Leitch Quality Drug Company is a partnership operating three drug stores in Orlando, Florida that is facing competition from large discount stores. The document analyzes the company's external threats, opportunities, internal strengths and weaknesses. It identifies key issues such as how to improve operations and whether to sell the company. Alternative strategies are considered, including stability, growth, retrenchment, and a combination approach. The optimal choice is a strategy of initial retrenchment to reduce debt, followed by controlled growth once the financial structure is strengthened.

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Implementation and Evaluation of Strategic Planning
Leitch Quality Drug Company
I. Case Summary
LeitchQuality Drug Companyisa companywitha partnership form ofbusinessthatoperatesthree drug storesinthe Orlando, Florida; a city
that had a populationofabout100,000atthe time.The partnership cameaboutwhenthe companywasknownasQualityDrug Store began
having difficulties in the early1940s due to declining profitsandthe LeitchBrothers (Carl andRichard) made anofferto buyalong withtwo
otherpartners(KeithSteider andMartin Rhodeswhose positionswerelatersoldto WalterNedsandNormanHenry).The partnership was
completedlate 1944andbecameknownasLeitchQualityDrugswith all partnershaving equalownership.Orlando grewrapidlyduring the
1950sofwhichLeitchacquiredtwo additional storesmaking the totalthree; Leitchalso tookonanagreementwith Rexallofwhich business
grewandprofitrose with the highpointbeing in 1967andhave since leveledoffdue mainly to the new superlarge discountstores,nowthey
are facedwith the decisionto sellthe company.
II. Case ObjectivesandKey Issues
a) Case Objectives
1) To understandanestablishedpartnership form ofbusiness facedwithsevere competition.
2) To understandanestablishedpartnership facedwithfierce competitionfrom a changing industry suchasthe super
large discountstores.
3) To understandanestablishedpartnership facedwithsevere competitionfrom similarsmalldrug storesandsuper large
discountchains.
4) To determine the future strategyofa smalldrug store partnership.
5) To understanda partnership type ofownership anddecisionstheyface.
6) To determine beststrategies ofa partnership thatmanagestheirownindividual store.
7) To understanda partnership companythatoperatesseparatelyunderthe same name.
8) To gaininsight into the trouble facedwith partnership andlackofcentraloperations.
9) To gaininsight into lack ofstrategic planning ofa partnership organizationandhowto meetthe looming competition.
b) KeyIssues
1) How to improve operationsofthe company.
2) Whetherornot to sell the companyto the grocerychain.
3) Whetherto incorporate the partnership.
4) How to besttake onthe newcompetitionaswellasthe competitionthathadalreadyexistedbetweenthe similarsmall
drug stores.
III. Analysis
a) ExternalThreats
i. The changing industryofnew superlarge discountstoresthatiscutting into the profitofLeitch.Carl Leitchexplained
why he thought Leitchwasnotgrowing asitshould: “It’s those new‘super’large discountstoresthathave cutinto
ourbusiness.”
ii. Two large discountdrugstoreshave builtatsuburbanshoppingcenterinOrlando, one locatedjustthree blocksof
Leitchstore 2. These storescarryfullline ofmerchandise ex.appliances, clothing,hardware itemsetc.Theydo high
volume discountswith drugsandcosmeticssoldsubstantiallylowerthanthose ofLeitchandmostofthe otherdrug
firms. Theyare partofthe new breedofgiantdiscountstoresinthe industry. These breedscarrya broadline of

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merchandise including manyhighmarginitems, theyable to getbettersitesin the large shopping centers,pricemore
competitively, have more merchandising experience andenjoyeconomiesinbuying.
iii. O’Shea Drug Companyhastwo storeslocatedveryclose to Leitchstore 1andstore 2; O’Shea storesare largerthan
Leitchstoresandoperate asfranchisesfora majorretaildrug firm.
iv. O’Shea storeshave broadenedtheirproductlinesto include suchthings assmallappliances,schoolsupplies, toys,etc.
aswell asoffering discountpricesonsomeproprietarydrugsandotheritems.
