Business Plan Acquiring firm: Walgreens

Business Plan Acquiring firm: Walgreens

Introduction:

Walgreen is born or started nears Galesburg. He at age of 16 has experienced the first drug store, which was positive one. The commitment of company is related to diversity as this is built upon a century old tradition related to honesty, fairness and trust.  The products of company are based on beauty, personal cares, treatment and medicine. Furthermore, the company provides vitamins and supplements, households, grocery as well as baby, kids, toys, sexual wellness and diet according to seasons (walgreens.com/, 2015). The nation largest drugstore chains are based on retails pharmacy USA divisions of Walgreen Boots Alliance. This is considered as first’s pharmacy directed health and well being enterprise. More than eight million customers are directly show dependency on Walgreen company across America through convenience. The company has presence in 50 states by operating 8240 stores. The company manages more than 400s healthcare clinics and practice provider around country. In short, the company is drug store provider in medicine industry. Today, the big giant chains in US are CVS and Walgreens. These two companies control at least half of drug stores market share in every city of US. Walgreens is acknowledged for its more than 27000 community pharmacies. This no doubt, play an important role as this is considered more accessible health care’s providers in the community. This also support the preventing and chronics care as for more than 8 million customers interacts with Walgreen on daily basis. Walgreen show dependency on relationships with patients in more than 8200 locations. The company management works closely with local providers and health care systems for the provision of range of services. This remains helpful for the improvement of health of communities as these are served nationwide. For the sake of prevention services, related to specialized counseling’s and supports as this manage the s complex conditions. Walgreen pharmacists serve as patients as this advocates further Walgreens purposes related to champions of everyone right based on happiness and health (news.walgreens.com, 2015).

  1. Industry/market definition:

Industry/market in terms of:

  1. Size:

The company is running business in retail industry.  There are 723119 employees in industry and it conducts the business up to the 25, 834 (ibisworld.com/, 2015).

  1.  Growth rate:

The annual growth of market is 1.3% and revenue is $ 263bn. The Composite Value of industry is 1047.9. Furthermore, today change is +0.73% (Drug Stores, 2015).

  1. Product offering:

The industry products are branded generic drugs, branded prescription drugs, personal health supplies, generic drugs, vitamins, minerals, dietary supplements; whereas some of industry activities are s preparation and selling prescription and non prescription medicines and drugs. Furthermore, the industry management focuses on retailing basic consumable goods, sell miscellaneous items such as magazines, refreshments and cosmetics. The most important activity is advising customers on utilize of over counter and prescription drugs.

  1. Other relevant characteristics:

The retail industry is having two main resources specially the pharmacies which is main sources of revenue. These resources are:

  • Spread between the  reimbursements  through the payer as third party  as this include net cost of acquire the drug
  • Fixed fee per prescription is known as dispensing fee

The current equation is similar to the non-insurance customers as this related to spread of higher due to non-bargaining position of non-insured customers. The source of revenue is having different dimensions such as:

  • Spread of amount through plan sponsors and reimburse amount for pharmacies
  • The rebates spread which is received through manufacturers for the drug placement  related to formulator and plan sponsorship
  • Mail-order revenue and special pharmacy operations
  • Fee related to administration

Walgreens buy Rite Aid:

The company in the industry is getting bigger and therefore, the company has announced the  deal  based on buying competitors Rite Aid which is about more than $ 9 billion.  This deal is crack after few days when the CVS largest competitors of company have acquired the Target Pharmacy business. Walgreen merged with the European drug chain Alliance Boots as well.  The folks are surrounded related to get bigger share through  Affordable care act.  Therefore, there is more competition for low cost prescription drugs. Therefore, based on cost competition, the chains of pharmacy are consolidating. It is fact that the bigger companies get bigger discounts through people as they are purchasing through it. Therefore, it is negotiable to deal better for prescription reimbursements. Through the federal regulations, the mergers are between the Walgreens and Rite Aid, which close scrutiny. The desire is based on maintaining competition in market place. Some of stores also sell in certain markets by the Walgreen Company. Through industry research, it is reveal and predicted that the Wal-Mart might be next chain for acquisition consideration (Safo, 2015).

  1. External analysis:
  2. “Modified Porter framework”

Walgreen operates in several industries through the retail pharmacy, health services, health and wellness division.  In the retail pharmacy, the company focuses on the brick and mortar pharmacy, over counter drug store, convenience store, and healthcare provider. Approximately, 95% of location of company is through drugstore whereas 65 % is through sales, which is come through prescription of drugs.  The following is porter five forces analysis of Walgreen Company.

