Mckesson Corporation: Competitive Environment Trends and Business Model Assessment

 McKesson Corporation is largest health-care provider in the United States; as of 2011 it ranked as the third largest company in the state of California; where the company is headquartered. On the Fortune 500 list McKesson is ranked 15 (“Fortune 500,” 2011), McKesson consisted of several Strategic Business Units (SBUs).

McKesson’s SBUs are divided into two primary categories: Distribution Solutions and Technology Solutions. The Distribution Solutions service all 50 states and deliver pharmaceuticals to institutional providers such as hospitals and health care systems; and also distributes to retail pharmacies; physician offices, surgery centers, long-term care facilities, and home care businesses. McKesson Canada, which is a part of McKesson, is a leading distributor in Mexico via its equity holding in Nadro.

McKesson Distribution Solutions consist of the following SBUs (McKesson, n. . ):

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• McKesson Patient Relationship Solutions
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McKesson Technology

Solutions consists of software, services and consulting to hospitals, automation, imaging centers, physician offices, home health care agencies, and payors. The Technology-Solutions of McKesson Provide an avenue to improve health care safety, manage revenue streams and resources, and reduce the cost and variability of health care. McKesson Technology Solutions consist of the following SBUs (McKesson, n. d. ):

• McKesson Automation
• McKesson Health Solutions
• McKesson Provider Technologies
• RelayHealth

McKesson is one of the most successful companies in its industry in the United States. From a strategic management and planning perspective McKesson believe in unity within its divisions. Although the businesses are separate entities, there are some similarities in reference to management and interface with the parent company.

The focus on this paper will be on McKesson Medical-Surgical, which is a SBU of McKesson Distribution Solutions; and the interface with the parent company; McKesson Corporation. McKesson Medical-Surgical Interface with McKesson Company McKesson as a company believe in unity; especially from a management perspective. This company has consistently acquired other companies; and has successfully managed to bring unity within each SBU based on the management goals of the parent company.

According to Raynor, (2007), “ McKesson has acquired approximately 75 companies since 1995 that have been aligned with or assimilated into our assorted business units. Our size and breadth of products and services fostered variability in HR practices that diluted our efforts to become a more seamless “One McKesson. ” Accordingly McKesson embarked on a series of initiatives to standardize, improve and automate, where possible, its HR processes.

Human Resources and Organization Management Team

McKesson created a team of Human Resource and Organizational Effectiveness (OE) professionals in 2004. The focus of this team was to develop best practices and improved quality via a buy-in from all the business units. If a consensus is not met after voting on an issue, an 80 percent majority vote is required to move on (Raynor, 2007). Performance Management Team McKesson has created a weekly meeting for over a year for the Performance Management Design Team, which met virtually via conference call or web meeting. This team was also designed to focus on more unity within the company. The team was responsible for creating roles and responsibilities for performance management; with emphasis on employee involvement.

New competency model was developed to redefine the rating scale. Peformance was implemented; via a PeopleSoft module and customized to support the newly created program and standardized performance practices (Raynor, 2007). McKesson Supply-Chain Management McKesson experience with its acute-care distribution business; which is also the bread and butter in the more recent years for McKesson; effective supply chain management has created success for various SBUs within the company. Supply chain management has been consistent within McKesson Corporation throughout all the SBUs.

The consistency is the belief in building strong relationships with customers, offering innovative supply chain management products and services; a creating innovative technology solutions. This consistency has also allowed the company to grow by adding new customers and increasing the business with their existing customers (Smith, 2006). Environmental Trends and Current Business Model McKesson Medical-Surgical is a spin-off of what used to be a drug wholesaler; Gil Minor III created what is currently considered a powerhouse medical and surgical box; which is where the market was trending (Smith, 2006).

The company has taken advantage of creating convenience in the medical industry. Instead of selling from a brick and mortar pharmacy, this company has taken advantage of selling via supply chain directly to its customers as well as on-line sales. From a strategic perspective the company has managed to create success in various ways. McKesson business units’ success is based on consistency, innovation, creativity, from one division to another. The company has taken medical supplies and services to a different a level.

They are not the typical CVS or Eckerd Drug store; the company caters more to medical professionals, such as doctors, psychiatrists, but more to medical professions who have connections with hospitals. The company also provides medical supplies and services to most major hospitals as well as other medical institutions. The innovation of the supply chain management, medical technologies, and the acquisitions and expansions has been successful for McKesson. A key element is also their ability to place the customer first.

From a strategic management and planning perspective, below are some of the strategies used by McKesson to build and sustain success in their businesses. McKesson business model relate to various environmental trends; such as new and innovative technologies, with cutting edge improvements. Creation of a cutting-edge supply chain management; which is currently an important trend with many companies that are trying to improve their bottom line and stream line their business(es).