v. Smalldiscount drugstoresaveraging 2000to 3000square feetinsize, featuring fast-moving healthandbeautyaid
products, markupsare modestwithrapidturnover-there is one suchstore in Orlando whichis the area ofLeitch.
vi. The industry is diversifying their productswhichseem to make thingsmore convenientforthe customer.Carlalso
alluded to this pointwhenhe stated“Why, Idon’t evenconsiderthem drug stores.Theyselleverything, even
groceries.Drugsare onlya sideline...”
vii. Unknownpreferenceofcustomersandconsumertrendswhichis made clearwhenCarlfurther went onto state “I
can’treally understandwhy people wouldwantto fill their prescriptionsatthese stores,service isso impersonal.But
they’re growing andwe’re not.That’sa factwe have to face.” Thus, asMr.Nedswarnedhispartners, Leitchislosing
sales.
viii. As a result ofchange inthe industry including diversificationofproductsandthe factthat the superlarge storesare
growing, smallercompetitorsarereducing pricesaswellasdiversifying-Leitchisfacedwith these threats.
b) ExternalOpportunities
i. Opportunityto sale Leitchto grocerychain.
ii. Opportunitiesto discountpricesandcompete especiallywiththe small neighborhoodtype storeswhere there islittle
price competitionsince the smallstoresbuylessvolume andhave higheroverheadcosts.
iii. Opportunitiesto distinguish themselvesfrom the competition with the fountainservices, customercreditsand
exclusive rights to sell Rexall within a 25-miles area.
iv. Opportunityto incorporate orsellsharesofequity perthe planMr. Henry’s and Neds’tried to persuade the Leitch
brotherofbeing thatthere wouldbe a possibilityoftax savingsandadvantagesoflimitedliability.
v. Opportunityto expandbydevoting more effortto the fountainbarservice since the competitionwith the small
neighborhoodtype pharmaciesare usuallylimitedto prescriptions,drugsandfewsundryitems-this will allowfor
Leitchto getaheadofthe smallercompetitionthusgaining some marketshare.
vi. Opportunityto expandbydevoting effortinto the sundry productsasmentionabovebeingthatthe small
neighborhoodtype pharmacies onlyhave a fewofthese itemsavailable.
c) Internal Strengths
i. People knowandtrustthe Leitchname asstatedbyCarl Leitch.
ii. In 1964 Leitchenteredinto anagreementwithRexall (a nationaldrug manufacturer).The agreementgivesLeitch
exclusive rights to sell Rexall productswitha 25-mile area.
iii. There isa delivery service offeredbyallthree storesofLeitchthat givescustomersanaddedconvenience.
iv. Leitchhas a fountainbarservice the partnerfeelproud.Richardstated“it is almostaninstitution in this country...” he
also said“we still feelthey give ourstoresa warmeratmosphere.Besides,whenthe kidscome into geta sundae, their
parentsoftenhave them buysomething else while they’re here.” Thusthe fountainbarhelpsattractmore sales.
v. Anotheraspectofthe Leitch’s“personaltouch” isthe credit givento customersasmostofitscustomersdo business
at Leitchoncredit thoughdoesnotcharge theircustomersinterestorservice feesandcreditapplicationsare rarely
checkedsince mostofthe people applying forcreditare knownbythe employees.Thisismore so a benefitto the
customersofLeitchthanthe store butcouldbe a way to retain those customers.

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vi. One accounting firm servesallthree ofthe Leitchstores, providing consistencyandmore accuracyofthe financial
statements.
vii. Rexall Companyfurnishesthe materialsfornewspaperinsertionsandpaysone-halfofthe advertising costs.This
providesLeitchwithcostsavingsin regardsto the entire amounttheymayhave had to take onwithout the supportof
Rexall.
viii. Rexall runs nation-wide adsforits productsandthoughthose nation-wide adsjustpromote Rexallproducts,ithasa
trickledowneffectonLeitchascustomermayexclusivelyseekoutstoresthathave the productofwhichLeitchis the
only carrierwithin a 25-mile area.