  1. Internal rivalry:

Walgreens company is operating within retails pharmacy industry as this is featured and dependent of  heavy on prescriptions drug sales through the continue revenues. This also offers customers basic consumer goods. The retail industry is having two gorillas such as CVS and Walgreens. Both of the companies in industry are having 7000 pharmacy stores. Other of the stores is counts on prescription drugs through 655 of revenues. The competition between these two giants is aggressive and direct. Walgreens get instruction based on transition of their accounts and show behavior as Express scripts customers. The company also works to acquire for market share.  The company has several advantages as compared to the other companies in industries such as; CVS Caremark, Medcohealth Solutions, Express Scripts and Safeway Inc.  Walgreen company is enjoying better credit ratings such as A. due to this, the business owner  is comparatively more willing as this give lease to the  company as compared to the competitors in industry. This also cut down cost of company borrowing. The company also operates traditionally in better locations through superior store management. This enhances results related to historic high profits per square foot. Walgreens is really a comparable giant in industry which shows moves in slight different strategic direction.  The company shows focus on primarily pharmacy sales.  The company has sold PBM divisions and purchased drugstore and through this initiatives, the company remain nation largest pharmacy services provider.

  1. Exists and entry:

It is fact that the company is positioned as giant on pharmacy industry and there is still plenty of room for the few of small competitors in the industry. The feasible thing for new competitions in the industry is based on brick and mortar prescription drug business. In addition to this, the small companies are focusing on 15% of market room. NCPA is representing 23000 of independent pharmacies in United States. The pharmacies are operated on profitable basis. The product breakdown is only differences between these independent stores and industry giant. The prescription sales make up is through 65 percent revenues through large retail chains, which are through over counter and general merchandise in member pharmacies. According to the 2009 statistics, the independent small pharmacies enjoyed competition with in competitive industry.

On logistics basis, the creation of independent pharmacy is considered as simple process.  The requirement of process is based on small store front, license and pharmacist as well as convenient location as there is existence of small local pharmacies as this become competitive threat.  

When there is consideration of the  big boxes such as Wal-Mart open a section pharmacy section in existing locations through relative little overhead. In addition to this, the pharmacy is considered as small part of industry business therefore, the big boxes show willingness to earn negative margins in division of pharmacy. This is for sake of increase traffic in stores parts. This is considered as ongoing issue because this is for filling massive spaces and one stop shop. This is based on exclusive competitors who are focusing on market share and their entry in the industry can intensifies the competition.

In retail pharmacy, the entrant seeks for mimic Walgreens large type chain faces monumental task through the establishment of new brands to rent and operates huge spaces. Through this, the company try to saturated market through pharmacy specific locations such as Rite Aid. So, the threat of robust specific competitors is low.  The company competes with convenience stores as well and through supermarkets by selling non-drug goods. The entry cost is considered low with help of new store and new chains of stores. The overhead is generally little, minimal staffing demands as well as lack of regulations. The Walgreens show little chances of transformation through different business sections for sustaining in above market with profit as new entrants can show capability to reduce margin.  

  1. Substitutions;

 The pressing and dangerous thing for the Walgreen in the industry is substitution to the business model of Walgreen Company. The company faces more competition and reimbursement pressure currently as compared to past. For pushing down prices of products, the PBM are utilizing the bargaining power for pharmacies. Furthermore, this is for encouraging the customers to switch their mail orders. The modern consumers are showing continuity, which is in favor of convenience, and bring cost advantage of online shopping.  This includes the books, clothing and most important electronics. The consumers are having a mindset related to extra travel and requirement of time to pick prescription. Therefore, the online ordering is an alternative for those customers. For the current business model, this is considered as threat. This threat is also exacerbated through recent FTC approval. This approval is based on Express Scripts-Medco merger. Through this, 2 big mail order pharmacies approach under one roof.

  1. Supplier power:

Several prescribed drugs are available under one roof as the pharmaceutical giant holds more patents. Through definition, there is monopoly as  this lead to enormous supplier power. This is also shown in status in quo in pharmaceuticals for some time. The companies are facing troubles through negotiating powers, which remain against the company. This situation is specifically against company when public pressure is against perceived differentials related to access and different prices as this remain significant. In industry, the companies need to earn back a highs fixed cost related to R & D through sale of drugs in Unites States. The major source in industry is Walgreen based on prescription drugs. The company is having bargaining power against the suppliers. In addition to this, the reduction of pharmacticals innovation will also decrease through new proportion, patented drugs in market, as the existing generics will assume more dominant role. There is reduction in supplier power which is advantage to Walgreen.

