University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Walgreen to enter international market
Since opening its first doors, Walgreens seeks to be the number one most cherished pharmacy-led health, wellbeing and beauty business. From the company inception day to present day, they have grown as one the largest drugstore chains in the United States offering unmatched customer service, including innovative ideas in their existence with a nationwide scope in even the remotest areas of America. Currently, with incorporation with its subsidiaries, Walgreen operates more than 8,000 retail stores evenly distributed across the 50 states of the United States inclusive of Puerto Rico, Guam and the District of Columbia CITATION Wal13 p 43 l 1033 (Walgreens 43). Ideally, they provide customers with full house services from offering customers goods and services and a pharmacy incentive that sells big through ensuring health and wellness in the community through their wide network of drugstores across America. Specifically, these drugstores sell both prescription and non-prescription drugs not forgetting general merchandise; convenience foods, photofinishing services, beauty care seasonal items, candy and personal care for its consumers. Their pharmacy division sales huge by offering long-term care and mail services, offering specialty in infusion and a medical facility offering respiratory services and pharmacy benefits solutions. Pharmaceuticals stands out as their most important selling product despite the fact that their store chains are filled mostly with retailing products; for one their pharmaceutical products makes up 65% of their sales which are mainly prescription drug sales and another 10% which emanates from over-the-counter medication services offered in their drugstores. Important to note is that, the business does not offer Pharmacy Benefit Management but instead they are an in-network pharmacy. By 2010, 20% of Walgreens retail stores and distribution centers were owned by the company itself.
Fast forward to present day, Walgreens is collaboration with Alliance Boots to offer its products and services to reach out to customers across the globe. Considering that Alliance Boots is an international presence as a pharmacy-led health and beauty stop, their partnership seeks to reach out to the globe as a whole with a combination of two exquisite brands christened Walgreens Boots Alliance Inc. offering pharmaceutical wholesaling services and pharmacy care to respective communities in the world. In playing its role as a health care provider, Walgreens has units for imperative health incentives like Centers for Disease Control and Prevention whose doors are open on a daily basis. Through over 400 selected Walgreens Healthcare Clinics, staffed with certified nurse practitioners, they diagnose and treat a wide range of chronic conditions and illnesses while at the same time offering preventive care services. As part of their existing system, Walgreens has made it its obligation to make sure all and sundry who visit their facility live happy and healthy lives. To make and entice the public to be more engaged in pushing for healthy lifestyles, the company has a rewards loyalty program where consumers are offered rewards and discounts on products and services for making healthy wise decisions. With an online tracking system, customers can look at the progress of their points using the company’s mobile application or through their website. Inclusive in their online mobile application, Walgreen customers are offered coupon choices which they can link to their personal accounts, the customers can also refill their prescriptions online where they are linked with a pharmacist to offer them the correct medication. Through various online portals, Walgreens is building a picture perfect customer experience that all pharmaceutical distributors are eager to have.
Products and Services Sold at Walgreens
Branded as the ‘New Walgreens’, it is the ideal one-stop shopper’s dream center where an individual can easily walk into a Walgreens store and get orders on sushi, cognac, a smoothie or even much better receive manicure while at the same time their pharmaceutical needs are catered for at one place. For instance, in Chicago Randolph street store, Walgreens opened its doors for its customers offering a wide-variety of fresh-hand rolled sushi which is prepared on a daily basis, a juice bar offering fresh smoothies and an in-class wine selection unit for its customers thus widening its transitional prospect of providing healthcare services to its customers only. Not forgetting, the Chicago branch has a boutique offering makeover services and manicures to its customers CITATION Tut12 p 14 l 1033 (Tuttle 14). Inclusive of this package, customers can still fill their prescriptions at Walgreens stores where they are also allowed a consulting opportunity with an in-store health guide thus offering its customers the typical drugstore experience.
In providing health care services to its customers, Walgreens understands that the quality of care is dependent on the convenience, consistency and cost-effectiveness in offering medical services to its customers so as to ensure their recovery process is successful and well befitting. To ensure that this values are achieved Walgreens has a outpatient pharmacy which offers specialty medical attention to customers, a well transitions paradigm which is responsible for discharged patients where they offer home delivery of medications and post-discharge monitoring services and 340B Complete system meant for the inventory recording services of patient outcomes and the spending patterns of the pharmacy. Furthermore, Walgreens offers mailing services, retailing services and specialty coupled with inclusion services.
The mailing service at Walgreens is mainly meant to ensure that prescriptions are delivered to patients in any way possible. As part of the channel mix for pharmaceutical services, it is important that drugs be delivered to customers with considerations of correct timelines and what other better way to ensure delivery than through mail. Walgreens has over 25 years experience with mail order prescription through a system that is integrated with community pharmacies. This is to ensure that pharmacists can easily track orders for customers and ensure correct deliveries are made. The mailing service have been made accessible through making refill orders on phone, online or in person where through the outlined avenues supportive counsel is offered to customers and delivery of drugs is the coordinated with existing records of a patient in a particular state. Walgreens retailing services is attuned towards ensuring that they are providing personal care to all their customers which is achieved through offering; pharmacy services, immunization services, health testing, specialty medication, healthcare clinic services, 90-day drug supply to patients, a fill and bill service, a prescription savings club where customers receive discounts for medication and pharmacy centers of excellence where unique needs of patients suffering chronic diseases are attended to. On the other hand, unlike other healthcare industrial players who view infusions and injectables as isolated services which should be provided under separate healthcare models, Walgreens opts for a model where they provide pharmacy injectables services, offer infused medication and other clinical services under one roof. Walgreens thus has in place a specialty pharmacy, offers infusion services and offers clinical management programs.
