Since its inception in the early 1970s, Cardinal Health has grown into one of the leading health care service providers in the world. A Fortune 500 company, Cardinal began as a food distributor, and then transformed itself under the leadership of Robert Walter into the foremost distributor of pharmaceuticals and medical instruments. With the advent of the internet economy, coupled with dynamic changes in the health care industry, it continued to expand its offerings to customers into other areas of opportunity: manufacturing and packaging; medical supply chain logistics and data management; customer inventory management; along with a host of other services aimed at streamlining efficiency and lowering customer costs (Teagarden 18-1 – 18-16). Social Responsibility
Corporate social responsibility as an amalgam of four distinct areas: economic, legal, ethical, and discretionary (Pearce II and Robinson 49-52). Economically, Cardinal Health is clearly meetings its goals. In the period between 1983 and 2000, stock value increased 70 times. Walter’s long-term focus on strategic growth had led Cardinal to acquire over 60 firms, each of which helped Cardinal improve corporate value, efficiency, and quality in both directions of the value chain. In 2010, the company reported revenues in excess of $98 billion and a net profit of approximately $1.3 billion (Cardinal Health, Inc. Company Profile).
Cardinal Health appears to meet its legal responsibilities, as well. Annual financial statements found on the corporate website are certified as per the Sarbanes-Oxley Act of 2002 (Cardinal Health 2011 Annual Report 89). Other regulatory issues, such as compliance with ISO and FDA policies, are discussed in the corporate website on the Compliance Services page (cardinal.com). However, Cardinal is not immune to legal difficulties. For example, on February 2, 2012, the U.S. Drug Enforcement Agency suspended Cardinal’s authority to ship controlled substances through its Lakeland, FL, distribution center. According to the DEA, a “staggering” amount of oxycodone had been shipped from the center to several retail customers, and that “continued operations posed an imminent danger to the public.” Cardinal is protesting the suspension (McLaughlin).
A statement by Robert Walter in 2002 stated that “playing fairly” and “acting ethically” were integral to Cardinal’s traditions and success (Teagarden 18-9). This is supported by the company’s Standards of Business Conduct booklet that is issued to each employee, vendor, supplier, and consultant that works on behalf of Cardinal Health. The 52-page booklet contains ethical guidelines and regulations, as well as resources and contact information for assistance in dealing with any ethics or compliance problems (Standards of Business Conduct).
Finally, Cardinal also puts great effort into discretionary responsibilities. According to the corporate website, Cardinal Health contributes millions of dollars and other resources to support various philanthropic activities that “improve healthcare efficiency, quality and cost-effectiveness and that promote healthy and vibrant communities” (cardinal.com). Cardinal’s philanthropy is a prime example of the second principle of strategy in action, as the company is applying what it excels at towards improving social health and welfare (Pearce II and Robinson 67-72). Challenges and Response
According to Teagarden, the health care industry must cut costs while improving efficiency and service. As a significant player in the industry, this is one of Cardinal’s biggest challenges. Teagarden states that health care expenditures are growing faster than the US gross domestic product. A substantial portion of these expenditures can be directly attributed to the rising cost of medical treatments and pharmaceuticals, and the industry has faced considerable backlash from the public to reign in the price tag without limiting the quality of or access to health care. Much of Cardinal’s success can be directly related to its ability to turn this challenge into a valuable opportunity, as the company has created significant savings for its customers by “maximizing economies of scale, creating efficiencies, lowering expenses, and simplifying distribution” (Teagarden 18-3).
Another challenge Teagarden discusses is disintermediation, specifically brought about by the growth and accessibility of the internet. Cardinal met this challenge by investing heavily in IT, which subsequently resulted in the launch of cardinal.com and various data management services aimed at improving the distribution, inventory, and information capabilities of its customers and suppliers. Lessons Learnt
In summary, Cardinal’s development as a leader in the health care industry is grounded on its strategy of “superior scale, market leadership, and proprietary offerings”, as well as a focus on operational drivers such as growth, customer needs, operational excellence, and leadership development (Teagarden 18-9). This almost religious dedication to strategic growth and emphasis on customer service has allowed Cardinal to position itself as the primary game changer in the health care industry. Furthermore, Cardinal’s success is also a result of its ability to capitalize upon the external environment by partnering with suppliers and customers; introducing IT innovations in response to technological challenges; as well as promoting strategic acquisitions to stave off competitors and substitutes (Pearce II and Robinson 81-86).