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Derek Shaw Walgreen Situational Analysis - SWOT FM238A - Foundation of Retail Mathematics Fall 2012 Purpose: To Analyze the Financial Performance of Walgreen Instructor: Sandra Henderson Williams

Table of Contents Walgreens Floor Plan pg.1 Overiew of Walgreens pg.2-4 S.W.O.T pg.5 Strengths pg.6 Weaknesses pg.7 Opportunities pg.8 Threats pg.9 Conclusion pg.10 Financial Reports & Charts pg.11-17 Walgreens 1901 to Present pg.18 What’s new at Walgreens pg.19 Work cited pg.20

Walgreens Floor Plan


Overiew of “A history of our company: How a neighborhood drugstore became America’s most trusted pharmacy... and changed the shopping habits of a nation.”(Stated on “Our Past”). It all started in 1901 when Charles R. Walgreen Sr. purchased a Chicago drugstore on the South Side (corner of Bowen Ave and Cottage Grove) and started the drugstore Walgreen. Charles Walgreen’s energy and excitement lead to new ideas and goals of expansion. Walgreen was much different from his competition; he manufactured his own line of drug products because he wanted his customers to have high quality and low prices. Charles Walgreen bought his second store in 1909; and by 1915, there were five Walgreen drugstores. He made many improvements and changes in the stores, one being the soda fountains that also featured luncheon service. By 1916, there were nine Walgreen stores, which were all located on Chicago’s South Side and doing a business volume of $270,000 annually. In that year Walgreen became Walgreen Co. By 1919, there were a total of 20 Walgreen stores, 19 of them were located on Chicago’s South Side and the other store was located near the north side. In this time the company opened its first photofinishing studio, promising faster service than most commercial studios. The 1920s were a booming decade for Walgreen stores. In 1921 the company opened a store in Chicago’s downtown area, this was the first outside of a residential area. Walgreen’s also at this time introduced the malted milkshake at their fountain counters in 1922. In order to meet the demand for ice cream Walgreen established its own ice cream manufacturing plants during the 1920s. The company continued to open up more stores and by mid-1925; there were 65 stores with total annual sales of $1.2 million. Fifty-nine stores were located in Chicago and its suburbs, with others in Wisconsin, Milwaukee, and St. Louis, Missouri. Before the year was finished the company expanded into Minneapolis and St. Paul, Minnesota. The company opened its first East Coast store in New York’s theater district in 1927. In that year the company went public and by the end of 1929, there were 397 Walgreen stores in 87 cities; the annual sales were $47 million with net earnings of $4 million. During the Great Depression Walgreen in the beginning suffered little, sales actually rose in 1930, to $53 million. By 1934, 600 Walgreen stores were functioning in 33 states. By 1932, the company got effected by the Depression and sales dipped to 447.6 million. The company continued on and by 1931 they became the first drugstore chain to advertise on the radio. In 1933, the company experienced a change, Charles Walgreen Jr., became the vice president of the company and Walgreen Co. acquired a liquor license and was soon selling whisky and wine in about 60% of their stores. Walgreen recovered from the Depression in the mid-to-late 1930s and sales totaled $69 million. By 1939 the founders health was failing; Charles Walgreen Sr., resigned from his position in August. His son was named to succeed him, and Justin Dart, He had been with the company since 1929, and was named general manager. Charles Walgreen, Sr., died in December 1939 at age 66.