  1. Buyers power:

 The individual consumers are having minor’s buyer power; these individuals are public and private insurance plans as PBMs is also significant for buyer power. Through this, it become more challenging as Government put costs cutting pressure on health care industry.

  • The retail sector of drug is experiencing the  increase consolidation as this boost rivalry
  • In industry, there is large number of potential buyers
  •  The plans  of Government are account for 10% of players as this related to boost of rivalry
  • Furthermore, the buyers are facing negligible switching costs

The landscape of PBM is changing as this shows uncertainty. The insurance plans of public are uncertain; however, these are centralized. The Medicare and Medicaid enhance large portions of insurance buyers, the government is all for prices. The Medi-Cal insurance program is having reimbursement rate about 10%. Judge through implications of medical care blocks this action.

Porter determines industry cash flow and profitability. The government has to make the cutbacks and take some toll on Walgreens as well as to other pharmacies.

  1. Internal analysis:
  2. Strengths of company:

The position of company in the retail market is its biggest strength.  On daily basis, the company fills about 250 prescriptions as compared to the average hundred prescriptions which are filled by the independent pharmacy the company has founded itself as trusted brand in the country.

 The company show strong market performance and show considerable growth. When considering 2005,s the sales of company are about $ 47.4 which shows a 12.55 increase over year. After every 19 hours, the company opens a new store. The name of company is carrying considerable brand equity.  The company offer drive thru services in 805 of its stores whereas 30% of company stores provide 24 hours services.  Furthermore, the company provides one stop shop to its customers, which is not just limited to the prescription of drugs; instead of it is helpful for other products in business model of company. The company is also having competitive advantage related to locations. It is fact company select locations carefully and expands through acquisition to utilize existing running locations. The stores of company are at stand alone locations as this allows the company to easily expand into 24 hour in current years. The Walgreens show commitments to leading way of innovation and technology. The company show focus on development and utilization of technology as this is making business effective and serves for customers in better format.

  1. Weaknesses of company:

Walgreens is currently market leader.  The company great weakness is related to inability as setting of itself through competitors related to prices. The recent announcement is based on Wal-Mart through month supply as generic prescription drugs through $ 4, which is matched with Target. Walgreen is low cost leaders in industry as there is sever competition through discounters. This show willingness as this related to acceptance lower margins related to prescription drugs through lost profit in other categories. The company has chosen strategy to not beat and compete because of prices. Company show failure related to use its major benefit over retailers as this ability to give conveniences to customers.  The health care products are not visible as this located towards the rear store. Therefore, pharmacy is located in corner of every door.  Furthermore, layout and design is directly contradicted these goals. Walgreens show attempt for encourage impulse buying through creation of deep loop as it is core pharmacy and health care items.  The company has direct competition in industry with CVS. The company has 5461 stores whereas CVS has 6163 stores. The online sales show account for small percentages related to the whole prescription drug sales. This enhances category which is continuing to grow as this is becoming more important through Walgreens for gaining market share (dghonline.org, 2012).

  1. External analysis:
  2. Opportunities:

Walgreens is having opportunities related to increase of sales as this changes composition of America population. The company expects 30% increase related to demand for prescription through customers aged 65 and next few years. Walgreen show 305 prescription and 42% sales revenue which is came through the older Americans. The Medicare plans changes have brought benefits to Walgreens through making prices Medicare participants. This pays same as no matter where the customers are shopping.  The dramatic increase is related to number of older American as this provides Walgreen show increase demands for prescription. There is potential increase of sales and revenue. The demand of prescription drug is also increased due to the increase of Government insurance plans. The percentage of prescription drugs is also increased through new drug choices and availability of generic substitutes. The market of Unites States has become saturated; therefore, the company should focus on international markets. There is need to increase average purchase up to 2%; through this, there will be increase in sales (newsroom, 2014).

