Walgreens Co. Swot Analysis

Walgreens Company SWOT Analysis

Melanie Garces

MGT/521

July 16, 2012

Kirk Davis

Abstract

This paper will provide insight into the strengths, weaknesses, opportunities, and threats of the Walgreens Company, the nation's leading drugstore chain. The company's 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 company's 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 company's 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 Analysis

Overview

Walgreens is the nation's 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, Walgreens's sales were $72 billion, with earnings of $2.7 billion (a near 30% increase from FY2010).

The company's 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.

Strengths

Industry Leader. Walgreens's 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 company's 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, May's 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 York's 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.

Weaknesses

Pharmaceutical 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