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Cardinal Health SWOT & PESTLE Analysis

ID : 52325253| Mar 2018

COMPANY PROFILE -Cardinal Health

Business Sector :Pharma, Manufacturing

Operating Geography :North America, United States

About Cardinal Health :

Cardinal Health is a global, integrated healthcare services and products company, based in Dublin, Ohio. It was founded in 1971 and the company is specialized mainly in manufacturing of medical and surgical products apart from distribution of pharmaceuticals. Cardinal Health tailored solutions for hospitals, health systems, pharmacies, ambulatory surgery centers, clinical laboratories and physician offices worldwide. The Companyoperates mainly in America, Europe and Asia linking patients, providers, payers, pharmacists and manufacturers for integrated care coordination and improved patient management.It caters to a network as wide as 85% of the hospitals in United States. With over a century of expertise in healthcare field, employing 50,000 employees across 60 countries, Cardinal Health ranks among the top 25 on the Fortune 500 in 2017. Cardinal Health's USP or unique selling proposition lies in its 100 years of experience in providing customized solutions for hospitals, health systems, pharmacies, ambulatory surgery centers, clinical laboratories and physician offices globally and operating the largest radiopharmaceutical network in the United States. Cardinal Health's vision is "to welcome new challenges, anticipate trends, and as Wings, brings support, speed, and mile-high vision to all customers, to be the premiere global healthcare company as recognized by current and potential customers, employees and shareholders. Diversity, inclusion and access are essential elements of that vision and are reflected in EPPIC (Ethical, people-driven, performance-driven, innovation and collaborative) core values.

Cardinal Health Revenue :

US $ 130 billion– August 2017

Competitive Analysis of Cardinal Health

SWOT
PESTLE
The SWOT analysis for Cardinal Health is presented below:
Strengths
Weaknesses
1. Wide range of products and services offered.
2. Presence in both manufacturing and distribution
3. Strong presence in the United States

4. Strong financial performance sustained over consecutive five years.
5. Phenomenal growth of Specialty Solutions group, proving to be a strong asset.
6. Vast provider distribution network across U.S.A
7. Runs the largest radiopharmaceutical network in the U.S.A
1. Lack of strong R&D to develop innovative products
2. Embroiled in allegations over involvement in opioid epidemic
3. Pricing pressures resulting in low profits
Opportunities
Threats
1. Tapping potential in Emerging Markets
2. Growing Demand for High Quality Medical products
1. Frequent FDI checks for GMPs(Good Manufacturing Practices)
2. Strong competition from new players
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Detailed SWOT Analysis of Cardinal Health

 

Strength

1. Wide range of products and services offered: Cardinal Health offers Services, Professional Products and Consumer Products. Consumer products cover Advanced Wound Care, First Aid, Home Health Care and Personal Care products. The Company's strength flows from four cardinal verticals - logistics, product, business and patient solutions. With one of America's largest distribution network, the Company helps streamline supply chain, discover cost reduction channels, improve performance and make logistics and business smarter through its offerings in Acute Care, Retail Pharmacy, Physician Office, Pharmaceutical and Medical manufacturers. The product solutions are divided under Medical, Pharmaceutical, Support Services and Consumer Products. The patient solutions cover Acute, Retail Pharmacy and Payer. It consists of 2 financial reporting segments – Pharmaceutical, which clocked revenues of $116 Bn with a segment profit of $ 2.2 Bn and Medical, which recorded revenues of $13.5Bn with a segment profit of $ 572 M in FY 2017.

Cardinal Health serves more than 24,000 pharmacies, sourcing over 4 lacs unique products, catering to over 85% hospitals in the U.S.A, serving more than 2million patients with over 50K homecare products globally. The Company has raised the global standard of care, be it developing health care systems containing binary sites, imaging or real-time healthcare services, electronic image management systems are being benchmarked as the new standards of care. They serve 10,000 specialty physician offices and clinics with over 72K laboratory products to more than 5800 labs.

2. Presence in both manufacturing and distribution: Cardinal Health has a wide network to which it supplies the products and services. This is because it is into both drugs and medical equipmentselling. The pharmaceutical products like drugs are only supplied by the company but medical equipment are manufactured by them. So, being in both the businesses expands their reach and makes their presence more substantial. Red Oak Sourcing, which is a joint venture with CVS Health, the largest pharmacy health care provider in the United States and a Fortune 20 company, shoulders sole responsibility for generic pharmaceutical sourcing for the retail division and pharmacy benefit manager - representing 85% of the pharmaceutical product volume of the two companies – making Red Oak one of the largest generic sourcing entities in America.

Cardinal Health nurses a well-knit network, which includes complex contracting, global sourcing, extensive regulatory interfaces, and a vital interconnection between manufacturers, providers, and patients. This places the Company is a leadership position in one of the biggest, safest and most secure pharmaceutical supply chain network on the globe.

3. Strong presence in the United States: Around 85% of the hospitals in United States are covered by the supplies of Cardinal Health. This gives a clear picture of how vivid and deep-rooted their reach is in the United States. It is also a testimony of their excellent service as otherwise it would not have been possible to sustain such a huge volume. This is the biggest strength of Cardinal Health.

4. Strong financial performance sustained over consecutive five years: Cardinal Health has shown sustained growth performance across the period between FY 2012 to FY2017. GAAP CAGR is 5.7%, while non-GAAP CAGR stood at 11.0%.Operated earnings growth recorded 3.4% GAAP CAGR and 8.2% nn-GAAP CAGR. Total shareholder return was 106.2%, with dividend per share growth standing tall at 16% CAGR. During this period, $8.6 bn was reinvested in business and $5.7 bn was returned to shareholders.

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Weakness

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Opportunity

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Threat

1. Frequent FDI checks for GMPs (Good Manufacturing Practices): The FDI laws for GMP checks are very strictly monitored by the Government. This makes things difficult for pharmaceutical companies. There is a lot of pressure of abiding by these practices. At the same time, there is also a risk of being framed by sabotages as reputation in this industry plays an important role.

2. Strong competition from new players: Amazon is looking to compete with Cardinal Health in the medical equipment distribution sector but has chosen not to walk the pharmaceutical drugs terrain tentatively. The medical segment earns 10% of Cardinal's revenues but around 20% of profits. Amazon poses significant threat to this segment of the business. There is still a lingering question whether Amazon poses a legitimate threat to healthcare behemoths like Cardinal Health, McKesson (MCK), and AmerisourceBergen (ABC) which requires detailed industry knowledge.Incumbent industry leader Cardinal Health has confidence in its low prices due to its scale and size and believe that “it would be hard” for someone else to beat it.In November 2017, reflecting on the competitive dynamics, Morgan Stanley marked Cardinal Health most at risk due to its "outsized exposure", with Amazon's marching feet in the pharma sector, followed by McKesson, because of their earnings exposure risk.

References

1. Cardinal HealthAnnual Report 2017:http://s1.q4cdn.com/238390398/files/doc_financials/annual/2017/2017_Cardinal-Health_AR-FINAL.pdf

2. Company website: http://www.cardinalhealth.com/en.html

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Cardinal Health SWOT and PESTLE analysis has been conducted by Swarnima Chowdhury and reviewed by senior analysts from Barakaat Consulting.

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