McKesson Corporation (MCK): Business Model Canvas

Introduction

The healthcare industry has been growing at a rapid pace in recent years, and it is expected to continue to grow in the coming years. In fact, according to a report by Grand View Research, the global healthcare market is expected to reach $11.9 trillion by 2025. This growth is being driven by several factors, including the aging population, increasing prevalence of chronic diseases, and technological advancements in the healthcare sector.

• The aging population: The world's population is aging rapidly, with the number of people aged 65 and over expected to triple by 2050, according to the World Health Organization. This demographic shift is driving up demand for healthcare services, as older people tend to require more medical attention than younger people.
• Increasing prevalence of chronic diseases: Chronic diseases, such as diabetes, heart disease, and cancer, are becoming increasingly common worldwide. According to the World Health Organization, chronic diseases are responsible for approximately 70% of all deaths worldwide. This trend is creating a need for innovative solutions to help manage and treat these conditions.
• Technological advancements: Advancements in technology are transforming the healthcare industry, making it possible for healthcare providers to deliver more efficient and effective care. For example, electronic health records (EHRs) are becoming increasingly common, allowing healthcare providers to easily access patient information and track their health over time.

Given this growth and the evolving needs of the healthcare industry, companies like McKesson Corporation are well-positioned to help healthcare providers manage their operations and improve patient outcomes. In the following sections, we'll take a closer look at McKesson's business model and how it is helping to shape the future of healthcare.

Key Partnerships

McKesson Corporation (MCK) operates in the healthcare industry, whereby partnerships are critical for the company's growth and success. McKesson has established key partnerships with various stakeholders in the industry, which include:

• Suppliers: McKesson partners with suppliers who provide medical equipment, pharmaceutical drugs, and other medical supplies. The company's partnerships with suppliers ensure that they have a continuous supply of high-quality products.
• Customers: McKesson partners with healthcare providers, medical facilities, and pharmacies to provide services and products that enhance patient care. The partnerships with customers ensure that the company remains relevant in the healthcare industry.
• Pharmaceutical Companies: McKesson has partnerships with pharmaceutical companies that allow them to distribute drugs to healthcare providers and pharmacies. These partnerships are essential for McKesson in ensuring that healthcare providers have access to the medications they need to treat patients efficiently.
• Technology Partners: McKesson partners with technology companies to develop and implement various healthcare technology solutions. These partnerships enable the company to access cutting-edge products and services that improve patient outcomes.
• Insurance Providers: McKesson partners with insurance providers to manage patient information and payment processes. These partnerships are essential in ensuring that patients can access healthcare services without unnecessary delays and complications.
• Regulatory Bodies: McKesson establishes partnerships with regulatory bodies to ensure compliance with regulations and standards. These partnerships enable the company to operate within a legally acceptable framework, which is essential in maintaining the company's reputation and avoiding legal complications.

In conclusion, McKesson's partnerships are critical in ensuring the company's growth and success in the healthcare industry. Through these partnerships, McKesson can access high-quality products and services that help healthcare providers improve patient outcomes. Additionally, these partnerships allow the company to address various challenges facing the healthcare industry, such as technology innovations, regulatory compliance, and payment processes.

Key Activities

The key activities of McKesson Corporation (MCK) are to provide healthcare services and technology solutions to healthcare providers and patients across the world. To achieve this, the company engages in the following:

• Procurement and distribution of pharmaceutical and medical products: McKesson is one of the largest pharmaceutical distributors in the world, supplying drugs and healthcare products to healthcare providers and retail pharmacies. The company also sources pharmaceutical products and medical supplies from manufacturers and wholesalers globally.
• Healthcare technology solutions: In addition to logistics, McKesson also provides technology solutions for hospitals, clinics, and other healthcare providers. The technology solutions include Electronic Health Records (EHRs), revenue cycle management, and supply chain management systems, among others.
• Medical and surgical supply and device management: McKesson provides inventory and supply chain management services for medical and surgical devices and supplies, reducing the burden on healthcare providers, and streamlining the procurement and cost management of healthcare supplies.
• Healthcare consulting services: The company provides healthcare consulting services to healthcare providers, advising them on strategy, operations, and technology solutions to improve patient outcomes, reduce costs, and enhance efficiency.
• Pharmacy management services: McKesson helps retail pharmacies to optimize their operations and profitability, providing services such as inventory management, marketing, financing, and technology solutions.

