The document provides a case analysis and recommendations for Rite Aid pharmacy. It recommends that Rite Aid focus on same-store sales growth rather than market share through private label brands, new services, and customer loyalty programs. It also recommends restructuring by narrowing Rite Aid's store footprint, upgrading new stores, and reducing overhead. Additionally, it recommends improving company culture by creating scholarship programs for pharmacists and implementing new training, retention, and incentive programs for employees.

1. Rite Aid Case Analysis

2. Recommendations
• Focus on same store sales growth, not market share
• Private Label Brands
Integrated • New services
Strategy • Customer -focused loyalty programs
• Narrow footprint through the divestment of unprofitable stores
• Invest in image upgrades of new store base
Restructure • Reduce management overhead
• Create scholarship programs for pharmacists
• Implement new training & retention program
• Implement employee incentives programs
Culture • Invest in employee facilities and wellness

3. Mission
 “To be a successful chain of friendly, neighborhood
drugstores. Our knowledgeable, caring associates
work together to provide a superior pharmacy
experience, and offer everyday products and
services that help our valued customers lead
healthier, happier lives.” – Riteaid.com
 Wellness+, Employee loyalty, Investments in online
tie into the Superior Pharmacy Experience.
 Investments into on-site healthcare clinics ties into
healthier, happier lives.

4. Core Values
 Passion for customers.
 Encouragement for employees.
 Winning through teamwork.
 Commitment to diversity and respect for the
individual.
 Accountability for actions and results.
 Integrity in all Rite Aid does.
 Value for shareholders.
 Caring neighbors.

5. Business Model
 Growth
 Through acquisition of other pharmacy retailers.
 Diversified growth  Purchasing of PCS Health
System.
 Create strategic partnerships
 Increase market presence and reach across
various distribution channels.
 Ex: GNC & drugstore.com partnerships.
 Strong focus on customer loyalty.

6. Strategy:
The Pharmaceutical Retail Industry.
 High bargaining power for
wholesalers (Control 85% of all
drugs sold).
 High bargaining power for
buyers due to Pharmacy Benefit
Managers and legislation.
 Strong rivalries between
existing three major players.
 Substitutes to high margin
brand names by generics.

7. Analysis / Assessment – Industry
 Types of pharmacies: independent, chain, mass
merchants, supermarkets, and mail-order.
 Key Players: Walgreens, CVS, Medco, and Rite-Aid.
 Large customer base and opportunity for growth.
 Growing population of older consumers.
 Health care laws (40M previously uninsured).
 Highly competitive.
 Average profit margin for pharmacy-related sales is
2-4%.
 Over $4.5B prescriptions were filled in US,
accounting for $300B in total sales.
 Average # of prescriptions filled per person =
 12.6.

8. Overall Strategy - Past
 Competition based on low
cost.
 Create economies of
scale through acquisitions
of other chains.
 Smallest of three major
retailers (Rite-Aid,
Walgreens, CVS).
 Cannot sustain strategy –
over–leveraged.

9. Strategic Shifts & Future Strategies
 Differentiate – cannot
compete on economies of
scale.
 Create products and
services that offer an
advantage over competitors.
 Provide higher levels of
service and a better
customer experience.
 Move from store - key to
customer-centric approach

10. Industry Trends
 Consumers search for low-cost alternatives.
 Internet-based.
 Mail-order.
 Economies of scale, lower overhead  discounts.
 Automated.
 Generic drugs (80% of FDA-approved drugs have
generic equivalent).
 Increased demand for:
 Prescription drugs.
 Pharmacists to spend more time on patient
counseling.
 Walk-in clinics.

11. Portfolio Analysis
 Retail pharmacy services.
 Over-the-counter drugs.
 Household and personal care items.
 Convenience foods.
 Nutritional supplements.
 Photofinishing services.

12. SWOT Analysis
Strengths Weaknesses
3rd largest pharmaceutical chain Overly aggressive acquisition
Online website (convenience) strategy
Implemented front-end Substantial amount of debt
merchandising to ↑ profits Employee unions issues
(pharmacy, foods, supplements) Poor credibility (Medicare fraud,
Loyalty programs (Wellness+) executive malfeasance)
Opportunities Threats
Mail-order sales Competitors’ position and plans
Walk-in clinics Prices dictated by US pharmacy
Test marketing new grocery distribution & reimbursement system
store/pharmacy concept in SC PBMs provide pharmacies with
 Full scale implementation of lower reimbursements
private brand (Simplify) Economic downturns (↑ # of
unfilled prescriptions)

13. Financials
Financial Ratios Comparison (NASDAQ)
Rite-Aid Walgreen Co CVS
(as of 2/27/10) (as of 8/31/09) (as of 12/31/09)
Current Ratio 207% 178% 143%
Quick Ratio 58% 78% 58%
Cash Ratio 5% 38% 9%
Gross Margin 27% 28% 21%
Oper. Margin 0% 5% 7%
Pre-Tax Margin 2% 5% 6%
Profit Margin 2% 3% 4%
Pre-Tax ROE 29% 22% 16%
After-Tax ROE 30% 14% 10%
Gross Profit $6,824,090 $17,613,000 $20,358,000
NI Applicable to ($515,585) $2,006,000 $3,696,000
Common S/H

14. Financials
Ranking by Rx Sales
(Retail Pharmacy Annual Report: 2010)

15. Proposed Sources of Same Store Sales
Growth
 Increase front-end economical products’ sales.
 Private label branding.
 Zone pricing.
 Immunizations.
 Specialty services.
 Patient counseling services.
 On-site healthcare clinic services.
 Mail-order pharmacies.
 Grocery store/Pharmacy model.
 Customer loyalty programs.

16. Conclusion
• Focus on same store sales growth not market share
• Private Label Brands
Integrated • New services
Strategy • Customer- Focused Loyalty Programs
• Narrow footprint through the divestment of unprofitable Stores
• Invest in image upgrades of new store base
Restructure • Reduce management overhead
• Create scholarship programs for pharmacists
• Implement new training & retention program
• Implement employee incentives programs
Culture • Invest in employee facilities and wellness

17. Questions?