Analysis of the Strategy, Execution and Strategic Risk of Walgreens
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An Analysis of the Strategy, Execution and Strategic Risk of Walgreens

An Analysis of the Strategy, Execution and Strategic Risk of Walgreens

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Analysis of the Strategy, Execution and Strategic Risk of Walgreens Presentation Transcript

  • 1. Risk Presentation April 17 th 2009 Analysis of the Strategy, Execution and Strategic Risk of Saturday, April 18 th , 2009 GSB 621 Strategy Execution Frameworks Spring 2009 Professors Mark L.Frigo and Richard Anderson The Center for Strategy, Execution and Valuation Kellstadt Graduate School of Business DePaul University Presented by Michael Borowiak Matthew Drake Huei-Jie Kwo Craig Johnston Michael Nemmers Jay Swaminathan
  • 2. WHAT YOU’LL LEARN
    • Key components of Walgreens’ corporate strategy
    • Strategic risks Walgreens faces and how it attempts to mitigate them
    • Risk metrics that Walgreens employs
    • Specific risk disclosures
    • Our conclusions
  • 3. Company Snapshot Share performance vs. S&P 500 (source FT.com) Notable developments 1901 Charles R. Walgreen Sr. starts the Walgreens chain 1916 9 stores incorporated as Walgreen Co. 1927 Walgreen Co. goes public 1975 Achieved $1 billion in retail sales 2008 Marks 34 years of consecutive earnings growth 2010 Target of 7000 stores Walgreen Co. (WAG) Fundamentals Founded 1901 Headquarters Deerfield, IL Sales Revenue (2008) $59 billion Stores (2008) 6,443 Employeees (2008) 237,000 Products Pharmaceuticals/Retail
  • 4. By 2008 Walgreens operated 6,443 retail locations in the US, a 9.7% increase on 2008
  • 5. Company Performance Profile
  • 6. Return Driven Strategy
    • “ Honesty and integrity are cornerstones upon which Walgreen Co. was founded and upon which we operate.”
    • “ We believe that honest goods can be sold to honest people by honest methods.”
    • Organic growth has allowed the company the opportunity to carefully select retail locations.
    • Leader in innovation and technology.
    • Capitalizes on businesses beyond pharmacy
    • Centralized patient database
  • 7. Risks in the Strategy
    • Financial risk-profits affected from drop in Medicaid funding
    • Outlook revised to negative as credit metrics weaken
    • Caterpillar/Walmart partnership-lower costs for employees-potential market of 75m people.
    • Substantial growth in the generic drug market increasing number of suppliers
    • Increased competition from Wal-Mart
    • Lack of viable locations and oversaturation in areas will impact sales growth.
  • 8. How risk is measured, monitored and managed (1) Financial Perspective Objectives Measures
    • Increase convenience and profitability across the entire Walgreens chain.
    • Increased emphasis on risk
    • Profit per customer visit
    • Appointment of Bill Rudolphsen as company’s first CRO
    Objectives Measures
    • Enhancement of the customer experience
    • Extensive use of customer satisfaction surveys, supervisor checks and mystery shoppers
    • Establishment of an extensive customer database
    • Creation of prescription savings club
    Customer Perspective
  • 9. How risk is measured, monitored and managed (2) Int. Business Process Perspective Objectives Measures
    • Reduction of cycle time
    • Improvements in efficiency
    • Extension of partnership with Kiva Systems and focus on cycle time, tote utilization, installation time and training time.
    Objectives Measures
    • Continuously improve employee satisfaction and employee retention.
    • Solicits information from employees via employee website
    • Annual satisfaction survey
    • Renowned employee development program
    Innovation and Growth Perspective
  • 10. Risk disclosures (from 2008 10-K) 1 2 3 4 However, these are simply cautionary notes and not specific enough
  • 11. “ Have no rigid system in you and you’ll be flexible to change with the ever changing. Open yourself and flow.”
  • 12. questions ?
