient outlets and institutional healthcare facilities, while the latter distribute speciality pharmaceutical products to physician owned and/or operated hospitals and clinics. The industry is highly concentrated with only three companies accounting for approximately 85% of the total industry revenue as of 2015 (MDM, 2016). These include Mckesson alongside Amerisourcebergen Corporation and Cardinal Health. High concentration in an industry provides an important advantage for incumbents, particularly those with dominant positions. It is quite difficult for new entrants to successfully enter the industry and grab a considerable share of the market (Prasad & Warrier, 2016). More importantly, concentration enhances buyer power, which can be crucial for dictating prices as well as trade terms and conditions (Hess & Rothaermel, 2011). Incumbents in a concentrated industry retain or increase their dominance by acquiring competitors. There have particularly been significant mergers and acquisitions in the pharmaceutical distribution industry in the last one decade. On its part, Mckesson has recently acquired PSS World Medical and U.S. Oncology, further consolidating its position in the industry (MDM, 2016).
Vendors
McKesson obtains pharmaceuticals from various manufacturers, none of which accounts for over 6% of the firm's purchases as of 2016 (Securities and Exchange Commission [SEC], 2016). This is a crucial supply chain strategy for the firm. Relying on multiple vendors cushions a firm against the risk of business discontinuity in the event one of the vendors is affected by adverse events. The major vendors for Mckesson include the largest pharmaceutical manufacturers: Gilead Sciences, Astrazeneca, Glaxosmithkline, Sanofi S.A., Pfizer, Novartis, and Merck & Co. Whereas these manufacturers command substantial power due to their dominance, Mckesson also commands significant power as a buyer given that it is the largest pharmaceutical distributor. The importance of buyer power cannot be overemphasised (Prasad & Warrier, 2016). As a powerful...
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