Human Resource
McKesson is one of the most prevalent distributors of healthcare products across the United States. The principal operational theme at McKesson underlines the provision of improved health service that equates customer needs in different aspects of the industry (Giber et al. 2009). The firm is a major player in the delivery of pharmaceuticals and other medical supplies to healthcare facilities including pharmacies such as drugs in North America and internationally. Nevertheless, McKesson specializes in the provision of information technology (IT) services to the healthcare environment. It plays a vital role in the supply chain of pharmaceuticals considering its efforts to maintaining its consistency in the distribution and procurement of medical products more than other many suppliers.
Suitable to the diversity of McKesson’s business sector, its operations are segmented into two different units to facilitate efficiency. The two departments include; the distribution solutions and technology solutions component. The distribution solutions group is principled to distribute products for example; drugs, health equipment, and beauty-care products. It is in particular oriented to the supply of pharmaceutical solutions for different medical institutions including hospitals, retail pharmacies, and other medical systems in the healthcare community. Conversely, the ‘technology solutions’ division is a representation of McKesson’s ‘Health Technology Solutions’ department that intermediates clinical solutions, network performance instruments, claims payment, and other technological resolutions aimed to diminish service convolution in the medical arena. Some of the services provided by the technology solutions department include; the clinical, financial and connectivity support.
Competitive Position
McKesson is ranked fifth on the ‘Fortune 500’ list (“Fortune 500”, 2017). McKesson is among the top three largest pharmaceutical distributor companies in the state of California where it is headquartered. As mentioned earlier, McKesson has a series of “Strategic Business Units” (SBUs) which operate under separate categories (Distribution and Technological Solutions). From different aspects of McKesson’s operations (Health Solutions and health technologies), the firm stands at a thriving position in the United States. The planning and organizational management at Mckesson believe in cooperation of its two operational entities as a key weapon of instigating positive outcomes of its auxiliaries and generally, its competitive position. However, there are other significant human resource factors which a lot contribute to positive results of McKesson’s activities more than services provided by many of its competitors.
McKesson's market sector, size, and its diversity in the pharmaceutical landscape continuously favor its market success in regards to competitive position. Through the aspects, the firm has been able to make a set of strategic moves which effectively sustain its competitive advantage by equalizing short-term impacts whereas establishing a base for a long term thrive.
Market Sector
McKesson has over years prevailed as an important competitor in the pharmaceutical industry allowing for the fact that there are a variety of other firms along the supply chain to the provision of pharmaceutical services. The company is involved in a complex market sector which often experiences a lot of significant transformations, mainly, as a result of the ever-changing nature of globalization. Importantly, McKesson's growth corresponds with its market sector facilitated by the flexibility of the company's industrial segments. For instance, the firm is from time to time able to implement current technologies by changes in the market sector which mostly indicate aspects of healthcare improvement. The company's consistency in quality improvement increases the reliability and validity of its services in the pharmaceutical supply system and so, the sustainability of competitive position.
Without hesitation, McKesson holds an honor in the pharmaceutical landscape which grabs it an excellent competitive position. Considerably, McKesson is by far independent in aspects of supply and procurement of pharmaceutical products unlike some other participants in the supply chain who depend on services from supplementary companies for a streamlined distribution system.
The pharmaceutical industry is dominated by large industries with huge revenues. The sector in which McKesson is engaged in has few companies that can be considered as its competitors thus offering it an excellent opportunity to utilize the privilege to boost its competitive advantages. The American Bergen and Cardinal Health together with McKesson own the largest share in the medical business sector. The market share enables them to grip an outsized portion of profits hence discouraging entrance of new companies in the industry. New entrants encompass a variety of difficulties when establishing a sufficient market share in the dominated environment since it becomes hard for the new players actually to transform their distribution resources into equitable profits. Importantly, the vibrant nature of the market avails McKesson a continuing competitive position. For example, the large firms including McKesson purchase drugs from manufacturers at large cut rates than individual customers and other suppliers and so, grabbing it a unique position in the industry.
Size
The most prominent aspect of McKesson industry highlights the immense size of its operations in various fields of the industry that increases its economic status. The large-scale of McKesson’s operations is logically a key illustration of its competitive advantages. Owing to the demands of the healthcare industry, the company has continuously thrived in performance fueled by its capabilities to operate as a large distribution corporation (Khan & Zsidisin, 2011). The Large structure of its supplies enables the firm to cover the market demands hence its superiority. Nevertheless, the company is capable to deliveries since it has many employees in the supply system which deters the occurrence of distribution delays. For instance, it is the prime distributor of pharmaceutical products in big outlets such as ‘CVS Health pharmacy’ and Wal-Mart hence outdoing the smaller supplier industries in the market so avoiding chances for a downstream movement of its current position.
