Business Strategy
Recent changes in the competitive landscape have caused Walgreens to shift its approach from their competitive advantage based on real estate and number of locations to a strategy that focuses on the Customer Experience.[8]
SWOT
Strength - Industry leader for retail pharmaceuticals, Large amount of store locations, History of excellence and reputation for quality service, Convenience of 24 hour stores, Long term agreement with medical distributor AmerisourceBergen to increase purchasing power.
Weaknesses - Competitive industry, Higher costs for many prescriptions
Opportunities - Take Care Clinics, Expansion internationally with Alliance Boots acquisition, Increased sales as baby boomer generation gets older
Threats - Increased focus on Pharmacy by big box retailers such as Walmart and Target, Growth of online script retailers, Government regulations.
Weaknesses - Competitive industry, Higher costs for many prescriptions
Opportunities - Take Care Clinics, Expansion internationally with Alliance Boots acquisition, Increased sales as baby boomer generation gets older
Threats - Increased focus on Pharmacy by big box retailers such as Walmart and Target, Growth of online script retailers, Government regulations.
Internal Analysis: VRIE
Valuable - Strategic Alliances. Walgreens announced in March a 10 year deal with medical distributor, AmericsourceBergen. This contractual alliance creates stronger purchasing power and combined creates the world's largest buyers of generic drugs. In addition, Walgreens has come to an agreement with European Pharmaceutical Retailer, Alliance Boots. The deal is a 3 year agreement, in which Walgreens buys 45% of the company this year with the option to purchase the remainder of ownership in 2015. This allows Walgreens to expand internationally and when finalized will create the largest international conglomerate of Retail Pharmaceutical. [9]
Rare - These alliances create unique, exclusive alliances.
Inimitable and Nonsubstitutable - Walgreens strategic alliances are such large scale that it would be hard to replicate by competitors, but not impossible.
Exploitable -Walgreens has seen a surge in stock prices in 2013, much due to speculation from what analysts believe will be the benefits from its strategic alliance moves. The company has increased leverage in buying power and distribution power that can be exploited for increased return in profits.
Rare - These alliances create unique, exclusive alliances.
Inimitable and Nonsubstitutable - Walgreens strategic alliances are such large scale that it would be hard to replicate by competitors, but not impossible.
Exploitable -Walgreens has seen a surge in stock prices in 2013, much due to speculation from what analysts believe will be the benefits from its strategic alliance moves. The company has increased leverage in buying power and distribution power that can be exploited for increased return in profits.
External Analysis: PESTEL
Political/Legal - The Affordable Health Care Act will bring about a larger clientele, who didn't have access to insurance previously. The act is expected to add 30 million newly insured persons to the market. This will bring great opportunities along with new challenges in informing customers of there options. Walgreens has taken proactive measures by combining with Blue Cross and Blue Shield to get information out about the new plans. Although Walgreens will benefit from increased customers, they will also be subjected to different reimbursement rates that may impact overall profits. [10]
Economic - Although prescription drugs are a fairly inelastic product, economic shifts still affect retail drugs. During economic downturn, customers resort more to generic drugs and finding cheaper alternatives than Walgreens. Fortunately, economic trends are again on the uprise and this is not a mjor concern for Walgreens in the current environment. [11]
Social - Baby Boomer generation contributing to increased market of health care patients. Not only do the sheer numbers of new patients expand the market, but the Baby Boomers generation also bring with it increased percentages of chronic disease and obesity, which in turn lead to more medications needed. [12]
Technological - The advancement of online retail has opened the door for new competition from third party suppliers, who provide prescriptions through mail order. Technological changes have changed the competitive landscape for retail pharmacy. [8]
Walgreens is looking to leverage technology inside its stores, by providing Pharmacists will iPads that will allow for better quality, more efficient service. The iPads will allow Pharmacists to quickly look up patient information and provides the flexibility for the Pharmacist to provide more personal service. This initiative shows the flexibility of the company to utilize technology to further advance its mission going forward. [13]
Environmental - Walgreens has recently debuted its first Net Zero Energy store in Evanston, IL. The store is completely energy self-sufficient using solar panels, wind turbines and geothermal energy. This is part of Walgreens continued green initiatives programs in effort to reduce the company's carbon footprint and provides the additional benefit of reduced operating costs. The store in Evanston plans to be a model for future Walgreens locations. [14]
Economic - Although prescription drugs are a fairly inelastic product, economic shifts still affect retail drugs. During economic downturn, customers resort more to generic drugs and finding cheaper alternatives than Walgreens. Fortunately, economic trends are again on the uprise and this is not a mjor concern for Walgreens in the current environment. [11]
Social - Baby Boomer generation contributing to increased market of health care patients. Not only do the sheer numbers of new patients expand the market, but the Baby Boomers generation also bring with it increased percentages of chronic disease and obesity, which in turn lead to more medications needed. [12]
Technological - The advancement of online retail has opened the door for new competition from third party suppliers, who provide prescriptions through mail order. Technological changes have changed the competitive landscape for retail pharmacy. [8]
Walgreens is looking to leverage technology inside its stores, by providing Pharmacists will iPads that will allow for better quality, more efficient service. The iPads will allow Pharmacists to quickly look up patient information and provides the flexibility for the Pharmacist to provide more personal service. This initiative shows the flexibility of the company to utilize technology to further advance its mission going forward. [13]
Environmental - Walgreens has recently debuted its first Net Zero Energy store in Evanston, IL. The store is completely energy self-sufficient using solar panels, wind turbines and geothermal energy. This is part of Walgreens continued green initiatives programs in effort to reduce the company's carbon footprint and provides the additional benefit of reduced operating costs. The store in Evanston plans to be a model for future Walgreens locations. [14]