d) Internal Weaknesses
i. Financial
a. The three Leitchstoresoperateseparatelywhichdoesnotgive the companya chance to optimize its
resources.
b. Leitchallowsits customersto use creditwhich is risky becausesomecustomersmayendup notpaying at
all aswell asnot coming backdue to the amountowedandcheaperpricesatotherdrug ordiscountstores.
c. Leitchallowsits customersto use creditat the three different storeswith a tab foreachindividual store
which is riskier. The companysendscustomersthree differentbillswhichcouldbe overlookedbeingthat
beside the store addressandamount, the billmaylookthe same andthe customermayfeelthatthey have
paida bill whichthey mayhave not yetpaidand vice versa.
d. Leitch
ii. Organizational
a. PerCarl’s explanation, the onlyreasonLeitchevenhasa formalpartnershipisso theycantrade under the
Leitchname andbecausepeople knowandtrustthe name.
b. The view to stay outofeachother’shairwith the presentarrangementasRichardstated“I’m notsure that
we couldmaintain ourpresentexcellentrelationship ifwe incorporated.” Thoughthatpresentexcellencehas
not beenfeltasoflate anddue to the factthat Mr. Nedsand Henry broughtthe incorporationplanto the
brotherswho stronglyopposedit.
c. The Leitchbrothers’fearoflosing controlofthe companyifoutside shareholderswere broughtin.
d. Eachstore ismanagedalmostindependentlyofeachotherwithRichard asthe managerofstore 1, Mr.Neds
asmanagerofstore 2andCarlasmanager ofstore 3 withMr. Henry asthe “not-so-silent” financialpartner.
e. Rolesshouldbe more definedsuchthatif Mr. Henry is in facta silent partnerhe should be treatedassuch.
Investopedia definesa silentpartneras“anindividual whose involvementina partnership islimited to
providing capitalto the business.Asilent partneris seldom involvedin the partnership'sdailyoperations
and doesnotgenerallyparticipate inmanagementmeetings.Apartfrom providing capital,aneffective silent
partnercanbenefitthe enterprise bygiving guidance whensolicited,providing businesscontactsto develop
the business, andstepping informediationwhena dispute arisesbetweenthe otherpartners.Regardlessof
suchrequests, it is considereda backgroundrole thatcedescontrolto the generalpartner.”
http://www.investopedia.com/terms/s/silentpartner.asp#ixzz4OD8fNmle
f. Being that eachstore is run almostindependentlyofeachother, eachstore ordersitsownstocksupplies and
setsits ownprices; nearlyallmajordecisionsare madebyeachstoremanager including equipment
purchase andstore redecoration(thoughdecisionsinvolving large capitaloutlayrequire jointapprovalofall
working partners).Thiscausesaslackofoptimizationofresourcesandinconsistencyto the customers-ex.in
regardsto pricing ofproducts, storelookandlayoutetc.

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g. No centralizedrecordssuchasthatofpersonnel
h. No written policies; informalpoliciesthatare notsubjective insteadofobjective andstructured.
iii. Marketing
a. The storesonlyjoin togetherto do some oftheirpromotionalefforts,thusspace forconfusedcustomersand
inconsistentstore appeal.
b. As the new wave ofdiscountstore came inMr.Nedswarnedhis partnersofthe potentiallossofsales, he
suggestedtheyexamine theirprofitmarginsitem byitem to see if some pricescouldbe cutto meetthe
competitionbutthe idea wasimmediatelyrejectedbythe Leitchbrothers-sono internalexaminationwas
conductedofwhichcouldhave helpedLeitchgetaheadandmitigate theirsalesdecline.
c. As a result ofnot examining theirprofitmarginsandthe foreseenexternalthreatsbyMr.Neds, Leitchsales
beganto see the decline ofwhichthe Leitchbrothers(who didnot wantto lose their profitmargins) still
resistedany move inlowering the prices-nowthere isa chance thatmore thanjust their profitmarginwill
suffer.