The above activities enable McKesson to deliver quality healthcare services, products, and information to healthcare providers and patients around the world.

Key Resources

McKesson Corporation's key resources are:

• Pharmaceuticals and Medical Supplies: One of the primary resources of McKesson Corporation is the wide range of pharmaceuticals and medical supplies that they offer to healthcare providers across the globe. The company sources its pharmaceutical portfolio from manufacturers and provides various medical supplies ranging from diagnostic equipment to surgical instruments.
• Technology: Information technology is an essential resource for McKesson Corporation for managing the supply chain and distribution network of pharmaceuticals and medical supplies. The company utilizes advanced technology to streamline the entire business process. It also has an electronic prescribing and clinical decision support system for healthcare providers, which enhances the company's capabilities to offer solutions that enable more efficient patient care.
• Human Capital: McKesson Corporation has a vast and diverse workforce, including pharmacists, sales representatives, engineers, and technology experts, among others. The company invests in the training and development of its employees to ensure they have the necessary knowledge, skills, and expertise to provide high-quality services to clients across the healthcare industry.
• Supply Chain Network: McKesson Corporation's extensive supply chain network is a crucial resource that enables the company to operate efficiently and effectively. The company has numerous regional distribution centers and warehouses located worldwide, which helps it to reach clients in different parts of the world with ease.
• Partnerships and Collaborations: McKesson Corporation has strategic partnerships and collaborations with several industry players. The company collaborates with pharmaceutical manufacturers to source innovative and high-quality drugs and medical supplies. Additionally, it partners with healthcare providers, payers, and governments to provide comprehensive healthcare solutions.
• Brand and Reputation: McKesson Corporation has a strong brand and reputation in the healthcare industry, built on years of experience and reliability. This reputation is a crucial resource for the company, as it helps to attract and retain clients and partners, and drives growth in the competitive industry.

Value Propositions

McKesson Corporation delivers innovative solutions that improve the quality and efficiency of healthcare. As a global leader in healthcare solutions, we offer a comprehensive suite of healthcare products and services that improve the health and well-being of patients worldwide.

• Unmatched expertise: With over 180 years of experience in the healthcare industry, we bring a level of expertise that is unmatched by any other organization.
• Cutting-edge technology: Our technology solutions simplify complex healthcare processes, resulting in improved efficiency, accuracy, and cost savings for healthcare providers.
• End-to-end solutions: We offer a full range of products and services that address the entire healthcare continuum, from pre-care through post-care.
• Proven Results: Our solutions have been proven to deliver improved patient outcomes, increased efficiency, and reduced costs for healthcare providers.
• Collaboration: We work closely with our customers to understand their unique needs and challenges, and develop tailored solutions that meet their specific requirements.

At McKesson Corporation, we are committed to advancing the future of healthcare, and we do so by delivering innovative solutions, deep industry expertise, and a commitment to delivering exceptional customer value.

Customer Relationships

McKesson Corporation (MCK) values its relationships with its customers and strives to maintain a high level of customer satisfaction. The company offers a range of products and services to its customers within the healthcare industry, including pharmaceuticals, medical supplies, and information technology solutions. To build and maintain its customer relationships, McKesson employs a customer-centric approach that focuses on understanding customer needs and providing tailored solutions. This is achieved through various channels and tactics, including: 1. Personalized service: McKesson has a dedicated team of professionals who provide personalized service to its customers. This includes sales representatives who work directly with customers to understand their needs and offer appropriate solutions. 2. Customer support: McKesson provides around-the-clock customer support through multiple channels, including phone, email, and online chat. This ensures that customers can get help whenever they need it. 3. Training and education: To help customers maximize the value of its products and services, McKesson provides training and education programs. This includes online training modules, webinars, and in-person training sessions. 4. Feedback and communication: McKesson proactively seeks customer feedback to continually improve its products and services. This is done through customer surveys, focus groups, and regular communication with customers. 5. Loyalty programs: To incentivize and reward customer loyalty, McKesson offers various loyalty programs. These programs provide customers with exclusive benefits, discounts, and other incentives. Overall, McKesson Corporation values its customer relationships and invests in strategies to foster long-term partnerships with its customers. By providing personalized service, support, education, and incentives, the company ensures that its customers receive the best possible experience.

