Using the material presented in the chapter, how would you explain Walgreen success story in the past? Do you think Walgreen can overcome the challenges discussed in this case? If so, how? Explain your answer. In the past, Walgreen Co. Succeeded part due to the density of its store (as we see on the text “downtown San Francisco has 21 stores within a one-million radius”). They established many stores with a variety of products and easy accessibility for all their clients. However their greater sector is the drug market.
I think it won’t be easy; it will be hard but possible to overcome the challenges. We see how competence (Wall-Mart, C.V…. ) is getting advantages on the pharmacy business, for example, testing 24-hour pharmacies and offering eye exams. But, I think Walgreen can still see this as an opportunity and compete with their rivals creating mail-order prescriptions through their local Walgreen ‘s and also offering their customers some offers or sales in order to keep capturing them to go into the store. So customers will have the chance of delivering or picking up their medicines. 2.
If you were asked to analyze Walgreen capabilities, how would you go about conducting such a study? What kind of data would you obtain? Explain your answer. Student responses will vary. The study may be conducted by obtaining the Walgreen annual report to see where the company feels they are and compare that with what the competitors are doing. 3. Describe Walgreen industry environment using Porter’s Five forces framework as discussed in this chapter. Threats of new entrants: low. Although Walgreen and C.V. are the giants in the retail pharmacy industry, there is still plenty of room for smaller competitors.
In total, small independent pharmacies still comprise approximately 15 percent of the market. Given that many consumers choose their pharmacy based on location convenience, however, the existence of these smaller local pharmacies is unlikely to become a competitive threat. In conclusion, an entrant seeking to mimic the Walgreen and C.V. type large chain faces a monumental task, from establishing new branding to renting and operating huge spaces, etc, that might not be worth it. Threat of substitutes: high. The most pressing and dangerous substitute to Walgreen’ business model is he mail-order pharmacy.
Given a consumer mind set, the extra travel and time required to pick up a prescription at a pharmacy like Walgreen makes online and mail order an attractive alternative to those who take prescriptions consistently, and is a serious threat to Walgreen’ current business model. Power of suppliers: medium Clearly, many prescription pharmaceutical drugs are available only from one company. The pharmaceutical giant that holds the patent. This is, by definition, a monopoly, and therefore subject to enormous supplier power. However, since Walgreen is a major source of prescription drugs it has some bargaining power against its suppliers.
In addition, generic drug typically could have many producers, this will reduce the power of suppliers, to the advantage of Walgreen. Power of consumers: medium-high While individual consumers have little buyer power, both private and public insurance plans as well as Bomb(Prescription Benefits Managers) have very significant buyer power. A highly consolidated PAM sector could have quite a strong bargaining power over Walgreen and other pharmacies, since losing a entrant with a large IBM means important lost revenues.
Intensity of rivalry among competitors: high Competition between Walgreen and C.V. pharmacies is aggressive and direct. For example, C.V. recently ran an advertisement in millions of circulars instructing Walgreen customers how to transition their accounts to C.V.. While they both are comparable retail pharmacies, in recent years they appear to have moved in slightly different strategic directions. While Walgreen continues to focus primarily on retail pharmacy sales, C.V. is making moves into pharmacy benefits management.