d. Carl remarked“Ourmainselling pointis the personalservice we offer.We can’tcontinue to offerthis
service if the marginsare cut.” Thisstatementdoesnottake into considerationthe consumertrendsnor
examinationofthe marginsnorthe market, thusdoesn’tseem anaccurate statement-especiallysince sales
have seenanobviousdecline.
e. Advertising is done independentlybythe three storeswhichcanbring aboutinconsistency.
f. Newspaperadsare runonthe average ofonce a monthforeachstorethoughmainlyto promote the store
name.Eventhoughprimarilyto promote the store name,considerrunning the admore frequentlyto capture
more customersespeciallywithmanydrugstoressurrounding the area.
g. Leitchrarelyofferspecialpricesongoodswhichshouldbe reconsideredinthis time ofnew breed
drugstoresso asto attractandretain more customerswho mayactuallypreferto shop atLeitchbutget
discouragedwhenthere are lowerpricesaround.
h. The one discountthat Leitchdoesofferwhichis onsalesofRexall-isbarelypromoted.The annualsummer
“one-centsale”where Leitchoffers“twoforthe price ofone plusa penny” becausethe Rexallwholesaler
offerssale goodsto individual storesata reducedprice forthissale.Mr. Nedssaidthe sale usually is
successfulbutit hasnot producedthe resultsin recentyearslike in the past.Thisis where more andfrequent
adswould help, especiallyduring the seasonduring whichthis discountoccurs.
iv. Operations
a. Eachstore managerisresponsible forthe purchaseandcontrolofallinventory; departmentheadsassistthe
managerinbuying the goodsneededfortheirown departments.However,the persondoing the ordering
decidesthe quantity-conceivablyanyone who worksinthe store canorderwhena salesmanvisits.This is a
asking formultiple potentialissuesex.duplicate ordering etc.
b. Purchasesare made throughsalesmenwho visitthe storesup to twice a week; this couldbe optimized.
c. Inventoriesare notkeptat full levelsasa “shortlist” is keptin all departmentsthoughbuying tripsare made
bythe three working partnersthree timesa yearwhere merchandise is selectedduring the Christmas,
summerandback-to-schoolseasons.
d. Physicalcountofinventory is only made forallstoresonlyonce a year-occurring betweenChristmasand
first ofthe year
IV. Alternative Strategies

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a) Stability: Leitchcouldincrease efficiency,cutcostandholdoffonexpanding furtheratthis time in orderto reduce the level of
debtandthus recoupingsomeofthose moniesto paydownsome ofthe debt.
b) Growth:Leitch cantake onthe franchise modelofoperationsthere byrecoupingthe moniesto help paythe debtquickerwhile
holding the managersresponsible forthe successoftheirindividual franchise.
c) Retrenchment:Leitchcouldincrease efficiencyandcutcostsinorderto reduce the level ofdebtand thus recoupingsomeof
those moniesto paydownsomeofthe debtto sucha degree thatone ormore oftheirproperty,plantorequipmentissold.
d) Combination:Apolicyofretrenchmentwithgrowthonce the debtreliance inthe financialstructure is reducedisalso a viable
alternative.
V. Choice ofStrategy
i. Choice (a):Maybe a considerationsince the currentfinancialstructure is debt-heavyrendering the companyunattractive and
risky aswell as spending moreinregarding to interestrate thoughit is short sightedandcounterto the partners’5year
expansionplanbutdefinitelyshort term.
ii. Choice (b):Isconsistentwith Mr. Swain’s idea thoughmaynotbe feasible atthis time due to riskinessofthe organization and
lackofappealto potentialfranchisees.
iii. Choice (c):Isconsistentwith plansto make the organizationmoreattractsince the currentfinancialstructure is debt-heavy
rendering the companyunattractive andriskyaswell asspending more inregarding to interestrate so will be, thisplanwill
enable itto possiblyresurrectitselfwithoutmuchdebtfunding.
iv. Choice (d):Is consistentwith currentfinancial conditionsofthe organizationandconsidersthe possibilitythat an optimal
financialstructure couldbe reachedgiving Leitchmoreflexibilityto continue implementing.