Channels

McKesson Corporation (MCK) provides healthcare products and services to healthcare institutions and retail pharmacies across the world. The company operates through the following channels:

• Distribution: McKesson uses its extensive distribution network to deliver pharmaceutical products to hospitals, pharmacies, and other healthcare providers. The company has a global reach, with operations in North America, Europe, and the Asia-Pacific region.
• Technology: As a leading healthcare technology company, McKesson operates a range of technology platforms that help hospitals and other healthcare providers manage their operations more effectively. These platforms include electronic health records (EHRs), revenue cycle solutions, and supply chain management systems.
• Retail pharmacy: McKesson also operates a retail pharmacy business in the United States through its subsidiary, McKesson Retail Holdings. The company operates more than 17,000 pharmacies across the country under well-known brands such as CVS and Walgreens.
• Specialty: McKesson’s specialty business is focused on providing pharmaceutical and related services to specialty pharmacies and other healthcare providers. The company’s services in this area include drug distribution, patient support programs, and clinical services.

Through these channels, McKesson is able to reach a wide range of healthcare providers and patients across the world, delivering high-quality products and services that help to improve patient outcomes and reduce the cost of healthcare delivery.

Customer Segments

McKesson Corporation operates in the healthcare industry, serving a diverse range of customer segments that include: Patients: McKesson Corporation indirectly serves patients by supplying pharmaceuticals and medical products to hospitals and pharmacies. The company aims to ensure the availability of essential medicines and medical supplies to patients when they need them. Hospitals and Health Systems: McKesson Corporation provides technology solutions and services to hospitals and health systems. These services include enterprise resource planning systems, clinical decision support systems, and revenue cycle management solutions. The company helps hospitals and health systems enhance their operational efficiency, reduce costs and provide better patient care. Pharmacies: McKesson Corporation operates a pharmaceutical distribution business, supplying prescription drugs and other healthcare products to pharmacies across the United States. The company also provides software solutions to pharmacies, allowing them to manage inventory, patient data and billing more effectively. Manufacturers: McKesson Corporation partners with pharmaceutical and medical device manufacturers, providing a range of services such as distribution, logistics, and channel management. The company helps manufacturers improve their supply chain efficiency and increase their reach to healthcare providers and patients. Government Agencies: McKesson Corporation serves government agencies, including the U.S. Department of Defense and the U.S. Department of Veterans Affairs, by providing medical supplies and pharmaceuticals. The company also provides technology solutions and services to government agencies, improving their healthcare delivery systems and efficiency. Wholesalers: McKesson Corporation operates a medical supply wholesaler business, providing medical and surgical products, and services to large-scale medical supply distributors. The company helps wholesalers reduce costs, streamline their supply chains, and increase their reliability to their end customers. In summary, McKesson Corporation serves various customer segments in the healthcare industry, ranging from patients and hospitals to manufacturers and government agencies. The company's diverse customer base enables it to capitalize on different market segments and optimize its operations to cater to the specific needs of each customer.

