Walgreens Company Analysis and Integration Strategy

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Analysis of Walgreens

By: Robert Antioho
Christopher Bennington
Andrew Graeff
Jordan Lenz
Jacob Wyand

Chapter 1: Company Background and Mission
Chapter 1: Company Background and Mission

Walgreen Co.

Introduction:
Walgreen Co. (Walgreens) and its subsidiaries operate a drugstore chain in the United States. “The Company provides its customers with multichannel access to consumer goods and services, and pharmacy, health and wellness services in communities across America” (Walgreen Company). The firm currently operates two mail-order facilities and has 7,752 retail drug stores located across all 50 US states, Guam, Puerto Rico, and the District of Columbia (Walgreens). Prescription drugs account for 65% of all sales, with the rest coming from front-end store purchases (Walgreens Co.). Walgreen Co. is ranked number 32 on the Fortune 500 list and is currently trading stock on the NYSE and NASDAQ stock exchanges (Fortune 10000 Companies 1-100).

History:
Opening its first store in 1901, Charles R. Walgreen started the iconic drugstore chain on the south side of Chicago. Along with selling prescription and over the counter drugs, the first store was extremely innovative with the addition of a soda fountain and luncheon service. With its emphasis on superior service and high quality items, Walgreen drugstores were received positively and produced large amounts of revenue. The company continued its growth and passed numerous milestones such as going public in 1927, surpassing the $1 billion in sales mark in 1975, and passing the 1,000 Walgreens stores mark in 1984. Recently passing the 7,000 store mark in 2010, Walgreens has seen large amounts of growth from its humble Chicago beginnings. “Walgreens century plus history has been marked by explosive growth fueled entirely by the opening of new stores” (Company History, 2011).

After a century of solid organic store growth, Walgreens has started to finally see this growth taper off over the last decade due to market saturation (Walgreens, 2011). With organic store growth slowing, Walgreens, under the leadership of CEO Gregory Wasson, has shifted its strategy towards offering a wide array of health services. “Walgreen has created a Health and Wellness division that has been aggressively opening in-store clinics and worksite health centers, as well as offering health screenings, immunizations, and patient counseling for conditions such as diabetes in its stores” (Walgreens Co.).

Industry:
According to Hoover’s business database (Under the North American Industry Classification System), Walgreens operates within the “Pharmacies and Drug Stores” industry. “The US drugstore industry includes about 42,000 establishments with combined revenue of about $220 billion” (Walgreens Co.). The top three companies within this industry are CVS Caremark Corporation, Walgreen Co., and Rite Aid Corporation. As shown in the table below, Walgreen Co. currently fills the second spot within the “Pharmacies and Drug Stores” industry.

(Walgreen Co., 2011)

While CVS Caremark Corporation produces more sales, their sales are inflated by about $32,000M due to a large subsidiary. In 2006 CVS acquired Caremark Co. which operates in the “Pharmaceutical Benefit Manager” or PBM industry (Sorkin, 2006). Comparing CVS Caremark and Walgreens on equal terms, excluding the PBM unit, moves CVS Caremark into the second industry spot with around $64,000M in drugstore sales.

Company Mission and Vision:
Walgreens 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. A destination where health and happiness come together to help people get well, stay well and live well.” (Walgreens). This mission statement exemplifies Walgreens desire to become the “Pharmacies and Drug Stores” industry leader. Along with its mission...
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