VI. Implementation
The partnerswouldbe wise to institute certainchangesinthe face ofthe immediate problemsthe organizationisfacing.Considerationshouldbe
givento curtailing costsandpracticing moreefficiencyinall areas.
1) Financial
a. Utilizing a budgetwouldvastlymitigate the waste ofthe organizationandprovide forbetterplanning andallocation
oforganizationalresources.
b. Being that On-Day’sgrosssaleshave increasedfrom $90,000in1966 to over$750,000by1969,itwouldbe wise to
continue the expansionafteroptimizing the financialstructure.
2) Organizational
a. Promotionwiththe organizationso asto alleviate Mr.Sibley from managing mostareasofthe companythusallowing
otherswith the necessaryskillsets to optimize those areas.
b. The partnersshouldfocusonbeing topmanagersrelegatedto making the majordecisionsincluding the strategic
planning (hopefullyandactive andflexible strategy).
3) Marketing
a. A betterlookinto what the competitions’strategiesentailwhichmaytake the skills ofa marketexpertstaffor
consultant.Styler hasbeengaining momentum witha strategythat one wouldnotthink wouldworkat face value so
maybe getting aheadofthatstrategywouldshedlight onnew approachesinthe industry.
b. An eliminationofnon-effective promotionalcostsshouldbe implementedso asto utilize that monieselse where
needed.
4) Operational

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a. A close analysisshouldbe takenin seeing whichOne-Daysite performsthe bestandthe sitesthat would needmore
tending as we have manylocationswithjust two partnerswho currentlypersonally supervisethe entire chain.
b. Having managersinplace thatrun their own franchise siteswould definitely leave them more accountable thushopefully
adding to One-Day’sbottomline; consistentwithMr. Swain’slong-term planthougha seriouscompanystrategic planis
not one thatshould be “playedaroundwith”.
In addition to these suggestionsforcurtailing the debtleveland increasing efficiency,considerationshouldbe givento the long-term statusofthe
firm with a strategyconsistentwith Mr.Swain’s idea.Importantfactorsto considerinclude Mr.Sibley’smultiple hats that doesnotallowhim to
focusonthe long-term visionofthe organizationthuscanleadto possiblelegalissuesespeciallywhencertainguideline suchasoperationsmanuals
not being inplace andsubjective hiring processesexists.Ifmore care istakenbyplacing dedicatedpeopleto suchareas,optimizationofthose area
will arise aswell asgiving Mr. Sibleya chance to long-term planwithMr. Swainthus betterable to allocate vitalcompanyresourcethougha
strong financialexpertexperience inbudgeting shouldbe broughton(maybeasa consultantfornow).Also,itis clearthat there is a declining
populationtrendinSyracuse so a marketing expertwouldbe able to getto the bottom ofthose reasons andconsiderfranchise ownersthatmaywant
to be locationin areasimmediatelyoutside the Syracuse location-maybe anadvantage.Also,the marketexpertmay possiblyunderstandhow
Styler hasquickly gainedsuchmomentum withits strategyasOne-Dayshouldnotbe blindsightedby its competition-lookinginto possible
takeoverbeing thatStylerequipmentmaybe failing andmaynotbe able to standtheir underselling formuchlonger.Consolidate youremployeesby
shifting them into locationsthatgetmore traffic so notonly rotationalin a set locationbutasa floater.With the retrenchmentapproach, ifdecided
to sale some property,plantorequipment-thatmaybe anadvantage asthe companymaybeable to sale itto the franchise ownerata discount-so
selling it but to the benefitofthe companyintwo ways aswell ashaving mangersthatwill run the companywithgreatresponsiblybeingthatit will
also be aninvestmentto those managersastheyare putting theirownmoneyinto it. So, IwouldsayOne-Dayshouldfirst lookinwardto become
more efficientso as to see whatcanbe done internally andimmediate, oncethatshowsprogressthenthe growth(expansionplan) cancontinue with
a betterfocusandgreatersustainable growthpotential.