McKesson also provide supplies and services to home health care, and been very successful with acquisitions and expansions. The environmental trends support the current business models and have created success within the company as well as the various divisions. McKesson Business Model Success According to Acur & Bititci (2003), “Today’s globally competitive environment is complex, dynamic and unpredictable. To deal with this level of change, uncertainty and complexity companies need to develop and review their strategies almost continuously to stay ahead of the competition.

Within this dynamic environment strategy management requires considerable resources and effort in terms of managerial time, with increasing pressures for innovation, knowledge sharing and co-operation. ” McKesson has proved that it is on the leading edge of technology in its industry; the company is continuously working toward new innovative ideas to create more efficient; better service; much of the operation has been focus on supporting supplies from a global supply chain management perspective. McKesson is the longest-operating company currently in the healthcare industries.

The Medical-Surgical business unit of McKesson, similar to McKesson as a whole has been efficient with its strategic management and planning as well as successful as a SBU of McKesson. McKesson Annual Report as of Fiscal Year End March 31, 2011 shows the Medical-Surgical Distribution and a service has increase consecutively since 2009. McKesson Business Model Reinventions McKesson has reinvented several models within the last five years which have proven to been successful for the company as a whole and its strategic business units.

Value creation and strategies should be identified at each business unit within an organization to create an integrated approach to strategic management. Strategic objectives should be deployed and implemented. To compete from a global environment; which is constantly changing the operational environment of a business strategy planning and management should be a continuous process, which will provide a closed-loop-control system which will facilitate management of the organization performance as a whole as well as individual business units (Acur, et al, 2003).

McKesson has reinvented their supply-chain planning and management from business unit to business unit. New and innovative technologies; placing the customer first; expansion and acquisition is what McKesson has done repeatedly and been success as whole as well as with its individual business units. Key Resources and Generic Strategy Deployed Within the Business Model One of McKesson’s key resources within the Medical-Surgical Business Units is the uniqueness of its distribution – supply chain.

Unlike some pharmaceutical that companies focus on distribution to Walgreens, CVS, Walmart, and other similar store chains; McKesson focus its supply chain on physician who have practices which are connected to large hospitals. McKesson supply-chain increase efficiencies from an operational perspective with its electronic ordering and purchasing system; with the improved system the company can offer faster and better customer service and deliveries. Another area in which McKesson offer uniqueness from a company and business unit perspective is managing their human resources to help impact the bottom line – from a financial point of view.

According to Raynor (2007), “Performance management is increasingly regarded as a business process with real bottom-line impact, versus an HR program. ” “Instead of being viewed as an HR program, performance management was now discussed in terms of business impact. ” Summary From management perspective sustainability is the ability to meet the needs of the present, yet not compromise the ability to meet future needs (Haugh & Talwar, 2010). McKesson Medical-Surgical Business Unit financial in the last few years has reflected financial sustainability.

McKesson’s supply chain operation from a global perspective, the ability to continuously improve and create new technologies; as well as new ways of doing business in the pharmaceutical industries has placed McKesson above many other pharmaceutical companies. The focus on human resource development with the creation of the Performance Management Design Team places McKesson and its business units above many companies today. All companies have various resources which play an active role in the performance of a company.

However, most companies under-rate the importance of in my opinion their internal customers. Employees play an active part in how a company performs financially. From a psychology perspective a happy person is can think better and perform better than one who is unhappy. Knowing how to manage ones human resource can improve how a company perform; and can increase innovative ideas from employees. All other resources can only be a good as a company’s human resource.

References

1. Acur, N. , & Bititci, U. (2003). Managing strategy through business processes.
2. Production Planning & Control, 14(4), 309. Retrieved from EBSCOhost. Fortune 500: 15. McKesson. (2011). Retrieved from http://money. cnn. com/magazines/fortune/fortune500/2011/snapshots/2219. html
3. Haugh, H. M. , & Talwar, A. (2010). How Do Corporations Embed Sustainability Across the Organization?. Academy of Management Learning & Education, 9(3), 384-396. doi:10. 5465/AMLE. 2010. 53791822
4. Leveraging Business Intelligence for Revenue Improvement. (2008). hfm (Healthcare Financial Management), 62(8), 1-8. Retrieved from EBSCOhost.
5. McKesson. (n. d. ) McKesson About 2BU Our 2BU Company Businesses 2BBusinesses. Retrieved August 20, 2011, from http://www. mckesson. com/en_us/McKesson. com/About%2BUs/Our%2BCompany/Our%2BBusinesses. html
6. Raynor, E. (2007). Developing the Performance Culture at McKesson Medical-Surgical. Organization Development Journal, 25(4), P19-P25. Retrieved from EBSCOhost.
7. Smith, C. (2006). Distributor CEO extends reach from hospital bedside to the home. Healthcare Purchasing News, 30(9), 16-21. Retrieved from EBSCOhost.

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