Walgreens Co. Swot AnalysisEssay Preview: Walgreens Co. Swot AnalysisReport this essayWalgreens Company SWOT AnalysisMelanie GarcesMGT/521July 16, 2012Kirk DavisAbstractThis paper will provide insight into the strengths, weaknesses, opportunities, and threats of the Walgreens Company, the nations leading drugstore chain. The companys key stakeholders – customers, employees and the community are also identified and an explanation provided as to how the company is satisfying the needs and wants of each stakeholder type. This paper analyzes the strengths of the company as the industry leader with its wide portfolio of products and services, as well as establishing the benchmark for growth through acquisitions. The companys weaknesses include prescription errors resulting in death and being unable to keep pace with a price competitive structure against large discounters. Walgreens is positioned to capitalize on the growing e-prescription demand and benefit from the recent health care reform policies. The companys decision to severe its relationship with Express Scripts, Inc. has negatively impacted customer count resulting in a top line revenue decrease. Finally, this paper will conclude with my decision as a mutual fund manager to invest in Walgreens.
Walgreens Co. SWOT AnalysisOverviewWalgreens is the nations largest chain of pharmacy and food retailers and leads the chain drugstore industry in both sales and profit. It currently owns and operates 8,307 locations in the U.S., District of Columbia and Puerto Rico. In the fiscal year 2011, Walgreenss sales were $72 billion, with earnings of $2.7 billion (a near 30% increase from FY2010).
The companys mission is 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. (Walgreens Co., 2012) Over six million customers visit the stores on a daily basis and 819 million prescriptions were filled in fiscal 2011. With 247,000 employees and approximately 18,000 items available in each store, Walgreens remains among the fastest growing retailers in the country.
Founded in 1901, Walgreens provides the most convenient access to consumer goods and services and pharmacy, health and wellness services, in America. (Walgreens Co., 2012) Many of its innovations including, but not limited to, computerized, connected pharmacies, drive-thru pharmacies, one-hour photo-finishing, expanded convenience food-and-drink sections; Express Pay and prescription label instructions have become standards in the industry.
StrengthsIndustry Leader. Walgreenss greatest strength is their market position as an industry leader. Approximately 75% of the U.S. population lives within a five mile radius of a Walgreens store. An extensive store network increases the companys accessibility to its customers and allows for the opportunity to leverage its footprint giving it a competitive advantage versus its competitors. The focus on delivering exceptional value and service, fueled by the culture of operational excellence and innovation, produced record profits, the strongest increase in net income in a decade and the largest growth in earnings per share in more than 15 years. (Wasson, 2011)
Gaining Strength through Acquisition. Walgreens has focused its efforts on acquisitions over the past few years. This year, Walgreens has entered into an agreement with Alliance Boots to invest $6.7 million in stock and cash in exchange for a 45% equity ownership stake in Alliance Boots. Alliance Boots is the leading international pharmacy-led health and beauty group in Europe and is similar to Walgreens in terms of iconic branding, complementary geographic footprints, shared values and a heritage of trusted healthcare services. Walgreens also entered into an agreement this year to purchase a regional drugstore chain in the mid-South region of the United States from Stephen L. LaFrance Holdings, Inc. The transaction includes 144 stores currently operated under the USA Drug, Super D Drug, Mays Drug, Med-X and Drug Warehouse stores located in Arkansas, Kansas, Mississippi, Missouri, New Jersey, Oklahoma and Tennessee. The acquisition also includes corporate offices, a distribution center located in Pine Bluff, Ark., and a wholesale and private brand business. In fiscal 2011, the company completed its acquisition of drugstore.com, extending its multichannel reach to an additional three million online customers, forgoing relationships with new vendors and partners and adding approximately 60,000 health, personal care and beauty products to its online offerings. (Wasson, 2011) In 2010, Walgreens completed its acquisition of Duane Reade Holdings, Inc., a large drugstore chain in New York. With one big purchase, Walgreens has become New Yorks biggest player on many blocks, adding 258 metro-area stores to its portfolio. (Ritter, 2010)
Wide Portfolio of Pharmacy and Health-Related Services. Walgreens offers an extensive range of pharmacy and health care related services that complement each other. The company offers pharmacy benefit, home medical equipment, specialty pharmacy, infusion and respiratory, mail service pharmacy, on-site pharmacy, and community pharmacy services. It serves businesses and organizations, managed care organizations, hospitals and care facilities, healthcare professionals, employers, unions, brokers, and educational facilities, as well as the public sector.
WeaknessesPharmaceutical Errors Resulting in Death. Since 2006, Walgreens has faced multiple lawsuits resulting in deaths as a result of prescription error. These errors consisted of incorrect label instruction, filling the wrong medication, improper dosage, and lack of counseling from the pharmacist. Although errors occur in a tiny fraction of the hundreds of millions of prescriptions filled each year in the U.S. this number is a growing concern. Analysts believe the problem can be attributed to the steady increase in the number of prescriptions filled annually, combined with a steady decline in the number of pharmacists. Pharmacies attempt to solve this problem by hiring pharmacy technicians–who are easier to find and earn less–instead of licensed pharmacists. The problem is that these technicians have not received nearly the level of training required to be a licensed pharmacist. Prescription medication
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The generic drug industry is a large, global business that is highly competitive. Many of its sales occur domestically. The largest drugs are manufactured in Asia, the Middle East, and Latin America, where there is little regulation of price and quality. These large global drug production firms tend to operate on profit margins, which are based on market share. An estimated $300 billion is allocated to pharmaceutical firms to make sure that American medicine is free of errors. In many markets that are a bit competitive, the pharmaceutical companies often have to pay significant fees for products from the same manufacturer so that the product can be approved for the market. A lot of the mislabeling, however, will be avoided with an appropriate training program and by doing research and certifying the drugs to the appropriate safety and effectiveness levels. As more and more false warnings are issued to consumers, the risk that it will be mistakenly used as a safety or other product (or more accurately, a pharmaceutical drug) is much greater. The problem, however, is that the false warnings and fraudulent prescriptions, while not harmful to health, will continue to increase the number of mislabeling to make it more likely that American medical doctors will misread or mislabel those prescribing a new or improved medication at low cost. These mislabeling problems can also increase the spread of counterfeit drugs, making it harder to verify a safety or efficacy. To remedy the problem of widespread misrepresentations of safety and effectiveness at the pump for a given brand of medicine, pharmacies have begun to install systems that ensure that safety information regarding new and improved medicines is displayed in a timely manner. While many studies have shown that when a change in name is used, the changes can increase side effects and cost over time. When a new name is given such as “Naloxone”, the price of the brand is reduced significantly. This is the only way pharmacists could be willing to make an informed decision about the safety or effectiveness of their new brand. The FDA has also introduced a comprehensive system for educating American patients about the dangers of prescription medication and has launched a national network of public education programs and has taken steps to make its website even more user-friendly.
Manufacturers of generic medicines are not the only problems faced by consumers. Some pharmaceutical companies have been forced under false marketing and false regulations to provide products without safety or effectiveness information. These regulations create and maintain significant barriers to American consumers going for the most effective prescription medicines when they get serious medical problems. This is particularly worrisome for patients with diabetes, hypertension, and asthma.
It is very important that American health experts do not become complacent or complacent about these health problems, and provide their readers with a more effective and balanced health care resource to aid health and support their families.
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