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10 Historically Bold Moves Made By Big Companies

Friday, February 07, 2014

 

Local business experts are praising CVS this week for their decision to end tobacco sales by October. It seems the company made a big impression on its customers by taking something away from them.

“This was better than spending $4 million for a Super Bowl ad. They will get more publicity and their stock will be added to portfolios of those interested in socially conscious investments," said Edward M. Mazze, professor of business at the University of Rhode Island.

“The timing was great, the way they announced was great, I give the decision an A+”

Bold movies typically pay back in big dividends or big disappointments. Some of the best corporate ideas support consumers - such as putting rear view cameras in vehicles and safety caps on pill bottles.

"The best decisions are the ones that have an affect on consumer health and consumer safety. [These improvements] are part of the responsibility that corporations have to the communities they serve,” Mazze said.

One needs only to track the career of CVS Executive Vice President Helen B. Foulkes to see the corporate climate of bold moves and calculated risks. Foulkes, a Harvard-educated MBA, was working her way up the retail merchandising and buying sector at CVS in 1997 when her boss offered her a challenge: Create a loyalty program. This vague assignment eventually became the CVS card that is probably on your keychain as you read this. Foulkes developed the ExtraCare Loyalty Marketing Program, the first and largest retail loyalty program in the country, with over 70 million active cardholders nationwide.

A changing business model

"[CVS] made a short term decision to forego profit and a long term decision to establish themselves as a community conscious company," said Howard Anderson, professor of entrepreneurship at the MIT Sloan School of Management. He went on to point out that often times these decisions are made to align with a corporation's changing business model and their corporate ethics.

"When Walmart doesn't carry Playboy Magazine, its not about business, but ethics. It is an ethical decision first, business decision second," he added.

The CVS decision is also in line with the changing business model at CVS. While they were once a company of convenience products, they are now a healthcare company. CVS has more than 7,400 CVS/pharmacy stores nationwide. It is the leading pharmacy benefit manager; serving more than 60 million plan members. It is also a market leader in mail order, retail and specialty pharmacy, retail clinics, and Medicare Part D Prescription Drug Plans. The company's pharmacy business has grown from 20 percent to 80 percent of all business at CVS Caremark in the last 20 years.

“What they're doing is eliminating a line of products that is exactly opposite to most of the other products they sell,” Mazze said.

“They were proactive, took a leadership decision, and quite frankly it was the right time to make this move.”

It's too early to tell exactly how this decision will impact the company's bottom line. CVS stands to lose $2 billion in tobacco sales when smokers go elsewhere for tobacco. But will smokers take their convenience shopping and pharmacy business with them as well?

A public relations victory

From a public relations perspective, however, it's already been a win for CVS. The company has received immediate and enthusiastic support from anti-smoking groups and healthcare advocates, such as Tobacco Free Rhode Island.

"CVS's decision not to sell tobacco products is a very positive statement of corporate responsibility," said economic expert Gary Sasse.

"As corporations chase profits they do not always act as good corporate citizens. CVS's decision reflects the highest standard of corporate citizenship and I am proud that they are a Rhode Island company. Good public policy over the long-run is good for the bottom line."

In the wake of the bold move by CVS to end tobacco sales by October, GoLocal decided to look back on some of the boldest moves in the history of big business.

 

Related Slideshow: 10 Historically Bold Moves Made By Big Companies

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10. RJ Reynolds

The Smokeless Cigarette

LOSE

In 1988, long after the American public wised up to the dangers of cigarettes, RJ Reynolds launched the Premier cigarette. They called it a “smokeless nicotine delivery mechanism that looks and feels like a premium cigarette.” It didn't. Smokers said it tasted like charcoal, and drug users quickly figured out how to use it to smoke crack. It has been reported that RJ Reynolds lost $1 billion on the product.

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9. McDonald's

The McLobster

LOSE

The alleged lobster roll – no one's sure there was ever any real lobster in there – from McDonald's was about as successful in New England as their McCrabcake was in Maryland. It looked bad, tasted worse, and was shunned by even the most die hard Golden Arches fans. (Unlike the McRib, which continues to have a bewildering trance on McDonald's fans.) The sandwich is still available in some Canadian franchises and occasionally in Maine.

Prev Next

8. Yahoo

Bans Employees From Working at Home

WIN

When Yahoo CEO Marissa Mayer became the company’s chief executive, she instated Google-like food options, offered new benefits, and insisted full-time employees work in the office. The tech world was shocked, and Mayer admitted the mandate could diminish productivity. However, she saw an up side.
 
"People are more productive when they’re alone,” she said at the time. “But they’re more collaborative and innovative when they’re together. Some of the best ideas come from pulling two different ideas together.”
 
