If CVS Pharmacy Can Say No To Smoking, You Can Too!


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?

Forecasting Failure?

Analysts have forecasted Caterpillar, Inc. (CAT), the industry-leading construction equipment manufacturer, to decrease in production this year. The company has been relying in foreign markets such as Asia and in the Pacific to keep them afloat after the 2008 recession. Looking at the decline in spending and cut backs in these foreign markets, analysts are forecasting rough weather in the upcoming quarters for CAT.

One of the biggest hits for Caterpillar was in purchasing Bucyrus International Inc. for $8 billion in 2011. This Chinese mining company was overvalued by $580 million, due to what Caterpillar thinks, were inflated profits by managers. Since China, the world’s largest exporter, has slowed down in production, Caterpillar is suffering as well.

According to the Wall Street Journal, CAT has announced 11% decrease in sales from this past quarter. This slow down, however, was not what Caterpillar had expected. In January, Caterpillar gave an outlook report for 2013 where they forecasted an increase in revenue of $8 billion and a $2 earnings per share increase. On the other hand, analysts are predicting that they will decrease in revenue from $65.2 billion to $62.1 billion by end of 2013.

Halting demand for mining equipment in Australia and Indonesia have also taken a tole in Caterpillar’s forecasting plan. With all markets slowing down, except for in Latin America, Caterpillar’s opportunity will be in these upcoming quarter. Caterpillar and other companies in the same situation will all be keeping their fingers crossed for  the US economy to pick up and start new production of construction and mining equipment to get back on track.

Another threat to Caterpillar is the more favorable use of natural gas to produce electricity. This causes a decrease in use of mining equipment and slows down equipment production. The narrowing use of CAT products has forced them to lay off the workers in the assembly plants.

Competitors of Caterpillar, like Komatsu, (the world’s second-largest seller of construction equipment) has also been struggling in the same markets and has already decreased their sales and profit forecast for this upcoming year. If Komatsu seen this coming, why didn’t Caterpillar?

With all these factors coming into play, Caterpillar should be reconsidering their forecasting plan and cut back on production as well as profit expectations for 2013. Will they heed this information or continue with their plan?

Do you think Caterpillar should have planned for this pause in production? Maybe Caterpillar should start producing new equipment for a new kind of consumer.

source: http://www.foxbusiness.com/news/2013/04/21/caterpillar-expected-to-cut-2013-guidance-in-first-quarter-report/