Pharmacy Chain CVS to Start “Go Green” initiative

Case Type: operations strategy; organizational behavior.
Consulting Firm: Ernst & Young (EY) Advisory 2nd round full time job interview.
Industry Coverage: healthcare: hospital & medical; retail.

Case Interview Question #01039: Your client CVS Pharmacy (NYSE: CVS) is a big retail chain in the United States, which owns the entire distribution and retail supply chain. Headquartered in Woonsocket, Rhode Island, CVS Pharmacy is one of the largest pharmacy chains in the United States by number of store locations (over 9,600 as of 2016) and total prescription revenue.

CVS stores sell prescription and over-the-counter (OTC) drugs, health and wellness products, and photo services. The U.S. retail industry has seen some shift towards being “green” (using recycled materials for packaging) and the client has not yet done that. The client CVS has seen sustained profits for the last several years and is now looking for several growth alternatives in terms of cost reduction and increasing market share. Your consulting firm has been brought in to prioritize the various alternatives and decide the order of execution. As part of the case team working on this project, you have two specific tasks:

(1) Present a rough time line for execution
(2) Identify risk and impact of executing these strategies.

How would you go about it?

Possible Answers:

As with most 2nd round cases, this is a totally qualitative case. The interviewer should present the strategies to the candidate and should probe the candidate for his / her thought process.

There is no right way to solve this case, but organizing the various factors to analyze in a tabular format and then plotting the various growth strategies in a 2 x 2 matrix is the best way.

If the candidate does not plan to use a 2 x 2 matrix, encourage him/her to use one after the preliminary analysis.

Additional Information: to be provided upon request

The interviewer should provide the following strategies to candidate

* Implement lean manufacturing processes
* Reorganizing Sales force(Incentives for sales force)
* Change packaging of products in retail stores( recyclable material)
* Launch new products in market
* Change Sales Floor layout

The candidate should come up with an issue tree (see Exhibit 1 below) to analyze the various growth strategy options and then create a table with all the 5 growth strategies and the factors that should be considered for evaluation.

Exhibit 1. Sample Issue Tree

Sample Issue Tree: Retail Store
* Market/Industry
- Market size
- Growth
- Competition
* Company
- Core competency
- Vision
- Financials: Costs, Revenues
* Growth
- Short term: Licensing, Pricing
- Long term: New products, Lean manufacturing
* Risks

Once the candidate has covered most basic attributes for evaluation, ask him / her to rate the various attributes in a rank scale order. A sample evaluation table (Exhibit 2) is provided below for comparison.

Exhibit 2. Sample Evaluation Table

Once the candidate has sufficiently addressed the various evaluation criteria, he/she should then next plot the various growth strategies in a 2 x 2 matrix with the 2 dimensions of risk and impact. A sample 2 x 2 matrix is provided below (Exhibit 3).

Exhibit 3. Sample 2 x 2 Matrix

The key focus area in the 2 x 2 matrix is the fine balance between risk and impact. This is where the candidate should ask questions about the current state of the market/industry, client company and competition. The interviewer should mention that some green initiatives in the retail industry has been causing some trouble with some packaging for the drugs.

The main purpose of this case is to understand the thought process of a candidate when an ambiguous business problem is encountered. The overarching issue with the client company CVS right now is the focus on green initiative by the retail industry, and that is why the impact of the packaging change to recyclable material is a medium impact strategy. A sample order of execution is as follows:

1. Packaging Change: Start “Go Green” initiative
2. Sales Floor change: Reorganize the drug products to emphasize new packaging
3. Sales Force realignment: Focus on the new green brand
4. Lean Manufacturing: Long term sustainable cost advantage
5. New Products: Product differentiation

Additional Questions for case discussion:

Question #1: What are some of the risks with the execution order strategy?

Question #2: Is this a long term sustainable solution?

Question #3: How can the retail store chain CVS leverage its dominance in the supply chain?

Question #4: What if the competition also copies the green initiative?