On the other hand, McKesson has successfully continued to invest in the establishment of productive distribution assets which are readily contributed by its large distribution responsibilities. It has efficient and dense supply density that increases efficiency and volume of its distribution channels. The firm has been able to generate accommodating warehousing infrastructure thus increasing probabilities for huge asset returns. Besides, the firm has incorporated a team of relevant expertise in its operating systems that lessen the burden accrued in capital management, consequently, increasing its economic returns. As a result, McKesson registers substantial asset returns which enhance its capabilities of sustaining a top level competitive position.
Diversity
The variety of the industry exemplifies that a supply company must be efficient to the delivery of multifaceted products for it to thrive in the medical field (In Roberson, 2013). McKesson is among the biggest firms in the pharmaceutical landscape; providing services of diverged nature. McKesson structure is segmented into operational units with each unit majoring in the supply of different products. As a result, McKesson can dominate its competitive position in the market since not all among its competitors have the distribution capabilities of its range.
Facilitated by its effective strategies to pharmaceutical diversity, McKesson has hindered the emergence of immediate and affluent drawbacks in its supply scheme. Importantly, it, as a result, emphasized on the expansion of its auxiliaries such as Albertsons and also, established possible relationship systems with core customers (Wal-Mart) which wholesomely enhances its performance. Also, McKesson continues to reestablish the existing distribution as well as its procurement networks. Reorganization of its operational structure is purposely meant to minimize the encompassed costs while curbing the complexity of information technology in the healthcare industry. Arguably, reorganization of its segments has progressively enhanced its operational efficiency and at the same time sustaining the company’s competitive position.
Risks
Despite the McKesson’s competitive advantages, the firm encounters some significant risks in its operations which trigger the existence of immediate drawbacks to its performance. Client consolidation, consumer decisions, and pricing intelligibility can be measured as the key threats that are likely to cause performance unstableness for McKesson.
Pricing Transparency
The pharmaceutical industry has over time received unrelenting suggestions that highlight the need for pricing transparency. The players especially the small scaled players have over and over again shown interests for a more transparent pricing system. Specifically, players critique the need for pricing transparency between drug manufacturers and distributors. It is logical that pricing transparency has the potential to lower McKesson’s pricing privileges by impacting a reduction of the existing discounting levels over potential competitors.
Probabilities of drug spending reduction
Over a period, clients have been delivering negative attitudes towards drug spending; a move that exposes McKesson to risks of profit reduction and slashing of its market. The firm's customers have continued to send their unrelenting fear for the increasing supply pricing of pharmaceutical products. Payers have in turn signaled continuing dedications of curbing the increment of drug spending. Arguably, the risk underlines a continuous trend considering that pricing is dependent on market demand (Zhao et al. 2016). Without hesitation, McKesson’s providence depends on the perceptions of drug manufacturers and pharmacy retailers. For instance, the firm remains uncertain whether manufacturers will be willing to shift their pricing based on demands. It is therefore logical that McKesson stands in a delicate pricing situation taking into account that reluctant acceptance among the manufacturers to turn purchase pricing by supply demands will cut down its economic margins.
Customer Consolidation
Augmentation of client mergers with McKesson’s competitors is a significant risk to its operations in different fields. McKesson operates in a highly competitive business hence the firm often face the danger of losing its core clients. A loss of its market adds up to unfavorable effects, especially on its financial limits.
Human Resource Opportunities
Notably, the healthcare industry is contemporarily experiencing a variety of transformations which are majorly focused on the improved service quality. The many changes in healthcare exemplify the need for systematic improvements in all operations including healthcare supply chain to establish quality improvement. In response to the need for an efficient supply chain in the medical industry, it is important for the distribution companies to put into practice the available human resources opportunities to increase their distribution efficiency. Nevertheless, many distributors in the pharmaceutical industry refer to opportunities as an immediate base of establishing a solid competitive position.
Considerably, there are some human resource opportunities that a merchant can utilize to enhance operational efficiency while setting its competitiveness. Owing to the human resource risks that McKesson faces in the healthcare industry; acquisitions, merger, and partnerships can be critiqued as the core management approaches that increase its business opportunities. The possibilities accrued by the mentioned strategies have the potential to helping McKesson boost its shareholder value and develop an enduring growth. The key opportunities include investment, saving, and franchise opportunities.
Acquisition
McKesson Corporation has the human resource capabilities of acquiring a variety of other distribution divisions in the pharmaceutical supply chain. Therefore, the firm has a chance of using acquisition as a strategic weapon of influencing growth in the overall healthcare landscape. Through the acquisition, the company acquires the opportunity of strengthening its competitive position. Growth through acquisition demonstrates the importance of getting hold of other potential distribution divisions at both the domestic and international level which in turn increases an organization’s market share.