Cost Structure

The cost structure refers to the expenses incurred by McKesson Corporation in delivering its products and services. The following are the main cost components of the company's business model:

• Cost of Goods Sold: This includes the cost of purchasing and storing pharmaceuticals, medical supplies, and other products that the company distributes to its customers. McKesson negotiates prices with manufacturers to obtain volume discounts and reduce its cost of goods sold.
• Distribution Costs: These are the costs associated with transporting goods from McKesson's distribution centers to customers. The company has a large fleet of trucks and uses third-party logistics providers to manage its transportation operations.
• Selling and Administrative Costs: These are the costs associated with sales and marketing activities, as well as general administrative expenses such as salaries, rent, and utilities. McKesson invests heavily in marketing and advertising to promote its brand and services.
• Research and Development Costs: This includes the costs of research and development activities aimed at improving existing products and developing new ones. McKesson invests in developing innovative solutions that help healthcare providers improve patient outcomes and reduce costs.
• Interest and Taxes: McKesson incurs interest expenses on its debt and pays taxes on its income. The company's tax rate is influenced by factors such as income levels, tax laws, and regulations.

Overall, McKesson focuses on reducing costs wherever possible while maintaining the high-quality standards that its customers expect. The company leverages its scale and expertise to negotiate favorable terms with suppliers and maintain efficient operations throughout its value chain.

Revenue Streams

• Pharmaceutical Distribution: The primary revenue stream for McKesson Corporation is the distribution of pharmaceuticals. This involves procuring medicines from suppliers and delivering them to healthcare providers and pharmacies. McKesson earns revenue by charging a markup on the price of drugs, which is generally around 3%. In 2020, pharmaceutical distribution accounted for over 90% of McKesson's total revenue.
• Medical-Surgical Distribution: Another revenue stream for McKesson Corporation is the distribution of medical and surgical supplies. This includes products such as exam gloves, syringes, and surgical instruments. Similar to pharmaceutical distribution, McKesson earns revenue by charging a markup on the wholesale price of these products. This segment accounted for approximately 6% of McKesson's total revenue in 2020.
• Specialty Pharmaceutical Distribution: McKesson also generates revenue through the distribution of specialty pharmaceuticals, which includes high-cost drugs used to treat chronic or rare conditions. Specialty pharmacy revenue is generally higher for McKesson than traditional pharmaceutical distribution. It accounted for approximately 4% of total revenue in 2020.
• Technology Solutions: McKesson has expanded its business model to include technology solutions for healthcare providers, such as electronic health record systems, revenue cycle management software, and patient engagement tools. Revenue from this segment is generated through monthly subscription fees or one-time software purchases. In 2020, technology solutions accounted for approximately 2% of total revenue.
• Other Revenue: In addition to the primary revenue streams mentioned above, McKesson also generates revenue from other sources such as consulting services, retail pharmacy franchises, and healthcare staffing services. These segments accounted for less than 1% of total revenue in 2020.

Overall, McKesson Corporation's business model is primarily focused on pharmaceutical distribution, which accounts for the majority of its revenue. However, the company has diversified its revenue streams through the expansion of its technology solutions and specialty pharmaceutical distribution. This diversification allows McKesson to mitigate risk and adapt to changes in the healthcare industry.

Conclusion

Based on the Business Model Canvas developed for McKesson Corporation, it can be concluded that the company has a strong foundation for growth and sustainability in the healthcare industry. By leveraging its core competencies, such as supply chain management and pharmaceutical distribution, the company can continue to expand its reach into new markets and serve a wider range of customers.

The company's partnerships with healthcare providers and manufacturers also provide opportunities for collaboration and innovation in the development of new products and services. Additionally, the company's focus on technology and data analytics can help it stay ahead of industry trends and provide valuable insights to healthcare stakeholders.

Furthermore, the company's commitment to corporate social responsibility and ethical business practices can help foster trust and loyalty among customers, investors, and employees. By remaining focused on its core values and mission, the company can continue to drive growth and success in the years to come.

• In summary, the Business Model Canvas has identified the following key factors for McKesson Corporation's success:
• Strong core competencies
• Strategic partnerships
• Focus on technology and data analytics
• Commitment to corporate social responsibility and ethical business practices

Overall, the Business Model Canvas has provided valuable insights into the strengths, weaknesses, opportunities, and threats facing McKesson Corporation. By using this framework to develop and refine its business strategy, the company can position itself for continued success in the dynamic and constantly evolving healthcare industry.