Final Presentation

Leah Challenger, Xavier Cordova, Brandon Earls, Erica Gutierrez, Carol

Medina, Shivam Shah, Dameon Williams

●● 2013: August 2013: 8,500+ stores nationwide!

1901: Charles R. Walgreen Sr.

Once Upon a Pharmacy...

To be the first choice in

healthy and daily living To help people get, stay,

for everyone in America and live well

– and beyond

Mission Statement (Carol)

“To be the most trusted, convenient multichannel provider and advisor of innovative pharmacy, health and wellness solutions,

and consumer goods and services in communities across America. A destination where health and happiness come together to help people get well, stay well and live well.”

Industry Information (Brandon)

● SIC Code-Drug stores and proprietary stores (5912)● NAICS Code-Pharmacies and Drug Stores (446110)● retail of prescription drugs, proprietary drugs, non-prescriptions, cosmetics, toiletries, etc.Industry Growth Industry

Profits

Macroenvironment Analysis (Carol)

● Economic Forces○ Global economic slowdown

● Global Forces○ Acquisitions and expansions overseas

● Demographic Forces○ Nationwide spread of prescription drug abuse○ Baby Boomer Generation○ Social class- lower incomes

Macroenvironment Analysis (Carol)

● Technological Forces○ Online retailing○ Mail order prescriptions○ Advertising via internet

● Social Forces○ Overall greater health consciousness○ Green initiatives

● Political and Legal Forces○ Affordable Care Act○ Stringent Government regulations

Industry Attractiveness

Strategic Groups (Leah)

● Companies competing in the retail drug industry○ Walgreens, CVS, Rite Aid, Walmart, Target, Kroger, SAM’s Club

● Top 3 Include○ Walgreens

■ Apx. 8,081 locations○ CVS

■ Apx. 7,500 locations○ Rite Aid

■ Apx. 4,623 locations

Competitor Analysis (Leah)

●Walgreens:○ Convert stores into the Well Experience store format○ Store layout, pharmacy and healthcare operations, product selection○ Broader assortment of beauty brands○ Increase customer engagement

●CVS: ○ 15 years of loyalty card data○ Personalized advertising and promotions○ “Cluster concept” store format expand grocery, fresh foods, and faster checkout.

●Rite-Aid:○ Opened first wellness store concept in 2011○ “Genuine well-being” store format○ Operates 1,174 wellness stores

Value Chain Analysis (Brandon)Primary Activities

Value Chain Analysis Findings-PrimaryValue Chain Activity Value Adding, Neutral or Negative Impact on ValueResearch and Development-Positive

● Converted the cost of prescription drugs ● Implementing Wellness Centers

Production-Positive

● Offering loyalty programs to attract consumers ● Providing customers and patients with service

Marketing and Sales- Positive

● Walgreens Balance Rewards Card● Over 500 private brands sold to customers

Customer Service-Positive

● Bringing more value to customers and patients ● Operating full Wellness center in Flagship stores

Value Chain Analysis (Brandon)Support Activities

Value Chain Analysis Findings-SupportValue Chain Activity Value Adding, Neutral or Negative Impact on ValueMaterials Management-Positive

● Industry leader in freight supply chain● TAGG Logistics fulfills and distributes product to Walgreens

Human Resources-Negative

● Need for better training and development ● Persons with disabilities

Information Systems- Positive

● Online prescriptions filled; do not deliver pharmaceuticals● Ranked first amongst retailers

Company Infrastructure-Neutral

● Centralized infrastructure● “Open-door” policy● 3-part legal infrastructure

Efficiency:●Materials management●Real estate managementQuality:●Brand name recognition & loyalty●The Well Experience Innovation:●NetZero Initiative ●Private label brands and partnerships ●Walgreens 2.0 next-generation store technology systemCustomer Responsiveness:●Rewards program●Targeted discounts and promotions

Distinctive Competencies and Sustainable Competitive Advantages (Carol)

Financial Analysis (Shivam)Ratios Walgreens Industry

FY2009 FY2010 FY2011 FY2012 FY 2013 FY2009 FY2010 FY2011 FY2012 FY2013

Liquidity Ratios

Current Ratio 1.78 1.6 1.52 1.23 1.11 3.0 2.9 2.9 3.1 3.2

Quick Ratio 0.78 0.61 0.53 0.43 0.33 1.6 1.5 1.3 1.5 1.6

Leverage Ratios

Debt to Asset Ratio 0.43 .45 0.46 0.45 0.45 0.46 0.39 0.42 0.38 .36

Debt to Equity Ratio 0.74 0.82 0.85 0.83 0.81 0.47 0.42 0.47 0.42 .43

Activity Ratios

Inventory Turnover 9.33 9.14 8.98 10.17 9.37 13.5 13.7 13.7 13 13.8

Days Sales Outstanding 11.05 12.64 13.26 14.81 15.31 16.1 15.5 15 14.2 14.1

Profitability Ratios

Return on Total Assets 0.08 0.08 0.10 .06 .05 0.09 0.07 0.08 0.1 0.1

Return on Equity 0.14 .14 0.18 0.12 0.14 0.15 0.11 0.14 0.16 0.18

Results Analysis (Shivam)