  • 13. Risk Presentation April 17 th 2009 Analysis of the Strategy, Execution and Strategic Risk of Saturday, April 18 th , 2009 Research pages Presented by Michael Borowiak Matthew Drake Huei-Jie Kwo Craig Johnston Michael Nemmers Jay Swaminathan
  • 14. Research pages (1) References Walgreens Customer Satisfaction Survey. ( www.walgreenssatisfaction.com ) Sawyers, Michael A. “Walgreens coming to Oakland in 2009.” Cumberland Times News. Dec 30 th , 2008. ( http://www.times-news.com/local/local_story_364141412.html ) Hoovers Company Factsheet. ( http://www.hoovers.com/walgreen/--ID__11601--/free-co-factsheet.xhtml Walgreens.com Press Room. ( http://news.walgreens.com/article_display.cfm?article_id=5078 ) Frederick, Jim. “Walgreens still on target for 7,000 stores by 2010.” Drug Store News . Sept 24 th , 2007. ( http://findarticles.com/p/articles/mi_m3374/is_12_29/ai_n21053466/ ) Walgreens.com About. ( http://www.walgreens.com/about/history/creed.jsp http://www.walgreens.com/about/press/facts/fact3.html ) Press release-author unknown. “Electronic prescriptions soar at Walgreens.” 13 th April, 2008. ( http://www.marketwatch.com/news/story/electronic-prescriptions-soar-walgreens/story.aspx?guid={A8A10423-B28D-44D1-88ED-A5DF9C8FC30C}&dist=TQP_Mod_pressN ) Ernst, Jerry. “New Walgreens draws heavy traffic opening day.” The Davison Flagstaff. 11 th Dec, 2007. ( http://blog.mlive.com/flintjournal/business/2007/12/new_walgreens_draws_heavy_traf.html )
  • 15. Research pages (2) References (cont.) Walgreens.com Investor Info ( http://investor.walgreens.com/releasedetail.cfm?ReleaseID=337062 ) Walgreenshealth.com Company Info ( http://www.walgreenshealth.com/whc/clientPortal/companyInfo/jsp/about_us.jsp ) Rigby, Bill. “Walgreen to cut Washington state Medicaid business.” Reuters.uk.com. 30 th Mar, 2009. ( http://uk.reuters.com/article/governmentFilingsNews/idUKN3053697020090330 ) Author unknown. “Research Update: Walgreen Co. ‘A+’ Corporate Credit Rating Affirmed and Off Watch; Outlook Stable.” S&P Credit Research. Oct 9 th , 2008 ( http://www.alacrastore.com/storecontent/spcred/675982 ) Havrilla, Mike. “Generic Drug Industry Consolidation is Underway.” Straighstocks.com. 18 th Jul, 2008. ( http://www.straightstocks.com/current-market-news/generic-drug-industry-consolidation-is-underway/ ) Burritt, Chris & Wolf, Carol. “Wal-Mart’s Retail Muscle Helps Expand Drug Sales.” Bloomberg.com. Mar 26 th , 2009. ( http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a88njE7I7byM ) Press release-author unknown. American National Business Hall of Fame. Date unknown. ( http://www.anbhf.org/pdf/walgreen.pdf )
  • 16. Research pages (3) References (cont.) Baker, Ronald J. “Using Key Predictive Indicators p118. “Measure What Matters to Customers.” 2006. ( http://books.google.com/books?id=WN17cLEYquUC&pg=PA118&lpg=PA118&dq=increase+convenience+and+simultaneously+increase+profitability+across+the+entire+system&source=bl&ots=fDwlJ5B9eP&sig=XA7PxmKXC5-4E4SIBlr8XVjbDdI&hl=en&ei=qmLlSaTCGMjqnQerraCnCQ&sa=X&oi=book_result&ct=result&resnum=1 ) Walgreens Company F3Q08 Earnings Call Transcript. ( http://seekingalpha.com/article/82359-walgreen-company-f3q08-qtr-end-05-31-08-earnings-call-transcript ) Seaman, Marley. “Walgreens 2Q profit down 7% on restructuring.” Wtopnews.com. Mar 23 rd , 2008. ( http://www.wtopnews.com/?nid=111&sid=1259118 ) Press release-author unknown. “Kiva Systems Chosen by Walgreens to Double Distribution Center Capacity.” Pharmacychoice.com. 11 th Mar, 2009 ( http://www.pharmacychoice.com/News/article.cfm?Article_ID=334302 ) Walgreens employee website ( www.employees.walgreens.com )   Walgreens 2008 10-K report ( http://investor.walgreens.com/index.cfm )   Prescription Drugs Canada Online Portal http://www.prescriptiondrugscanada.org /
  • 17. Research pages (4) References (cont.) Frigo, Mark. L and Litman, Joell. “Driven: Business Strategy, Human Actions and The Creation of Wealth.’” 2007 Frigo , Mark L. and Litman, Joel. “Strategic Risk Management: Aligning Strategy, Execution and Risk.” March 2009 Graphics and Photographs obtained from Flickr.com FT.com Walgreens.com Google Images