Cardinal Health Essay

834 Words Oct 23rd, 2008 4 Pages
Integrative Case 3.1:
Corporate Strategy at Cardinal Health
Discussion question 1: What are the benefits and costs of Cardinal Health’s product-related diversification strategy?
Firstly, Walter started implementing its product-related strategy on time, in 1996, when FoxMeyer went bankrupt. If, the company was not diversified and dependent only on one product division, it might have ended up as FoxMeyer.
Also, the drug distribution division has been forced to lower its prices by health care providers, patients, insurance companies and HMOs. Moreover, related costs are increasing, reducing profit margins of the company. This division is not as profitable as other three divisions, generating less than 50% of the company’s total profits,
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The company may face structural problems associated with the diversification strategy. As the company gets larger and larger and diversify into different product divisions, the organization structure should be changed to fit the diversification strategy. An inappropriate fit may result in low performance and lead to strategic changes.
Also, internationalization or geographical diversification may lead to problems related to psychic distances. As the company gets more diversified, information flow will be harder due to differences in language, culture, level of education, political systems, foreignness and level of industrial development.

Discussion question 2: What has made Cardinal Health the biggest player in the US health care industry in general and the undisputed profitability leader in the drug distribution business in general?
Its product related diversification strategy, through series of successful acquisitions, has made the company the biggest player in the US Health care industry. Diversifying the company into industries with high growth rates and potential profitability enabled the company to outperform its competitors who depends mostly only one product division.
As it is mentioned in the study, the acquisition strategy is in Cardinal Health’s blood and it is extremely good at acquiring firms and integrating them with the parent company. Cardinal Health’s acquisition success can be explained in four aspects. First, the company acquires only