In 1940 the company opened its first superstore in downtown Chicago, the store contained a two-way escalator to provide access to the two floors, this was the first in any drugstore in the world. In 1946 the company acquired a 27 % interest, later increased to 44 %, in a major Mexican retail and restaurant company, Sanborns. More Walgreen Super Stores were opened in the late 1940s, which that year sales were up to $163.6 million, and Walgreen began to advertise on television. Walgreen opened its first self-service store in Chicago’s South Side in June 1952, The self-service stores offered lower prices but, required more employees because the store was larger and carried more products. The company built more self-service units and converted conventional stores. But, also closed some older conventional stores because they were either too small or the locations had become undesirable. The number of stores grew only to 451 in 1960 from 410 in 1950 sales grew from 4163 million to $312 million. With the opening of a self-service store in Louisville, Kentucky, at the end of 1960, self-service stores outnumbered traditional stores. Another major event in 1960 was the opening of the first Walgreen in Puerto Rico. In 1969, a third generation of Walgreens ascended to the company presidency, C.R. (Cork) Walgreen III was named president. In 1980 Walgreen began refocusing on drugstores and getting rid of certain businesses. In 1980 they ended the agency program that began in 1929, which accounted for only 2% of sales. In 1981 Walgreen closed its 27 optical centers and ended its partnership with Schnuck’s, the company also eliminated many in-store restaurants. In 1980 Walgreen Co. brought the Rennehbohm chain, based in Madison, Wisconsin. Also in 1981 Walgreen bought 21 Kroger SuperX drugstores in Houston. In 1982 the company added on a new service, which was next-day photofinishing available chain wide and put grocery departments in some stores located in Urban areas. In 1983, Walgreen installed its Intercom computerized pharmacy system, this system allowed customers to have prescriptions filled at any Walgreens in the country. In 1986 Walgreen bought the 66 Medi Mart stores located in New England, also that year Walgreen bought 25 stores from the Indiana chain, Ribordy, and opened 102 new stores, making 1986 Walgreen’s biggest year for expansion yet. In 1989 the company opened four mini-drugstores called Walgreens RxPress, this store offered a full-service pharmacy and popular non-prescription items in areas where full-sized locations were difficult to find. This store also offered convenient drive-through pharmacies. By mid-1997 the company had more than 2,200 units and was aiming for 3,000 by the new century. The pharmacy industry as a whole in the 1990s was an extreme change, at this time there were more and more people over the age of 50; as a result more prescriptions were being filled each year, making pharmacies a must. Also at this time competition increased as chains such as Wal-Mart Stores, Inc. challenged Walgreen. At this time to respond to this challenge Walgreen began investing heavily in technology and by launching new initiatives aimed directly at taking advantage of the trend toward managed care. In technology, the company improved its inventory management capabilities when it rolled out POS (point-of-sale) scanning equipment chain wide in late 1991. Followed in 1994 the SIMS (Strategic Inventory Management System), which united all elements of the purchasing-distributionsales cycle.


Today, Walgreen is rated number 4 on the Top 100 Retailers list, which is located on Walgreen in recent years has been working very hard, in 2011 President and CEO Greg Wasson announced to the White House that Walgreens is going to convert or open 1,000 food oasis stores across the country over the next five years. Walgreens also offers Web pickup service in the Chicago area, which is a convent way to online shop with neighborhood stores. Walgreens also has electric vehicle charging at 800 locations. In 2012 Walgreens re opened their flagship store in Chicago’s loop which shows a whole new side to the Walgreens shopping experience, the flagship store offers fresh food, groceries, an open and personable pharmacist counter, and the cosmetic section looks as if you are at a department store shopping for make-up. Walgreens also offers a rewards program when you get a Walgreens card and buy product from any Walgreens you get points added on to your card, when you reach a certain amount of points you can get for example $5.00 off your final total. Walgreens also has a cell phone application that allows you to order your prescription and when you come into a Walgreens it will be ready for you right away with no wait. Today the current Chairman of the Board is James A. Skinner and the President and Chief Executive Officer is Gregory D. Wasson.


S.W.O.T. Strengths Weaknesses

•Training employees •Locations •New Balance Rewards program •Private label - Nice! •New Cosmetic section •Advertisements to the public •Use of Mobile Applications •Hours of operation

•Locations •inconstant pharmacy hours •Hours of operation •Less profit made in 2012 •Low PE Ratio (price to earnings) •Merchandise layout •Private Label - Nice! •Hard to use Walgreens Mobile Applications



•Aging Generation •Expand Take Care Clinic’s •Transfer to electronic records •Adding more store locations in certain States •Allow rewards points for prescriptions in all States where a Walgreens is located •Hire more pharmacist to develop a closer connection with customers •Expand the LOOK Boutique •Organize the merchandise appropriately for easy traffic flow

•Health Care plans •Wal-Mart’s lower prices •CVS •FDA laws and regulations •Shortage of Pharmacist •Constant changing technology •Product differentiation •Customer Loyalty


