The Long Play – Amazon’s Next Disruption

Amazon’s recent acquisition of online pharmacy PillPack for $1 Billion has been the talk of the business world. And rightfully so as Amazon is looking to expand the scope yet again, disrupting another industry in healthcare. While many are saying that Amazon is going to experience challenges within the healthcare industry, I look at Amazon’s history of innovation, strategic positioning, plummeting stock prices and a tried and true scope M&A strategy to show why they are poised for success.

When Amazon acquired PillPack, the stock prices of drugstore competitors plummeted (RiteAid – 11.1%, Walgreens 9.9% and CVS Health – 6.1%); this is largely due to Amazon’s history. Amazon has had a strong history of shaking up industries and at the dawn of each disruption was a naysayer saying why it wouldn’t work. True, Amazon has tried and failed to enter into the health care space before with its failed acquisition and integration of Drugstore.com. However, in 2018, Amazon has a much stronger position for success. First, Amazon’s recent acquisition of Whole Foods provides Amazon with strategic position to leverage a hub-and-spoke business model. For all intents and purposes, they have ‘pharmacies’ already strategically placed within the neighborhoods of prospective clients.

Second, armed with the lessons of the failure of the Drugstore.com deal, expect the usage of the business licenses acquired in the PillPack deal to come into play in the long term. Rather, expect to see Amazon to disrupt as it always does; by dropping prices and making competitors scramble. I anticipate Amazon will go the route of distributing generic medicines to uninsured consumers at lower rates; taking care of price and convenience in one fell swoop, as it always does. I also see a heightened focus on health supplements and I am curious to see Amazon’s play surrounding the upcoming cannabis industry which is projected to grow from $9.2 billion to $47.3 billion within the next decade.

The question is how does Amazon always figure out a way to expand and dominate in so many different sectors? In this case, a brilliantly employed scope acquisition strategy. A scope acquisition strategy is employed when a firm is looking to increase the variety of products or service offerings that they deliver. As I have already stated, Amazon has proven time and again to be the master of expanding the scope of their service offerings; starting with books, expanding into clothing, tech and now healthcare. Mid-market players would be wise to consider employing a scope acquisition strategy as they consider growing to become a successful enterprise.

MorganFranklin Consulting provides a full range of M&A Lifecyle services. From Pre Deal, Post-Deal, Post 100 days, MorganFranklin has the capability to help companies through the challenges of Mergers and Acquisitions for deal strategy, to valuation to post merger integration and divestiture.

2018-08-09T16:37:26+00:00August 9th, 2018|Insights, Insights - Companies|