Businessmodel of McKesson

Customer Segments

McKesson has a niche market business model, with a specialized customer segment. The company targets its offerings at pharmacies, pharmaceutical manufacturers, and healthcare providers. In its most recent fiscal year, sales to its 10 largest customers accounted for 52.4% of its total revenues.

Value Proposition

McKesson offers one primary value proposition: brand/status.

The company has established itself as a powerful brand as a result of its success. It bills itself as the oldest and largest healthcare company in the U.S. It is also the second-largest specialty firm (after acquiring U.S. Uncology in 2010) and the fourth largest pharmacy chain, with 3,000 retail pharmacies compromising its Health Mart franchise. McKesson also has the following customer statistics:

• Serves over 50% of American hospitals, and 76% of hospitals with 200+ beds
• Serves 20% of U.S. physicians (over 200,000)
• Serves 100% of the top 25 health plans
• Delivers one-third of all medications used each day in North America ### Channels

McKesson’s main channels are its direct sales team and retail channels (regional and national pharmaceutical chains, independent pharmacies, and mass merchandisers). The company promotes its offerings through its website, social media pages, seminars, webinars, trade shows, and conferences.

Customer Relationships

McKesson’s customer relationship is primarily of a self-service nature. Customers utilize its products and services while having limited interaction with employees. That said, there is a personal assistance component in the form of phone and e-mail support.

Key Activities

McKesson’s business model entails distributing healthcare-related products and designing and delivering related services. It obtains its products from third-party manufacturers.

Key Partners

McKesson maintains the following partnership programs:

CommonWell Health Alliance – The company is a founding member of this group, which is a non-profit trade association consisting of health IT firms devoted to health IT interoperability. Members evaluate service expansion into various care settings for the benefit of providers and patients.

Alliance Partners – The company maintains partnerships with leading healthcare IT providers to ensure that customers have a wide array of launch points into InterQual content. Partners undergo a comprehensive certification process in order to have CareEnhance Review Manager Enterprise integrated into their product workflows. They are then responsible for installing, maintaining, and supporting the combined offering for mutual customers. There are more than 20 partners serving over 700 clients; they include 3M, Acesis, AllScripts, CaseNet, CaseTrakker, Cerner, DST Health Solutions, Epic, Essette, Exl Healthcare, HealthEdge, HP, MedHok, Pega, and ZeOmega.

McKesson Ventures – The company invests in and partners with firms seeking to create solutions for positive change in the health care economy. It targets businesses operating in the following areas:  Alternative Care Delivery Models, Consumerism, Pharma Value Chain, and Data Value Chain.

McKesson also maintains strategic business partnerships with several prominent firms and associations, including the American Medical Association, BMC Software, Cisco Systems, EMC Corporation, Oracle Corporation, Symantec Corporation, Toshiba, and Wolters Kluwers Health.

Key Resources

McKesson’s main resources are its human resources. They include sales and marketing staff that promote the offerings it distributes and its customer service staff, which provides support.

Cost Structure

McKesson has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is cost of sales, a variable expense. Other major drivers are in the areas of sales/marketing, administration, and R&D, all fixed costs.

Revenue Streams

McKesson has one revenue stream: the revenues it generates from distributing products and delivering services to its customers.