Reference no: EM132917196
Aetna is a large insurance company, with policies in life insurance, health, disability and other lines of insurance. CVS is a large drug store chain, which recently bought Aetna, in a $70 million transaction.
a. Aetna had been a customer of CVS, directing some number of its enrollees (those with its insurance) to CVS for better pricing on the pharmaceuticals (prescription drugs) they needed. Is this unusual acquisition (of Aetna by CVS), a horizontal integration or a vertical integration, and why that answer?
b. How could it be, or become, a diversification strategy for CVS?
c. Would that diversification strategy be a related, or unrelated one for CVS, and why?
d. One speculation is that CVS will want to increase its network of MinuteClinics that it has in some of its store, which give direct health care services and chronic care management to patients/customers, who can then buy drugs there. If so, the purchase of Aetna could drive more patients to both the clinics and the pharmacies (drug stores), which could explain some of the hopes for the acquisition. Given all that, how will this acquisition position CVS against the "retail apocalypse" (the trend of people buying things online rather than in brick-ad-mortar stores)?