Walgreens Marketing

MARKETING 9

WalgreensMarketing

Competition

Thefact that Walgreens drugstore chain operates under the pharmaceuticalsector implies that it encounters significant rivalry bothinternally and externally. Apparently, the retail pharmacy sectordepends heavily on prescription drugs as compared to the other typesof drugs as a continuous source of revenue. However, firms in thesector also rely on over the counter drugs and basic consumer goods.CVS suffices to be Walgreens’s greatest rival in the pharmaceuticalsector (Holsted et al., 2012). It is evident that the number of drugstores for each of the firms exceeds 7,000 stores implying that bothfirms have an almost equal share of the market. However, the numberof Walgreens’ stores is slightly greater than CVC’s. To beprecise, Walgreens’ stores are in excess of 7,700. Both firmsdepend on prescription drugs as the major source of revenue. As amatter of fact, prescription drugs account for 65% of their totalrevenue (Holsted et al., 2012).

Thecompetition exhibited by CVS and Walgreens pharmacies is both directand aggressive as evidenced by a recent CVS advertisement thatadvised Walgreens’ customers on how to transfer their accounts fromWalgreens to CVS (Holsted et al., 2012). Following the advertisement,a significant proportion of Expert scripts customers have moved awayfrom Walgreens as their provider of prescription drugs and insteadbegun using CVS as their provider. However, it is important to notethat Walgreens Co. has a better credit rating as compared to CVS. Therespective credit ratings for Walgreens and CVS are A and BBB+. As aresult, Walgreens Co. has an advantage of obtaining leases formproperty developers as compared to CVS. The advantage has alsoenabled Walgreens to cut on its borrowing costs.

Thedecision of Walgreen to endeavor into the health insurance businesshas also placed it into direct competition with health insurancefirms (IEG, 2011). The fact that Walgreens is not a low cost leaderin the industry implies that it also faces stiff competition from theexisting discounters in the market. The discounters are easy andwilling to offer lower prices for prescription drugs based on thefact that they can compensate the lost profit in other productcategories. However, since Walgreens cannot take part in pricingcompetition, Walgreens has decided to offer branded products anddiversify in other areas to put up with the competition fromdiscounters.

Thefact that Walgreens stocks branded products implies that the firmalso encounters competition from other retailers that offer genericpharmaceutical products. As a countermeasure to the threat,Walgreens’ pharmaceutical systems ensure the prompt notification ofpharmacists following the introduction of an equally effective andgeneric drug that trades at a comparatively lower price than itshigh-end branded product. The other competitors include big-boxstores such as Walmart, supermarkets, Rite Aid, and conveniencestores. With regard to Walmart, convenience stores and supermarkets,they can be willing to reap negative returns from their pharmacysections so as to create customer traffic that would turn theirstores into a one-shop store.

ProductOfferings

Eversince the establishment of the corporation, Walgreens has endeavoredto become the largest drug store chain in the USA and beyond. Itoffers convenience foods, household products and other products inbeauty care, seasonal items and photofinishing (Holsted et al.,2012). The product offerings also include the division of HealthServices that offers plans for both prescription and medical drugs.Walgreens also comprises of the Wellness and Health division thatoffers that is responsible for operating in-store clinics. By 2011,Walgreens had guaranteed a significant consumer access to its stores.To be precise, the firm ensured that 75% of its consumer base hadaccess to its drug stores by locating its pharmacies within fivemillions of their consumer locations.

Theprovision of prescription and OTC drugs as one of the servicesoffered by Walgreens to better the health outcomes of Americans alsoentails the provision of prescription services. To be precise, thenumber of prescriptions issued by Walgreens is in excess of 800million annually. Walgreens has also a website to enhance the ease ofdelivering its services as well as increasing its access tocustomers. The introduction of website services is in tandem with theinternalization strategy of the corporation in its effort to increaseits market coverage. Walgreens’ product offerings also includehealth insurance products (IEG, 2011). The chart below shows thebreakdown of the corporation.

Figure1: Walgreens Product Offerings Breakdown

Thefirm has located its Take Care facilities on the work sites andwithin the locations of its pharmacies. Walgreens operates Senior MedLLC as a pharmacy provider that provides healthcare facilitiesassociated with long-term care. The firm also manages the complexhealth conditions of its customers with the use of its SpecialtyPharmacy section. The handling of homecare needs such as the settingup and delivery of medical supplies and equipment occurs under theHome Care section. The Mail Service uses the mail to refillprescriptions conveniently.