Strengths Walgreens recently re-trained all of their employees to make sure that the employees would be able to assist customers better and to also learn the new Balance Rewards program, to understand the new credit card and POS systems so that way sales would flow easier and to fix any confusion. Walgreens has a total of 8,400 locations in all 50 states, Puerto Rico, and the District of Columbia (Walgreens, Store Count 2012). With the number of locations they have can be convent for people if you are needing to find a Walgreens location close to you. Walgreens recently started their own Balance Rewards program, it is a way for customers to save money by purchasing merchandise that gives you so many points and when you hit the minimum 5,000 points you are able to redeem your points and get $5.00 off your final total. If you hit 10,000 points you get $10.00 off, 18,000 points you get $20.00 off, 30,000 points you get $35.00 off and if you get the maximum 40,000 points you get $50.00 off. The process to redeem your points is very easy, when you go into the store and scan your Balance Rewards card or mobile application the sales associate will ask if you would like to redeem your points today, you have an option to continue to redeem to 40,000 points or use the 5,000 points you have. Walgreens is also running a special when you pick up a prescription and use your Balance Rewards card you automatically get 5,000 points. (Walgreens, Balance Rewards Help, 2012). Walgreens also has their new private label- Nice!, one of the best ways for a company to save money on merchandise products is to create your own private label, Walgreens did just that. The pricing the customers will see will surprise many and persuade them into buying the private label. Recently, I went in to my local Walgreens and researched the price differences for name brand and Walgreens brand, here are some prices that stood out most to me; Nice! purified water bottles are retailed for $2.99 and then a competitor like Ice Mountain water bottles are retailed for $6.49, the Ice Mountain bottled water is marked up 50% from the Nice! bottled water.(Personal in-store experience). Walgreens recently has been showing images of the new cosmetic section LOOK Boutique, and this cosmetic section does not look like a drugstore, the new section looks as if you are at a department store shopping for MAC or Chanel Cosmetics. It is also stated that the make-up experts will help you pick the perfect shade of lipstick, your right color for face make-up and even do your make-up making you feel like a star. This can be a huge strength and could help increase profits because many women and men like to have a professional show them what colors look best on them and what is going to match your skin tone the best.(Walgreens 2012 Annual Report). Walgreens has many smart approaches when it comes to advertising to the public, for example recently Walgreens aired a commercial that shows Walgreens from the beginning to images of the downtown Chicago flag ship store and while these images are showing the voice is talking about the many achievements that many people wouldn’t know Walgreens have done; EX. invented malted milkshakes, first non-profit pharmacy for troops and first child safety tablets. Walgreens will also have commercials that demonstrate how the Balance Rewards program works and the benefits of it. Walgreens likes to educate their customers when it comes to advertising, which gets people thinking why Walgreens should be their first place to shop. Walgreens has taken on the use of mobile applications, these applications can do things like, refill your prescription so it is ready for you when you walk-in, find a location close to you, be used as our Balance Rewards card, send images from your mobile device to a Walgreens photo finishing to have them printed out and ready for you when you come in and you can even shop, check out, and ship products to your home from any mobile application. Walgreens has locations that operate 24 hours a day to 9pm at night depending on what store location you are going to. This can helpful for people who can’t shop at normal hours due to long days at work, this adds a convince to them. 6

Weaknesses Even though Walgreens has 8,400 locations in all 50 states, Puerto Rico, and the District of Columbia; some States like Alaska, North Dakota, Vermont, and Wyoming only range about 1-9 store locations in each State. This can be a huge weakness because most other States have more than 9 stores in the other 46 States. I believe more profit could be made if they would add more locations to the 4 States with a low amount of stores, because some people may have to drive an hour or more to get to a Walgreens but have an option to go somewhere that is closer could lose customers and profit for Walgreens. (Walgreens, Store Count by State 2012). Walgreens may have some pharmacy hours that are 24 hours, but many do not. I know for an example at my neighborhood Walgreens during the week the pharmacy closes at 6 and on weekends they are closed; I live in Boys Town/ Belmont which is a very populated, busy, late hour running area. This is a big weakness because people usually work until 6pm during the week and some people really need to get medications. Some people may look at this and decide to pick somewhere like CVS or Walmart that offer longer more do-able hours. In the end Walgreens could lose more money for not having better pharmacy hours.(Walgreens personal experience). Relating to the hours of the pharmacy hours is also the actual store hours. It is stated that there are 24 hour locations, but, for many locations they close at 10pm on weekdays and 9pm on the weekends. But you look at Walmart a competitor with Walgreens almost every location is 24 hours and if not they are open to 12am. Walgreens should really try to have the hours be more constant because people may try to go to a Walgreens, but, they are closed at 9pm so the customer goes to a Walmart that is open till 12am. They can loss more customers this way and are losing money they could be making. (Walgreens stores hours 2012, Walmart store hours 2012). Walgreens in 2012 made less profit this year than they did 2011, this year net sales totaled $71.6 million, net earnings $2.1 million. In 2011, net sales totaled $72.2 million, net earnings $2.7. In total from 2011 to 2012 Walgreens had a 21.6% decrease in profit. (Walgreens 2012 Annual Report) Walgreens also has a low PE Ratio (price to earnings) according to as of now Walgreens stock is down 0.07 which is 32.16%, the difference from 2011 to 2012 is they are down 1.38%. This could concern potential new investors to what to buy stock or invest in the company since they are experiencing low PE Ratio. ( The layout for the merchandise at Walgreens is very confusing, when you go to look for pet food you see a whole section of bug killing chemicals right next to something you want to feed your pet, but you decide isn’t such a good idea. Also, things like cleaning supplies mixed in with Hallmark cards and then magazines in the next isle with food items. Things like this can get customers who are in a hurry even more stressed out, because they can’t find what they are looking for in an isle that contains similar products. This could cause customers to decide to shop somewhere that is more customer friendly in where they set the merchandise. Walgreens did release their private label- Nice! But, even though the price is good for paper towels, toilet paper, and trash bags the quality is what is keeping customers away from purchasing their private label. It is smart for companies to create private labels mainly for the better profit because of the cheaper prices you can offer, but if you aren’t selling as much as you are making you can lose more money. Which is exactly is what Walgreens is doing and they could start to be seeing more loss in profit then they did in 2012. The Walgreens Mobile application is a brilliant way to keep customers coming to Walgreens and getting things done quickly. But, when customers don’t understand how to use the application it can cause stress, frustration, and lose of customers. Recently, it has been discussed by many they like the idea Walgreens is doing, but how to do it is the real question and is causing customers to give up on something that could help Walgreens gain more profit.