Merger
An alliance describes the combination of two operating companies to form one company (DePamphilis, 2010). For the case of McKesson, a merger is an effective strategy of influencing positive outcomes of its operations in the industry. McKesson has a variety of opportunities in the industry that can be achieved quickly through the merger. The firm has the needed human resource capabilities to participate in horizontal and market extension mergers.
The logic behind horizontal merger describes the incorporation of two companies which operate in the same industry for the sake of enhancing market consolidation. In the pharmaceutical industry, there are a variety of distributor firms which can merge with McKesson Corporation. Significantly, the firm has the necessitated human resource capabilities including capital investment for an active merger with small and also large distributors. Also, the firm has the ability for a product extension merger considering that its operations face competition in different markets. Product extension merger demonstrates the union between companies that provide similar products but encounter competition in various environments.
The amalgamation between McKesson and other supplier businesses in the industry is likely to favor its performance by strengthening and creating enough chances for driving its position to higher levels. The merger provides the firm the opportunity to enjoy sufficient economies of scale. For instance, it develops a strong base through which McKesson will be able to make up for its transparency costs in a broad range of increased operations. Merger offers McKesson the control over its comparative economies in the supply market, which highly diminishes competition pressure. Less completion in the market provides the firm enough chances of providing products at increased prices thus reducing the effects that may result from pricing transparency and reduction of drug spending (Parr et al. 2005). Also, merger develops a satisfactory customer base, and so, McKesson will be able to undercut the impacts of client consolidation by its competitors. For instance, McKesson merger with many distributors and in particular dealers at lower levels denies its core competitors such as the Bergen Brunswig chance to scheme for a significant market share (Paley, 2006). McKesson will in due course grab a significant market share which favors its competitive position.
Partnership and Contracting
McKesson position in the supply chain offers it enough chances to partner with other players at different echelons in the supply chain whose capabilities do not overlap (Ayers, 2006). On the other hand, contracting is another human resource factor that can easily derive McKesson’s performance while helping the firm to maintain its competitive position of its technology unit
The partnership provides McKesson the opportunity of strengthening its market share hence maintaining its competitiveness. For instance, the pharmaceutical industry has a big number of viable partners such as the retailers who stand at a different level since McKesson operates as a supplier. Partnering is an effective strategy of expanding its operational boundaries in various market settings since retailers are located in different target markets.
The existing healthcare industry underscores increasing requests for IT solutions to counteract the ever-changing growth of healthcare organizations. As a response to technological advancement, McKesson’s technological unit acts as a vendor for different technological solutions for medical solutions such as imaging solutions. Also, the firm operates not just as a seller but has advanced into a connectivity partner of the imaging technology. The biggest challenge impacting the company’s progress in some markets, suggestible, regional markets encompass issues related to the lack of a striking marketing team. For this reason, McKesson needs to partner with a consulting agency to get the essential requirements for an effective campaign of its medical technology, especially in the local business environments.
It is important to note that the buying behavior of technological solutions within the healthcare industry is determined by the reliability and efficiency of the system and distributor capabilities of supplying the accrued solutions. Connectivity is a complex field which requires critical attention related on often basis regarding issues of, for instance, maintenance and upgrading hence the need for contacting. McKesson has potential opportunities for subcontracting its technology solutions unit with specialized companies in the IT sector. Authorization of its technology unit to a specified IT agency presents a set of useful elements on the company's reliability and efficiency. Subcontracting would ensure that McKesson's services are up to date in regards to the changes in the healthcare industry and so, building a strong customer base.
References
Ayers, B. J. (2006).Handbook of Supply Chain Management, Second Edition. CRC PressDePamphilis, D. M. (2010). Mergers, acquisitions, and other restructuring activities: An integrated approach to process, tools, cases, and solutions. Burlington, MA: Elsevier/Academic Press.
Fortune 500. (2017). McKesson. Time Inc. extracted from http://fortune.com/fortune500/mckesson/
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In Roberson, Q. M. (2013). The Oxford handbook of diversity and work.
Khan, O., & Zsidisin, G. A. (2011). Handbook for supply chain risk management: Case studies, effective practices, and emerging trends. Ft. Lauderdale, FL: J. Ross Pub.
Paley, N. (2006). The manager's guide to competitive marketing strategies. London: Thorogood.
Parr, A. N., Finbow, R. J., & Hughes, M. J. (2005). UK merger control: Law and practice. London: Sweet & Maxwell.
Zhao, Y., Meng, X., Wang, S., & Cheng, T. C. E. (2016). Contract analysis and design for supply chains with stochastic demand.