  1. Threats:

The biggest threat for the company is come through intertype competitors. The company has to compete against the local pharmacies and small drug stores. The company is having disadvantage related to Target and Wal-Mart companies as these retailers are carrying board assortment through SKUs, which is typical in several stores on weekly basis, millions of customers are visiting Wal-Mart and find it alluring to fill prescriptions in stores. The rely of company is on high controlled and regulated entity.  This step makes the company vulnerable to changes related to regulations and government laws. In addition to this, the raise health care costs in general is become political topics through this, there is a push for the health care reforms as this cause patients to look for the low costs alternatives which lead them towards outside of traditional retail outlet. The company also faces the issues related to chronic shortage of pharmacists.

  1. Business mission/vision statement:
  2. Mission statement:

The mission statement of company is;

Walgreens mission is to be America’s most-loved pharmacy-led health, well-being and beauty retailer. Its purpose is to champion everyone’s right to be happy and healthy (walgreens.com, 2014)

  1. Vision statement:

The vision of Walgreen company is;

To be America’s most loved pharmacy-led health, wellbeing and beauty retailer (news.walgreens.com, 2015).

  1. Industry/market needs:

The market needs are based on the provision of suitable pharmaceutical  products and drug to customers. The industry is running business for the health, care and wellness of customers.   Therefore, the company provides the flu shots, basic health testing and other vaccines in a convenient setting (innosight.com, 2014).

  1.  Targeted customers:

 The target customers of company are other pharmaceutical and retail store companies, which are smaller, but they are helpful to increase business of company as every drug and product is available in Walgreens stores. The other second targeted population of company is  old aging population of United States. It is fact that today baby boomer targeted population of company will be turn into 65 aging population in future (Abarrett2, 2013).

  1. Resources or capabilities to satisfy targeted customer needs:

The company utilize the one stop shop strategy to fulfill the desires of customers. Furthermore, the company locations of stores always remain helpful to satisfy targeted customers. The customer’s needs are also satisfied through clinic provision and other non drug section opening in business model of company. The company is also famous in terms of availability of products and 24 hours services. In addition to this, a new mobile app of company such as Widgets bring contextual and timely message on home screen which engage customers in quick and possible manner (Tode, 2015).

Bibliography

Drug Stores. (2015). Retrieved december 2, 2015, from http://finance.yahoo.com/echarts?s=^YHOh838&t=1d#{“range”:”1d”,”allowChartStacking”:true}

Abarrett2. (2013). Walgreens Target Market. Retrieved december 2, 2015, from https://storify.com/Abarrett2/walgreens-target-market

dghonline.org. (2012). Review of U.S. Health Care Law from a Human Rights Perspective. Retrieved december 2, 2015, from http://www.dghonline.org/content/health-care-reform-us

ibisworld.com/. (2015). Pharmacies & Drug Stores in the US: Market Research Report. Retrieved december 2, 2015, from http://www.ibisworld.com/industry/default.aspx?indid=1054

innosight.com. (2014). How can you transform to achieve a wider company mission? Retrieved december 2, 2015, from http://www.innosight.com/impact-stories/walgreens-case-study.cfm

news.walgreens.com. (2015). Vision. Retrieved december 2, 2015, from http://news.walgreens.com/fact-sheets/vision.htm

news.walgreens.com. (2015). Walgreens Recognizes its 27,000 Pharmacists as Industry Celebrates American Pharmacists Month. Retrieved december 2, 2015, from http://news.walgreens.com/press-releases/general-news/walgreens-recognizes-its-27000-pharmacists-as-industry-celebrates-american-pharmacists-month.htm

newsroom. (2014). Walgreens Outlines Growth Opportunities and Strategy at 2014 Annual Shareholders Meeting. Retrieved december 2, 2015, from http://news.walgreens.com/press-releases/general-news/walgreens-outlines-growth-opportunities-and-strategy-at-2014-annual-shareholders-meeting.htm

Safo, N. (2015). Walgreens buys Rite Aid as industry consolidates. Retrieved december 2, 2015, from http://www.marketplace.org/2015/10/28/business/walgreens-buys-rite-aid-industry-consolidates

Tode, C. (2015). Walgreens’ new app anticipates users’ needs with intelligent messaging. Retrieved december 2, 2015, from http://www.mobilecommercedaily.com/walgreens-new-app-anticipates-users-needs-with-intelligent-messaging

walgreens.com. (2014). About Walgreens. Retrieved december 2, 2015, from http://news.walgreens.com/fact-sheets/about-walgreens.htm

walgreens.com/. (2015). Company Information. Retrieved december 2, 2015, from http://www.walgreens.com/topic/about/company.js

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