Opportunities The aging generation can be an opportunity for Walgreens because the Baby Boomers make up one third of the United States population and have the most disposable income. As the population starts to age the more prescriptions filled will increase. Walgreens could use this as way to to market better to the older generation and add benefits to secure more baby boomers to purchase prescriptions more at Walgreens. Expanding Walgreens specialty clinic Take Care would be a good idea for Walgreens. Mainly because many CVS stores have minute clinics and that is a good way for people who visit these fast clinics to also buy prescriptions at the drugstore they are at. Many people would rather get their prescription and see a doctor in the same place to get it all done together. Walgreens has been using electronic prescription fulfillment since 1992 and is currently accounting for about 25% of all prescriptions. Since the new health care legislation and stimulus packages providing people to adopt the electronic health records, this will make it easier for doctors to access electronic records and electronic prescription fills. This will allow Walgreens to utilize their advantage by cutting coast and gaining customers. Adding more locations to States like Alaska, North Dakota, Vermont, and Wyoming would help increase Walgreens profit mainly because these locations only have 1 to 9 locations in each State. Some people in those States can’t get to a Walgreens because the nearest one could be located an hour or more causing people to not want to make the trip and deciding to choose a Walmart instead. Allowing rewards points for prescriptions in all States where a Walgreens is located would really help the store get more people on with rewards program and begin to become loyal customers. For example, Arkansas, New Jersey and New York Walgreens locations don’t allow you to earn points on prescriptions; they could be losing customers because of this. ( Balance Rewards Help Center 2012). Hiring more pharmacists to develop a closer connection with customers would be a great idea for Walgreens. As stated previously customers like to have a close connection with their pharmacist since they are the ones dealing with your medication. Lack of this could cause a loss of customers and decrease the amount of profit made in the pharmacy. Expanding LOOK Boutique is something Walgreens should focus on for more locations. As of now the only LOOK Boutiques in Walgreens are at downtown Chicago flag ship store and the Puerto Rico flag ship store. If they would do this more men and women would want to come to Walgreens to get any cosmetics they need because stores like Walmart and CVS don’t have this unique department store layout. This could help gain more customers and profit. Organizing the merchandise in appropriate areas could help Walgreens when it comes to easier traffic flow. As of now, some locations are not organized well and it can cause people to get confused and to not want to shop at that store because of the confusion and time it takes to find something.


