Porter's Five Forces In The Pharmacy Industry

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Porter’s five force model. Threat of New entrants (low): Although Walgreens and CVS are the giants in the retail pharmacy industry, there is a plenty of chances to small competitors. Entry into the brick-and-mortar prescription drug business is feasible even on a small scale. Logistically, creating an independent pharmacy is relatively simple: requirements include only a professional who dispenses prescription drugs, a small store which faces the street, and a license. The scale of Walgreens and CVS that many consumers choose their pharmacy based on positional convenience, however, the existence of these smaller local pharmacies is unlikely to become a competitive threat. Bargaining power of Suppliers (Moderate): Clearly, many prescription…show more content…
Rivalry among existing firms (High): The retail pharmacy industry has two 800-pound gorillas: Walgreens and CVS. Both companies have over 7,000 pharmacy stores and both count on prescription drugs for about 65 percent of their revenue. Competition between Walgreens and CVS pharmacies is direct and aggressive. For ex: CVS recently ran an advertisement in millions of circulars instructing Walgreens customers how to transition their accounts to CVS, and this behavior has continued as Express Scripts customers can no longer use Walgreens as their prescription drug provider and CVS works to acquire this market share. Threat of substitutes (low): This is one of the great advantages of the pharma industry. Because the demand for pharma products continues and the industry flourish. One of the main reasons for high competitiveness in the field is that it is an ongoing…show more content…
• Walgreens has aligned itself with AARP. Partnering together they have launched a multi-year program targeting seniors. Through events such as Ask About Your Medications organized by AARP and held at various Walgreen locations customers are able to listen to their pharmacist discuss and explain various medications. There is also a website for this program which displays both the AARP and Walgreens logos. Weakness: CVS: • Real Estate compared to walgreens. • There are many cases that have been recognized as armed robberies and for that the store chain should look upon it’s security. • Contradiction of interests between PBM segments and retail pharmacy. • Sales major focus is on lower margins on products. Walgreen: • The number of acquisitions is not so high and it depends more upon the organic expansion. • These pharmacies face informative and predictable risk from the variability of “generic conversion” • Inability of the company to keep stride with the growing private labeled brands popularity. • The in-store implementation of the store formats and services is not consistent at every
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