Link to Article: http://www.forbes.com/sites/scottdavis/2014/02/06/cvss-decision-to-dump-tobacco-delivers-on-its-brand/
CVS Pharmacy has recently taken a large step forward in their industry by making the strategic decision to remove tobacco products from all of their stores in order to show how serious they are about being committed to the health of their customers. Also, for CVS customers that are smokers, they will begin offering free online assistance to help their customers stop smoking if they choose to do so. This was obviously a difficult decision and one that could potentially lose them a lot of money, but they believe that this decision will have the opposite effect, and will actually help them strengthen their brand, retain their current customers, and inspire new customers to come into their stores.
I think this directly relates to the material that we covered in class when it comes to the decisions that departments have to make together regarding the success/failure of their company. A decision like this is obviously not made overnight and is one that can only benefit the company if everyone in the company (all departments) is onboard. In class, we learned that a part of a company’s successful strategy is that “learning and continuous renewal are essential parts of a [successful company’s] strategy.” CVS is choosing to “lead the market” instead of “follow the market” and I believe this will really pay off for them. According to the author of the article, “CVS is “putting its money where its brand is” and has the first mover advantage.”
I also believe this article directly relates to the business simulation we did in class. I think the simulation really showed us how important it is for companies to make important thought out decisions and to not try to be something that they’re not. I also think it proves to us that even though at times it was hard to let go of a product that we have been making for a while, sometimes it was the best decision for the overall health of the company. While CVS could’ve remained successful being in the tobacco industry, they chose to differentiate themselves from their competitors and hopefully help them gain a competitive advantage.
Overall, I believe that this decision was the right one for CVS especially since none of its competitors have really done anything as of yet regarding selling tobacco in their stores (Walgreens?). I believe that in order to make these decisions CVS executives strategically evaluated all of their market segments and made sure to forecast so that in case their revenues did fall dramatically, the company would be able to bounce back. One thing that really stood out to me while doing this simulation is how important forecasting is and how important knowing your market segments are in order to be successful. I feel like my team had a lot of trouble with this in the beginning of the competition and this is what caused us to suffer later on. Knowing your products and knowing the market segments that those products are is extremely important and making sure that all of your departments are working cohesively is just as important.
Do you agree with CVS’s decision to remove tobacco from their stores?
What do you think it’s competitors will do regarding CVS’s decision? Will they drop tobacco products as well?
What else do you think CVS can do to set themselves apart from their competition?
Do you believe this will negatively impact CVS’s business?
6 thoughts on “If CVS Pharmacy Can Say No To Smoking, You Can Too!”
I thought this was a great article. I think the move on CVS’s part will benefit them int he long run. I believe that off the bat their sales will be down a little due to the lack of tobacco products. However I believe that this will create a long term positive reputation for the company and create higher sale sin the near future as well as customer loyalty. Overall I believe this was a brilliant move on their end.
I really respect the cause of this strategy done by CVS, as it may help a lot of smokers in this region. However, statistically there are 1.1 BILLION tobacco users in the world (as of 2014). This number is expected to increase to 1.6 billion over the next two decades. Therefore, subsequently their revenue will decrease dramatically due to certain factors. As a smoker myself I would rather go to Walgreens in order to buy all my needs, because it’s a one shop stop, and I would not have to go to two places for items and tobacco for other (time consuming). Hence, personally I do not recommend this strategy and I think it will decrease their overall revenue in the short and long term.
Honestly, I disagree with the step CVS’s had done, it mixed business with emotions. In my opinion this is a very expensive PR and marketing stunt. I may be talking about my own bias since I myself smoke, I agree that some people want to quit smoking but there are others such as myself whom actually don’t want to. This move isn’t taking us into consideration, people whom want to quit will always be faced with temptations, whether its alcohol or tobacco, they must have stronger will power and not deny other people what they want because they can’t handle seeing a cigaret box or someone smoking does this mean that everything should get banned because some people are trying to quit. I don’t see other competitors moving in the same path as CVS unless they really need the publicity.
Interesting article about business strategy, from my point of view I believe that CVS’s did their homework before taking on such a bold and a massive campaign hence, I don’t think that discontinuing a profitable segment would be an easy /unassessed strategy with no evaluation of the pro’s and con’s. although I disagree with the author on the point framed that being market leaders rather than market followers is always a good thing thus, from my humble personal experience I learned that sometime being a market follower would be more profitable and safer if your company is a fast learner and more efficient. So I think CVS’s competitors would take a breath before replicating that strategy. Moreover such a campaign by CVS’s should be bundled with a set of new initiatives hence, discontinuing a profitable segment could harm their financial so they should buddle this with another opened segment like substitutes of smoking products. Finally, it would be great how that experience for CVS’s paid out? I think I will google their news 🙂
While one commenter suggested that tobacco users are increasing worldwide, other sources suggest that the percentage of adult smokers in the US has dramatically decreased in the last 50 years. CVS, along with other pharmacies operating in the US, have been criticized in the past for selling cigarettes at their stores for the apparent contradiction to their main serving purpose (a pharmacy). With a population that’s more aware of the health risks of smoking (especially the youth), I believe CVS’s decision will be imitated by other giants in the near future (namely Walgreens and Walmart). While the decision means the company will be missing out on $1.5 billion of annual tobacco sales, standing firmly by their decision, making people more aware of the health risks of smoking, and helping people quit smoking will certainly increase the company’s reputation and image.
Although I’m impressed with CVS’s decision to forgo the selling of tobacco products, I think there are several other areas that they can improve upon in order to compete with Walgreens and other retailers. Several of the stores are badly in need of renovations and they are often out of stock of merchandise such as certain vitamins and cold remedies. However, I think public image is extremely important, and it’s extremely respectable to see where their ethics lie even if it means loss of revenue.