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Case Study 8 FOSATEN Walgreens Walgreens Staying One Step Ahead Sgweeted wine side by Foogle compartir le CVS and on the other side by dymanic and change rating with partner.com parittelufound cough and ac some of how tooteid til and within a very crowded market please. Mowa Malax managed to stay competine and the donec interchange market RICHARD 1. LIVINEN You don't hope for surprises at the corner drugstore, an Ameri can staple since the nineteenth century. Today's customers expect Walgreen's habit of listening to customers, adding the prod a certain range of products, from vitamins to bandages to pre ucts and services they desired, and growing in a controlled pre scription medicines dictable manner paid handsomely and set a long-term strategy But Walgreens, one of the oldest players in the drugstore for Walgreens's growth for decades to come. In many states, the game, wants to redefine your image of the contemporary dinig name Walgreens became synonymous with the very image of the store. By broadening their portfolio to include the counseling of comer drugstore. genetic and long term diseases, seiling health insurance, and According tom Collins, an author who profiled blue-chip even installing EV (electric vehicle) charging stations outside hun companies in his 2001 best-seller Good to Great, if you invested dreds of their stores, Walgreens is betting that consumers will like in Walgreens at the end of 1975, in 2000 your returns would have the range of expanded services beat the stock market by more than fifteen time, Coca-Cola Co. by almost eight times, and General Electric Co. by almost five times. He praised the company for adhering with fanatical con Evading the Competition sistency to strategy of convenience! its been a whirlwind year for the 111-year-old drugstore chain. It John Pauza, a twenty-three year Walgreens vet and former lost critical negotiations with Express Serpts, one of the oldest head of os investor relation department concured. The company pharmacy benefit managers in the US acquired Drugstore.com "terrific formula" matched constant, 5% annual expansion with a filled 25% of prescriptions via their mobile app, and added district eye for cost containment. But in the mid 2000s, they got so ease counseling and health insurance sales to its growing roter enamored of growth that they lost wght of the expense line. of services Walgreens thrived by steadily doing the US. map with new Like a profighter Walgreens is learning how to duck a storesBut once they reached saturation in a number of keymar punch while going in for the uppercut it's an aggressive game kets, even after buying NYC drugstore chain Duane Reade, the of car and mouse that Walgreens and competitors CVS play. company was forced to redefine how it could continue to expand each trying to crowd the other out of profitable marketplace woo new and vital collaborators, or be the first to host a new The "New" Corner Drugstore product or service Unfortunately for Walgreens, in an increasingly complex medical "They've had a lot of other retailers get into the space regulatory environment, the business of filing prescriptions isn't and their competitors have expanded into other spaces, too, as simple as it used to be. And though the company never lost said David Magee, an analyst at Atlanta-based SunTrust Rob sight of its contumes focused vrategy of convenience and one- inson Humphrey "They were lagging, now they te shaking stop shopping, price now matters more than anything to many things up." shoppers, who find that sometimes the comer drugstore isn't the Walgreens CEO Gregory Wesson agrees, telling shareholders only option worth considering that Walgreens is moving beyond the traditional drugstore format Two additional factors made business challenging for Wal- to create something unique, new, and special greens in recent years. First increased competition: While the company was once the clear retail pharmaceutical leader, Wal-Mart fundamentally changed the game in 2006 when it Steady Growth, Unsteady Future introduced 54 rellson generic prescriptions. Only two years Charles R. Walgreen, Sr. opened his first store on the south of later, CVS dramatically multiplied its number of stores when Chicago in 1901. He purchased the dusty, dimly lit store of a lit beat out Walgreens with a fast-minute $2.9 billion bid for former employer and set about making it one of Chicago's most Longs Drugs successful drugstores by thinking carefully about what cus The second squeeze came from increasingly tight nego tomars wanted and couldn't find at the time in competing tlations with pharmacy benefit managers (PBM)-third-party stores. He slowly expanded the store's product line, adding hot organizations that contract with pharmacies and negotiate food to augment the standard ice cream and soda fountain of discounts and rebates with drug manufacturers. As of today, ferings in 1910, and introducing the malted milkshake in 1920 roughly half of all Americans receive drug benefits adminis C-16 tered by PMs, which handle about 70% of all prescriptions? think they were sold a bill of goods. John Palisad Walgreens created its own PPM. Walgreens Health Initiative, "They paid a lot of money for an unsuccessful company in 1995, but the business never achieved enough success to justify its existence Looking Forward Increasingly reliant on PM to drive prescription sales. Despite this Wil performed spectably focal you Walgreens found itself an unproductive negotiations last year 2011: it posted $72.2 billion in sales. 