Introduction

Walgreen Co. established in 1905 as a small store from Illinois (Frederick, June, 2006), now one of the largest drug stores chains of America with more than 5500 stores in 47 states. Though the closest competitor CVS has more stores but in profitability Walgreens is still leading the market (Frederick, June 2006). The growth of the company is achieved through consistency, innovation, and customer satisfaction.

Present study presents a strategic analysis of the company with reference to their mission and vision, objectives, strategies, PESTLE and SWOT analyses. The recommendations to strategic alternatives are based on the company and industry scenarios in 2006.

Industry and Competitor Analysis

The drug store industry has evolved from fragmented stores to super markets and malls. More competition is faced by independent small stores due to big store chains. Narrow profit margins are generated for store dealers due to laws in drug industry in favor of manufacturers. The expansion to niche markets, low cost leadership, technology advancements, and health care provision are some new trends in this industry.

The companies like CVS, Rite Stores, and drugstore .com with Walgreens are more focused on customer satisfaction and retention (Azzalo and Longo 2006). New opportunities are generated due to resistance to recession and shortage of trained pharmacists.

PESTLE Analysis

Political Factors

Drug manufacturers strong lobbying to gain favorable amenities in drug laws related to extension in patents, high profit margins, and market monopolies decreased the margins and powers of drug dealers like Walgreens.

Economic Factors

The financial conditions and economic recession in USA has decreased purchasing powers and increased inflation in drug industry also. Low  cost solution focusing on customer needs are needed by the company.

Social Factors

The emerging sociocultural issues in drug industry like un prescribed medicine selling to prevent or terminate pregnancy and to assist in committing suicide.

Technological Factors

Technology enhancement is the key factor in controlling costs and gaining competitive advantage. Online selling, RFID systems, customer interactive websites, and ICT support in daily operations are the major tools used by drug industry. Company has advantage of leading in the industry with latest technology.

Legal Factors

In US, the legal liabilities in drug business are very high and demanding. The company has to keep track of recent liability laws in states like Maine to adopt suitable measures for business operation in particular state.

Strategic Analysis

Corporate Strategy

The building of Walgreens stores is from ground with visible locations and free standing as compared to CVS stores.

• Believe in honest goods selling by honest employees to deserved consumers.
• Maintenance of integrity of business operations.
• Organic growth opportunities availing to ensure long term success.

Business Level Strategy

• Leadership in technology and technology.
• Capitalization of opportunities other than medicines like cosmetics, food etc.
• Centralized decisions with complete records of consumers.

Major Strategies of Competitors

The giant store chains of Wal-Mart and Target along with other drug stores chains are facing same industry conditions as Walgreens but they are using more floor space with better designed drugs sections to attract convenience buying customers (Levy and Weitz 2006).

Functional Strategies

Marketing Strategies

• Customer store experience enhancement.
• Regular satisfaction surveys for customer and supervisor checks.
• Extensive purchaser record establishment.

Financial Strategies

Financial strength is the major asset of company, the profits, assets, and capital invested has been successfully invested in the business again.

• Increase profitability and convenience through stores operations.

• Improved risk emphasis on major areas.
• Increased profit on a single customer transactions.

Production and procurement Strategies

• Products cycle time reduction
• Efficiency and effectiveness improvements
• Extension of partnership with important suppliers and buyers.

Human resources and Knowledge Management Strategies

• Continuous improvement in satisfaction and retention of employees.
• Interactive coordination with employees and customers through company websites.
• Periodic satisfaction survey and performance appraisal system for employees.
• High potential employee development and training programs.

SWOT analysis

Strengths

• Customer knowledge and corporate objective of customer satisfaction.
• Genuine efforts to provide convenience to customers in stores location and designing.
• Creating and meeting new demands to respond the change in market needs.
• Start of clinics in new stores to facilitate early medical aid to travelling patients and for neighborhood.
• Innovations like energy conservation plants and radio-frequency identification (RFID) technology make them market leaders.

Weaknesses

• The grid layout Walgreens stores are convenient but make desired products location more difficult.
• Narrow isles in stores make customers walking more difficult.
• Huge Traffic jams with crowded parking lots make life uneasy for neighborhood.
• Non trained and impolite sales people with narrow focus on company's ultimate goal of customer focus.

 Opportunities

• Aging of first baby boomers population increases the demands for medicines.
• Targeting younger customers in tough competition to gain a new market of health conscious customers.
• The opportunity to extend brand into health food market, fruits and vegetable trade, and self grooming organic medications.
• Expansions of stores network to expand the market to new destinations.

Threats

• Generic discount programs from giant chains of stores like Target and Wal-Mart.
• The political threats of drug reforms which ultimately cut the profit margins of Walgreens.
• Customers' lawsuits percentage is quite higher in drug retail business and liability of Walgreens increases due to these threats.
• Direct competitors' threats like that of CVS and drugstore.com, generates knocking competition in industry.

Future Strategic Alternatives

Company needs to strengthen weaknesses by focusing on improvement in following areas with suggested strategies.

o   Stores layout should be improved to keep the grid format as it is convenient to customers but to reduce the display clutter in stores with the use of signage for better location of products.

o   Train the workforce with latest sales and communication skills to gain competitive edge in drug retailing.

o    The parking lots need to be redesigned for traffic risk reduction. Wider parking lots with speed bumps will reduce the speed risks (Wison 2006).

o   Radio Frequency (RFID) technology is competitive edge of the company. Expansion and innovation in this technology leads them to gain wider markets and effective transactions controls.

Best pursuable Alternatives

The best strategic alternative for the company is to enhance differentiation through latest technology, trained work force and satisfied customers. Diversification strategy with overseas expansion is also feasible but needs lot of financial and human resources which can be solved through licensing and franchising.

Implementation and Control of Selected Alternative

The technology enhancement and service differentiation can be achieved through continuous improvements in processes and strict controls. The quality standards of products and services need to be evaluated and updated from time to time. Competitors' successful strategies and change in customers' demands should also be closely monitored to adapt the changes in industry (Drug Store News, 2006).

Anticipated Future Crises

Although, the future of drug store industry looks prosperous due to the following reasons:

o   Personal care and health become top priorities for a healthy lifestyle.

o   Long life span and aging baby boomers population

o   Enforcement of patent laws to famous medicines made them more secure to licensed dealers.

o   Avoidance of hospitalization and increased usage of medication therapies.

A pat from the above opportunities, the margins of industry profits are will be at lower side due to following factors in future:

o      Increase of competition due to new players and less customer loyalty.

o      Inflation in medicine prices and low margins from manufacturers.

o      Third party plans for payment restrictions.

o      New offerings from Hymalls and supermarkets.

Future Prospects

The future prospectus of Walgreens lies in ultimate customer satisfaction of their stores. If they keep up with the present sound financial statements and able to find low cost solutions, without hurting the expected quality standards,  Walgreens gain competitive position in the market for long term. Products and service differentiation with diversification of their operations to overseas countries will increase the market coverage and share. Latest technology to stream line requisitions, orders, inventory, and insurance management are some critical areas to focus in order to remain competitive in the market.

Conclusion

Walgreens mission statement and corporate objectives are visionary and on firm grounds.  Company is having regular growth and sound financial position. Products diversification and differentiation is suggested for the future strategic dimensions of company.