● 2013 net sales of $72.2 billion

● Strong liquidity with consistently positive cash flows from operating income

● Repeatedly strong quarterly results and attractive growth

● Walgreens initiated several programs to reduce costs and improve operational efficiency

Results (Cont.) (Shivam)

Strengths (Erica)

●● Balance Rewards Loyalty Program● Private label product lines● Well Experience Model● Alliance Boots Acquisition● Experts in managing real estate● Alliance with Amerisource Bergan Corp. (ABC)

First mover in sustainable facilities

● Demand for affordable healthcare and drugs has created a loss in profit margins

● Revenue, Operating Profit & Net Profit decreased from 2011 to 2012

● Customer service training programs● Cost management and pricing strategy

Weaknesses (Erica)

Opportunities (Erica)

●Demographic -○ Americans over age 65 ○ 30 million uninsured Americans

●Sustainability - Expand Net Zero model

●Technological - ECommerce and Digital Channels

●Global - Expand into international markets

●Sociocultural - ○ Penetrate private label market○ Generic Drug trend increased○ Expand Well Experience Model

Threats (Dameon)

● Rivalry Among Competitors- Regional and national drugstore chains.

● Government Regulations- Vulnerable to changes.

● Economic- Global economic slowdown forecasts risk of slow down.

STRENGTHS●Walgreens Brand Recognition●Successful fully functional Net-Zero energy store●Balance Rewards Loyalty Program●Well Experience Model●Alliance Boots Acquisition●Expertise in managing real estate●Alliance with Amerisource Bergan Corp.●Successful high market share in private label product lines

WEAKNESSES●Recent push for affordable healthcare and drugs has created a loss in profit margins●Revenue, Operating Profit & Net Profit decreased from 2011 to 2012●Customer service training programs●Cost management and pricing strategy

OPPORTUNITIES●Expand Net-Zero energy stores ●Grow clinical healthcare divisions ●Market expansion into international markets●Diversify private label market●Implement “Well Experience” model throughout●Flagship stores; introduce in-store partnerships●E-Commerce●Emerging health care services- baby boomers & Protection and Affordable Care Act

THREATS●Highly competitive industry●CVS’s acquisition of Caremark●Recent changes in federal, state, and local regulations●E-Commerce●CVS no-cigarette sales policy

SWOT Chart (Xavier)

Business-Level Strategy (Xavier)

● Focus on the company’s strengths/competitive advantages, addressing threats and weaknesses

● Four Generic Strategies

● Cost Leadership● Focused Low Cost● Differentiation● Focused Differentiation

Business-Level Strategy Analysis Advantages (Erica)

Differentiation:●Creates a barrier to entry●Increases brand loyalty●Market Share●Balance Rewards Program●Wellness Program

Technology:●Single network●Drugstore.com

Business-Level Strategy Analysis Disadvantages (Dameon)

Need to Address Weaknesses:●Cost of Research and Development●Need for greater in-store convenience/layout

Difficulty in Price Differentiation:●Target Pharmacy●Lower Cost associated with Lower Profits

Key Strategic Issues (Xavier)

Walgreens has faced numerous strategic issues:

●The changing healthcare environment and reinventing the customer experience in stores

●Differentiation from competitors like CVS and Rite-Aid by creating a superior all-around convenience experience for consumers

●Walgreens will be “stepping out of the traditional drug store format and creating something unique, new and special"

Strategic Alternative #1 (Erica)

Differentiation from Competition

•Enhance Well Experience Model

◦ In-house Starbucks Cafe

◦ In-house Paul Mitchell

Strategic Alternative #2 (Leah)

Differentiation from Competitors (CVS, Rite Aid)

●Walgreens continues to implement the NetZero Green Initiative in stores

●Short term costs vs long term return

●Implement Net-zero equipment in existing stores

Strategic Decision Tree (Xavier)

Superior Convenience Differentiation Beauty/Starbucks

Partnership

Starbucks Partnership

Health/Beauty Partnerships

NetZero Initiative

Well Experience

New NetZero Stores Only

Global Store Changes

● High-End Beauty Market Penetration

○ Alienation of Low-Cost Consumers

● Attraction of New Market Segment Consumer

○ Conflict with Starbucks Partners

● Increased Market Share/Media

○ Confusion in Walgreens Culture/Alienation of Employees & Consumers

● Increased Market Share/Cost Savings

○ High-Cost Implementation● Low-Cost Restructure &

Positive Media○ Inconsistent Culture

Conclusions/Improvements (Shivam)

● 850 Well Experience stores

● Cost Leadership with generics

● Reposition as one-stop shop for

● High-End Superior Convenience

● Achieve our Vision