Building Blocks of Competitive Advantage

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Ani Abrahamyan Cherie Reeves Daeus Brown Frank
Orellana Michael Dedal
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Company History

• Founded in 1901 by Charles Walgreen
• 1927 Walgreen stock went public
• 1946 Acquired Mexican retailer Sanborns
• 1968 First to use child resistant containers
• 1975 Reached 1 billion in sales
• 1981 First Intercom computers installed
• 1982 Next-day photo available chainwide
• 1999 Walgreens.com was launched
• 2007 Acquired Take Care Health Systems

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Corporate Strategies

• Organic Store Growth
• Increase market share through innovation and
  execution
• Leverage the benefits of scale
• Healthcare offerings beyond traditional pharmacy
• Attracting and retaining top talent

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Company Overview

• Industry
• Drug Retail
• Competition CVS, Rite Aid, Longs
• Corporate Info
• Employ over 226,000 people
• Operate 6,000 stores in 49 countries
• Serve 4.7 million customers a day
• Expect to have 7,000 stores by 2010

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Stock Price Over Last 14 Years
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Jeffrey Rein

• CEO since July 2006
• Began as Assistant Manager
• Degrees in Accounting Pharmacy
• Cash Compensation 883,333
• Bonus 500,000
• Stock Options 6.3 million

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Macro environment

• Aging Population
• Generic Drugs
• Political Health Care Issues
• War in Iraq
• High gas prices
• Sub prime mortgage collapse

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SWOT Analysis
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Porters 5 Forces

• Threat of New Entrants Moderate
• Threat of Substitutes Low
• Bargaining Power of Buyers High
• Industry Rivalry High
• Bargaining Power of Suppliers Low

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Building Blocks of Competitive Advantage

• Efficiency
• Quality
• Innovation
• Responsiveness to Customers

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EFFICIENCY

• 1. SIMS - Store-Level Inventory Management
  Systems
• tracks inventory levels
• 2. Intercom Plus
• - Allows pharmacists to spend more time
  addressing customers questions

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QUALITY

• 25,000 products offered in Walgreens stores
• Majority of pharmacies operate 24 hours
• User-Friendly website, which is also available to
  navigate in Spanish

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INNOVATION

• Walgreens has set some standards in the modern
  pharmacy business through its Innovations.

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INNOVATION

• Computerized pharmacies that are connected to
  each other nationwide
• Drive-thru Pharmacies - 80 of the stores
• Intercom Plus
• Windows based system
• Organizes pharmacy operations in a more efficient
  manner

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INNOVATION(Continued)

• Large letter prescription instructions -
  introduced in 2004
• Touch Tone Prefills - allows prescriptions to
  be refilled on the phone or online

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RESPONSIVENESS TO CUSTOMERS

• Walgreens Specialty Pharmacy - specializes in
  complex decease management medications (HIV/AIDS,
  cancer, etc.)
• Take Care Health System
• Vaccine Supplies during a shortage
• Emphatic approach the customers problems

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Take Care Home Health Systems

• A wholly-owned subsidiary located inside
  Walgreens
• No appointment necessary to get medication
  attention
• Open 7 days a week
• Costs 60-80 if no insurance coverage

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Flu Vaccines

• The Co. ran Flu Vaccine program between October 2
  to November 7, 2006
• Private practices experienced shortage of
  supplies
• Walgreens was able to deal directly with the
  manufacturers

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Empathy towards Customers

• Managers encourage employees to go beyond
  customer service and show empathy to patients and
  customers
• Employees have recounted stories when this
  practice has been a success

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Competitive Advantage in its industry

• Prescription and non- prescription drugs
• Competitive Advantage over its competitors
• CVS
• Rite-Aid
• Wal-Mart
• Positive earnings for the past 33 consecutive
  years
• Four levels of generic building blocks
• Innovation
• Quality
• Efficiency
• Responsiveness to Customers

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Revenue for the past 3 years
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Distinctive Competencies

• Innovate its services
• Ability to hire great employees
• Low employee turnover
• Real estate locations for Walgreens

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External Stakeholders

• Customers
• Customer Service, reliability and efficiency
• Suppliers
• Diversification, reliable distribution channels,
  and technology
• Surrounding community
• Community Service
• Fundraisers

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Internal Stakeholders

• Shareholders
• Dividends
• Financial Interest
• Employees
• Work Atmosphere
• Career Advancement

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Past and Future Strategies

• Past Strategies
• Store growth
• Distribution Centers
• Innovation
• Customer Service
• Future Strategies
• Build on distinctive competencies
• Continue innovation and hiring great employees
• Focus on expansion on store growth and services

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Business Strategy Through Growth

• The company is constantly growing through buying
  stores
• As of October 31, 2007, there are 6,059 stores in
  49 states and Puerto Rico

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MARKET SEGMENTATION

• Walgreens aims at Diversity
• No such thing as average Walgreens patient or
  customer

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DIFFERENTIATION

• Leader in Pharmaceutical Industry
• Constantly innovates and sets itself apart from
  the competition
• Drive-thru pharmacies
• Take Care Health Clinic

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Business-Level Strategy

• Product Proliferation
• Largest selection of products of all drug stores
• Selection depends on the stores location
• Pharmacy gets the prescription without
  limitations

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Business-Level Strategy

• Price Cutting
• No price cutting in RX
• No price matching
• Price cutting in SS
• Reduce prices on competitive products like milk,
  eggs, ice-cream, and cigarettes.

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Business-Level Strategy

• Market Penetration
• Building New Stores
• One mile from every home
• Over 400 new stores in 2008 in ideal locations.

   
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Business-Level Strategy

• Product Development
• Private label products
• Only RX that owns their own clothing line.
• Much cheaper to customer yet has the same quality
  as the name brands.

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Business-Level Strategy

• Market Development-tapping into a new market for
  existing customers
• Ink Jet Refills
• DVD rentals
• DHL delivery service
• These extended services creates customer loyalty
  yet captures news customers at the same time.

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Technological Environment

• Intercom Plus
• Largest database second to US government
• Connects all pharmacies together
• Saves prescription histories, patient profiles.
• Saves time and money
• -Assist in filling prescriptions
• Easy transaction for insurance companies.

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Technological Environment

• SIMS
• Strategic Inventory Management System
• Keep Walgreens profitable and efficient
• Created a job position called SIMS coordinator in
  the company.

• StoreNet
• Intranet for Walgreen
• Makes communication easier
• Major performance indicator
• Control payroll
• Sales
• Inventory level, etc.

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Recommendations

• Continue innovating and offer more services
• Promote mail order prescriptions
• Continue their growth strategy
• Store credit cards

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