520.5 billion in gross profit with Express Scripts, one of the largest PBMs. When talks fell and $3.6 billion in cash flow from operations apart, Walgreens stood to lose up to $53 billion in prescnp. And despite ever tighter competition, Welgron s posed to tion sales. profit from 76 million aging baby boomers who are increasing reliant on prescription drugs, along with the 36 million Americans A New Chapter who may get access to health care when reforms are enacted in Luckily, CEO Gregory Wasson had been focused for years on depended on prescriptions for the better portion of its proft 2014. This makes sense considering that Walgreens has fong de defining Walgreens, and he brought a sweeping set of changes it filled 778 million prescription last year, up from 651 milioni to the company in 2011 the year before First. Waston got Walgreens out of failing lines of beinete, which included spinning of a PM to Catalyst Health Solutions toom, offering early retirement to old-timers and miting outsid In addition, Wasson continues to freshen up the executive Inc for $525 million ors Into key top management spots, a move previously unheard "They made a very public sale of it really just to kind of sub of in a company that prided itself on promoting from within it in CVS's face." said Jet Jonas, analyst at Gabelli & Co. "The launch of CVS PBM was patched as this big transformational the store managers, the district managers, the regional buy According to John Palizza, Walgreens successes in whether thing, but Walgreens wanted to point out that the PBM business into this transformation is pretty rocky and not what they do." Meredith Adler, an analyst at Barclays Capital agrees No Next, Wassion is keen to deliver customers whatever they want from Walgreena strategy dubbed customer centric retailing Now they're getting some fresh one had opened the windows there for way too long." she said One phase involves store makeovers that add food, beer, wine. and liquor, eliminate unpopular producte, and expand the beauty aisles. More than 4,000 stores have been remodeled at a cost of approximately 545,000 each Discussion Questions And after introducing Walgreen app for the iOS and Android platforms, the company soon found consumers using the apps to 1. What planning objectives and goals can you identity Submit 25% of all prescription refills Using the apps, customers CEO Gregory son's plans to revitalice Walgren can select store pickup locations as well as the date and time of 2. What benchmarscan Warns to measures pickup, they can also receive SMS alerts when their prescriptions ces and control progress in its puniuit of these plan? are ready The company is also creating a clever niche for itself by ap. Problem Solving pealing to customers' arvonmental sensibilities. "A green drugstore consumers might ask "Why not?" Starting in 2007, You've got a great assignment to serve as speciala Walgreens began installing rooftop solar paneis on many of its sistant to Walgreen's CEO daring a summer toship stores, looking to complete one hundred thirty installations by But the first task you signed a bit daunting. The the end of last year with fifty three installations in Ohio, Wal. CEO says "You're my conscience Ydre going to be greens is one of the largest solar power users in the state. The present for every decision make I want you to be critical rooftop panels typically offset 15-20% of stone's energy con and make sure my decisions and plans stay on track Be sumption. In addition, the company debuted its first EV elec ready to speak out and defend yourself. What planning tric vehicle charging station in an Orlando, Florida, location in errors will you be watching for? What planning techniques October 2011. Earlier that year Walgreens announced that it will you be ready to recommend if the CEO seems to be hoped to have up to 800 EV Charging stations installed outside straying of course stores by the end of the year And then there was acquisition of Drugstore.com, which Further Research it purchased last March for $429 milion. With new access to three milion customers and over 60.000 health and beauty products, this Imagine that you have been retained by Walgreens CEO acquisition pushes the company another notch shead of CVs and Gregory Winson at a scenario pilarning consultant Re into more direct competition with Wal-Mart and Target search what is happening to describe three possible long But analysts are for over the value of this purchase. In thin Tarm sonarios in which Wilgreens could face women teen years. Drugstore.com never posted a full year profit, despite til, competitive and trage challenges Explain from being purchased at a 113% premium on its stock price. And it where Walgreens that merge possible wasses doesn't even have prescription drug business to bring Walgreens these threats explot, and strength Wilcandran having sold off that line 2010 pon to counter the challenge C-17