Distribution

Walgreensboasts of its strategic and convenient location of its drug stores.The better positioning of its stores close to consumers has enabledthe company to realize more sales than its major rival, CVS. By 2011,the company had 8,210 locations that included 7,761 drug stores. Atthe end of 2012, Walgreens had 8,270 locations in the fifty Americanstates and in Puerto Rico. As a result, the convenient location ofthe pharmacies has enabled it to serve at least 6 million customerseach day thereby enabling it to record sales every year (Strong,2012). It was not until 2009 after the company stopped attainingrecord sales for the previous 34 years that Walgreens decided tochange its product distribution strategy. Rather than opening newlocations that had similar offerings and appearance, the companyidentified three initiatives for the strategy. The first initiativeentailed the introduction of a new store strategy. The secondinitiative of the strategy was the expansion of the delivery ofhealth services. Thirdly, the firm opted to employ the necessarytechnological services to aid the delivery of health services as wellas multichannel retailing. The major focus of the third initiativewas the introduction of automation to improve pharmacist services andenhance online capabilities.

Walgreensreferred to the new strategy as “customer centric retailing”(Strong, 2012). The meaning of the strategy was that the firm haddecided to retail its products based on the delivery efficiency andother needs of its customers. The CCR strategy renovated and revampedthe existing product distribution strategy by shifting the focus fromthe traditional convenience general merchant to the moderncorporation that focused on beauty/wellness/health andpharmacy/medicine. The incentive behind the introduction of the CCRstrategy emanated from the need to establish a daily living store aswell as a retail health store. The redesign of the stores resulted instores that had better visibility and signage besides theinstallation of lower shelves. The changes enhanced the ability ofconsumers to shop from the stores. The table belowshows the distribution of Walgreens’ facilities.

Location Type

2011

2010

2009

Drugstores

7,761

7,562

6,997

Worksite Health and Wellness Centers

355

367

377

Infusion and Respiratory Services

83

101

105

Specialty Pharmacies

9

14

15

Mail Service Facilities

2

2

2

TOTAL

8,210

8,046

7,496

Table1: Number of Locations

Thecompany also decided to narrow its assortment of merchandise as wellas emphasizing on branded products that had good value. Theinitiatives targeted to enhance the sales realized from the storessince consumers would opt for branded products as opposed to theirnon-branded alternatives. The corporation also accelerated itsinvestments in the next-generation distribution stores. The strategyalso resulted in an enhancement of service delivery and training. Bythe end of 2011, the company had managed to integrate the CCR formatinto 5,000 stores. Walgreens also moved away from low/highpromotional retailing with the objective of reducing the number ofpromotions and costs associated with product promotion. On the otherhand, the firm endeavored to improve the significance of thepromotional campaigns.

Thelatest distribution strategy also compelled the company to acquireother firms to increase its access to the market. For instance,Walgreens acquired Duane Reade in 2010 that was the largest drugstoreretail chain in New York. The acquisition was worth $623 million. Thefirm also placed another acquisition in 2011 by acquiringdrugstore.com that was the largest online retailer of drugs for $409million. Following the acquisition of the online retailer, Walgreensperformed tremendously on its internationalization strategy since themarket availed its products to the international market. The firmalso decided to reduce the increasing competition created by CVS byselling its Pharmacy Benefit Business to Catalyst HealthcareSolutions for $525 million thereby marking its exit from the pharmacybenefit business. On the other hand, the firm decided to concentrateits efforts on the provision of healthcare merchandise to itsconsumers at a time when CVS decided to expand its pharmacy benefitbusiness (Strong, 2012).

Oneof the major developments entailed Walgreens’ decision to acquire a45% stake in the largest drugstore chain in Europe, Alliance Boots in2012. The strategic decision aimed at increasing the global coverageof the company following the notable declining growth in sales evenafter the implementation of the CCR strategy. The major productofferings of Alliance Boots encompass beauty and pharmacy-led healthand the distribution and wholesaling of pharmaceutical products. Atthe time of the acquisition of the 45% stake, Alliance Boots hadalready entered the markets of 25 countries. From the decision, itwas evident that Walgreens had decided to implement its globalizationstrategy with the online market buffering its efforts to reach alarge number of global consumers. In a bid to cement its globalpresence and availability of its products, Walgreens in conjunctionwith Alliance Boots signed a 10-year deal with AmerisourceBergen forthe latter to distribute its drugs on a daily basis (Humm &amp Wohl,2013). From the deal, the company targeted to increase its sales ofspecialty drugs.

References

Holsted,N., Jones, J., &amp Levin, B. (2012). WalgreenCo.Griffin Consulting Group.

Humm,C., &amp Wohl, J. (2013). Walgreens to Buy Stake inAmerisourceBergen, Cardinal Loses Out. ThomsonReuters.

IEG.(2011). Drugstore Chains To Formulate New Sponsorship Strategy. IEGSponsorship Report.

Strong,J. S. (2012). Walgreens:Strategic Evolution.Walgreens.