Threats With new Health Care plans that are taking place this could cause certain insurance companies not being accepted to cover prescriptions or even raise the cost on certain medications. This can be a big issue for Walgreens mainly because they are known for trying to keep lower prices for everyone, this could cause Walgreens to increase prices in prescriptions and could potentially cause Walgreens to lose customers. Walmart’s pharmacy offers prescriptions as low as $4 for generic medication and not to mention Walmart has cheaper prices on food items, health and beauty items, and etc. Walgreens offers for $25 a year for an individual to choose from about 400 different generic medications when needed. Walmart has a better deal because you can purchase the medication when needed and pay the $4, but, what if you don’t need as many medications in a year but you still paid $25 for only a couple prescriptions you are paying more at Walgreens. Also, people don’t like to pay an annually amount they like to do a pay as you go kind of method. ( 2012 & Walgreens. com 2012). CVS is another threat for Walgreens because CVS is the basically the same as Walgreens, so some people can confuse the companies which can a threat for Walgreens because CVS is ahead of Walgreens; CVS was the first to come out with the rewards card and then just recently Walgreens came out with a rewards card. This is a big threat for Walgreens mainly because they need to try to stay ahead of CVS to make sure to keep people coming to Walgreens. FDA laws and regulations can be a major threat to Walgreens mainly because drugs can become unsafe; medications can be taken off the market and etc. This can be a threat for Walgreens because if certain medications or drugs they have become banned Walgreens can lose money because they had to purchase those medications and now they have to give them to the FDA and lose that money they expected would become profit. Another threat can be the possible shortage of pharmacist; since the baby boomer generation does take up one third of our countries population and since the generation is getting older the need for more medication is going to cause more of a need for pharmacist and today people like to have a connection with their pharmacist. Also, people don’t like to wait, when they need to get a prescription they want it fast and want to finish their errands fast. Some people may even change their pharmacy if they don’t get the fast and personal service they will find somewhere that does. The constant changing technology can be a threat for Walgreens because keeping up with technology can be expensive since it seems to change about every few months. The consistent training that needs to be done can become stressful to the company and the POS system crashing can become more occurring. Product differentiation can become a threat because Walgreens has so many different products and marketing all of them can become stressful and costly. Some companies may even pull products if they believe Walgreens isn’t marketing those products enough. Another thing product differentiation can cause is less people looking to buy Walgreens private label Nice! because of the many other products Walgreens offer. Customer loyalty can be a threat for Walgreens because if you can’t keep your customers loyal to your company you will have less store trafficking and lose profit. Also, not keeping customers happy may cause them to go to a different drug store, so Walgreens needs to make sure customers are satisfied and to keep them loyal to the company.


Conclusion Today, Walgreens is listed as the number one drugstore chain in America. And has come so far since the first store in 1901. Today, Walgreens makes sure all of their employees are properly trained, continuing to expand to other locations, and is using mobile applications and rewards programs to draw in more customers. What I see for Walgreens in the future is all positive, what I can say is I know they will keep their prices low and continue to compete with Walmart and CVS to have lower priced prescriptions. Expanding the looks of the flagship store to other stores to prove to everyone that they are not like every other department store and to develop a strong customer loyal base for stronger store trafficking. I also see the expansion of more Walgreens in other countries and more locations in the United States along with expansion to stores, I also can see the expansion of more Take Care Clinic’s in more Walgreens locations. I can also see the overall profit for next year to be higher then it was for 2012, mainly because this year Walgreens completely updated it self and like the old saying “you got to spend money to make money�.


Walgreen Financial Reports








Walgreens 1901 to Present

The beginning....

.....Today at Walgreens


What’s new at Walgreens

New cosmetic section!

Are we at


New pharmacy!

New savings! 19

Work Cited “Balance Rewards.” Help. N.p., n.d. Web. 15 Nov. 2012. <>. Walgreens 2012 Annual Report. N.p.: n.p., n.d. PDF. “Walgreens (WAG).” WAG. N.p., n.d. Web. 15 Nov. 2012. <>. “The Media, Marketing and Advertising Professionals’ Complete Resource for Industry News, Events, Jobs and More.” MediaPost ⓠNews and Conferences for Media, Marketing and Online Advertising Professionals. N.p., n.d. Web. 15 Nov. 2012. <>. “Shareholder Tools.” Walgreen Co. N.p., n.d. Web. 15 Nov. 2012. < index.cfm>. “Walgreens Historical Highlights.” N.p., n.d. Web. 15 Nov. 2012. <>. “Walgreens History (100th Anniversary).” Vimeo. N.p., n.d. Web. 15 Nov. 2012. <http://vimeo. com/6823776>. BradyBrannonRich. “Doug Hurley - Walgreens Commercial “At the Corner of Happy and Healthy”” YouTube. YouTube, 16 Aug. 2012. Web. 15 Nov. 2012. <>.

I Derek Shaw saved my project in InDesign I Derek Shaw created the following page 5 in Excel


Walgreen Swot Book  
Walgreen Swot Book  

A SWOT analysis book I did for my Retail of Mathematics class.