Now that Yahoo's future looks far brighter than when Mayer started, it seems she was onto something all along.
Prev Next

7. Sony

Backs Betamax

LOSE

Sony was right to support Blu-ray over the failed HD DVD, probably because they learned their lesson with the Betamax experience in 1975. That's the year the Betamax video recorder hit stores shelves. A year later, the VHS format hit the market. Sony never licensed its Betamax technology, and the two formats were not compatible. Consumers had to choose between the two. You know how that story ended.
Prev Next

6. Tesla

Enters the Auto Market with High End Electric

WIN

Whoever killed the electric car must not have been looking when the first Tesla Model S cars were sold at the Tesla factory in Fremont, California. The Silicon Valley electric carmaker took the idea of eco-friendly vehicles and turned it into a blueprint for lead-footed success. Tesla's first made-from-scratch car, the electric Model S sedan, received a rare near-perfect score from Consumer Reports. At the time, Bill Ford, the executive chairman of Ford Motor Co., said "My hat's off to them." Tesla has since transformed America's image of electric cars. 
Prev Next

5. Apple

Fires Steve Jobs

LOSE

One of the world's most famous college drop outs, Steve Jobs founded Apple, helped it grow into a billion-plus public company, and launched the Macintosh. He was also ousted by Apple's Board of Directors in 1985. The popular take is that the board was stupid to fire Jobs as the leader of the Mac division, because Apple would have more quickly become the company it is today. A new take on the decision posits that the then-30-year old  Jobs was disruptive and incompetent in that role. After 12 years away from the company he founded, he learned the skills and discipline required for Apple's rebirth.

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4. Microsoft

Takes on Sony + Nintendo in the Console Gaming Market

WIN

Microsoft has one person to thank for its console gaming success, and that person isn't even real. Master Chief is the hero of the insanely popular "Halo" franchise, which was first released was a launch title with the original Xbox. The game revolutionized First Person Shooters on consoles, and sold millions of consoles along the way. At the time, Microsoft was known as primarily a software company. They may have took a bath on those early consoles, but they now join Sony as one of the two major console makers left standing. (Sorry, Nintendo. The Wii U is going to sink you.)  

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3. Netflix

Changes Pricing Plan

LOSE

Netflix is back on top now, but it almost went under in 2011 when it mishandled its pricing changes and attempted to slice off it DVD business under the name Qwikster. As they did with the New Coke launch, customers responded with immediate anger, leading Netflix CEO Reed Hastings to apologize. The company reverted to its $7.99 streaming plan and has never looked back.

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2. Ford

Opts out of Government Loans

WIN

After Detroit’s automakers went to Washington in 2008 asking for emergency loans to keep their enterprises afloat, the big bus oval was the only one to opt out of the bailout. Ford decided to mortgage all of its assets to raise operating funds instead. Taxpayers eventually spent $80 billion to rescue General Motors Corp. and Chrysler Corp. Ford focused on efficiency and increasing sales without using government bailout  money - thus avoiding the federal tinkering that Chrysler and GM  had to accept as a part of their deals. The company has since kept pace with GM, the country's largest automaker.

Prev Next

1. Coke

New Coke

LOSE

Perhaps the most famous brand misstep since Ford's Edsel, New Coke is the Titanic of corporate miscalculation. In the 1970s and early 80s, the soft drink giant faced increased competition from Pepsi and other products. To stay on top, Coke executives stopped production of the classic formula and introduced New Coke with tremendous fanfare. The public's responded with immediate outrage. Coca-Cola re-launched its original formula – called Coca-Cola Classic – almost immediately. Today, unopened cans of New Coke go for hundreds on eBay.

 
 

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Comments:

Couple of things:

This may end up being a loss for CVS. Unfortunately Golocal will interview a progressive URI professor, who will of course praise this “nanny-state” move. You seem to forget that there is a massive country out here, and people do have the freedom to choose how they want to live their lives. This is the outcome: in states (like RI, NY, CA) that ban smoking, it will stay. In other states that don’t have these bans, CVS will start selling them again, why? Money and Walgreens. The tobacco companies make over $300 billion dollars a year & the government gets money from taxing it. Walgreens, Rite-Aid, and any other company that sells them will reap the profits that CVS will so casualty remove.

Also stop with this nanny-state mentality. You cannot tell someone else what they can or cannot do, what is next? CVS will ban salt?

P.S. - Sorry but the Tesla has done nothing but prove that spending a ton of cash will not keep a car from catching on fire.

P.S.S. - Also Ford is not keeping pace with GM. GM will never pay back the “loan” they were given. Their stocks would need to sell for I believe $55 a share. Latest quote is $33. US taxpayers lost $20 Billion on that deal.

Comment #1 by Silence Dogood on 2014 02 07

CVS stands to lose $2 billion in tobacco sales when smokers go elsewhere for tobacco. But will smokers take their convenience shopping and pharmacy business with them as well?

Yes, but sales is not the primary metric -- it's net revenue. Cigarettes are a pretty low margin item and the state has to mandate a minimum price due to the heavy taxation in order to prevent (although not successfully) black markets or competition on price. Hence, the competition is on product display or bundling. Yes, they may lose the consumer who would pick up higher margin other items, but smokers are (1) declining and (2)pharmacy folks are generally loyal to convenience and relationships -- you can pick up cigs when you are pumping gas or getting your coffee at a cumberland farms, etc.

The article hints, but does not discuss the pending state legislation that will outlaw "health care facilities" from selling tobacco anyway so they are just milking the public relations ahead of something they would have done anyway since retail health care is **way more** profitable.

Comment #2 by Prof Steve on 2014 02 07

I believe this is the first salvo of progressive government intervention into private industry for the benefit to gain political favor from the federal administration. Your local CVS will now have a entitlement program window to sign up for a Obama phone to the SNAP program after you receive your soon to be mandatory flu shot. Lets not forget complementary voter registration for all customers. (Sons of Liberty) where are you?

Comment #3 by patrick murray on 2014 02 08




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