Management Team and Organizational Structures
Deerfield, Illinois acts as the corporate headquarters for Walgreen with a cooperate organization composed of 10 distinct divisions. The E-commerce, IT and Engineering departments are meant to maintain all company new developing processes while ensuring Walgreen stays a-depth with the ever changing technological trends through maintenance of company software and hardware CITATION Wag13 p 11 l 1033 (Wagner and Orvis 11). Their marketing department is responsible for all factors related to product branding and visibility across the markets. In existence there is a facilities and real estate team whose sole responsibility is to locate potential store sites to ensure continuous expansion of the Walgreens franchise. Also in existence is the finance, legal, merchandizing and procurement, human resources, business development and the sales and strategy departments not forgetting the corporate management team. All the outlined departments are headed by a manager who is accountable to the Chief Executive’s Office. At the top of the food chain is the Non-executive independent Chairman of the Board, then the president/ Chief Executive Officer, President for Pharmacy, Health and Wellness Services and Solutions, President Operations and Community Operations, Chief Human Resource Officer who also holds the Senior Vice President Position, 6 departmental senior vice presidents, President for Digital Marketing, Accounting and Controller Divisional Vice President, 2 directors, 9 Independent directors and at the bottom of the chain there is the Divisional Vice President for IR and finance CITATION Han14 p 112 l 1033 (Hans 112).
Walgreens local locations have five departments which make up the in-store organization of the company; which have the responsibility of running 19 distribution facilities servicing over 7,500 locations retailing Walgreen products across the nation. Considering it is the impetus of the startup of the Walgreen brand by Charles R. Walgreen, the pharmacy department is considered as the foundation of the whole business. On the forefront of Walgreens main agenda is to establish itself as the best pharmaceutical service provider in the market; the best way to achieve this goal id adoption of a balanced leadership model which focuses on the operations of the business, strategic results leadership, people leadership and customer leadership. For engagement purposes with customers, the corporate management (executive team and senior mangers) have a sit-down and generate a plan then in collaboration with regional managers, the plan discussed is implemented through processes and behaviors adoption and lastly front-line employees are pooled into the cycle to create a inclusion sense where they will collect feedback from customers on the success of a new product. In the past, the leadership at Walgreens was aligned towards authoritarianism as the main focus of the business was to break more ground and reach a wide market base but now the company has adopted a new management model keen on engaging leaders to offer support to their subordinates while at the same time offering accountability of staff. This therefore called for refinement of staff roles all down through the management chain to focus more on engagement of employees and the giving customers a great experience whenever they visited any Walgreen store. For purposes of ensuring the effectives of the organizational structures at Walgreens, some changes had to be enforced; marketing vice presidents were transferred to specific regions to enhance a link with customers while at the same time building a link with employees in retail stores.
The past 100 years has been successful for Walgreen to the extent of being listed as on e of the most venerable drugstore chains in the United States. With regards to establishing its vision of being the number one pharmaceutical provider in America, it sought to expand its wings beyond the borders considered as the world largest pharmaceutical buy keen on taping into the international emerging markets opportunity. This international success has been actualized through their investment in the European pharmaceutical retailer Alliance Boots based in Switzerland. Following a 45% stake buyout in the Swiss company, Walgreens will have 12 countries network of close to 11,000 drugstores. Inclusive in the deal between Walgreen and Alliance Boots is an open window for complete purchase of Swiss-based Company after three years which will include the assumption of the company’s debt CITATION Fro12 p 52 l 1033 (Frost 52). This deal is game-changing for Walgreens for it fuses two powerful brands to create new opportunities that are forecasted to make huge profits in the coming years.
Coming on board, Alliance Boots brought with it close to 3,300 operational health and beauty stores that are operating in eleven countries; the network is further composed of 370 wholesale distribution centers with a dispensing base of 260 million prescriptions in over 170,000 healthcare facilities and pharmacies. Important to note is, Boots develops products for both health and beauty purposes through a development program in Nottingham, England. Walgreen will therefore take up the initiative of rolling out the products manufactured by Alliance Boots in their stores which is a sure enough moves that will boost their sales locally. It is anticipated that the combined enterprise will rake in up to $130 Billion in sales in the year 2016 thus enabling Walgreen to have the leverage to parley comfortable generic drugs prices which will in return expand the international markets of Alliance Boots specifically in Latin America and China CITATION Cha07 p 203 l 1033 (Chandler 203). The deal is considered well calculated for it comes at a time when the United States is experiencing unbalanced economic uncertainty; in retrospect to the above; Walgreen is going to be exposed to the expanse European market. However, this move to purchase Alliance Boots is not just all pretty for since the buyout, Walgreens stock price has declined by 15%. The stock price decrease is greatly influenced by retention of the United States tax domicile as opposed to adoption of an inverted structure which will move the company headquarters overseas thereby escaping the American high corporate taxation.
Walgreens social responsibility is rooted in the company’s earliest leaders specifically the founding father Walgreen snr. who left behind a powerful legacy admired by many. This legacy has been inclusive of how the daily running of Walgreen is undertaken thus ensuring the vision of Charles Walgreen is carried out in everyday operations of the company. Fulfillment of the founder’s legacy is done through various socially responsible activities that ensure; community development, environmental sustainability, diversity in daily operations, supplier diversity and disability inclusion.
In matters pertaining Walgreen’s social responsibility to the community the company is engaged in a Way to well Tour which was launched in 2009 for the sole purpose of offering free health teats to the people of the United States and Puerto Rico as a sense of giving back to the community. Mainly, the tour offers tests on glucose, cholesterol levels while at the same offering educational materials on health to visitors administered through the use of nine buses which tour the whole countries with some busses being restricted to certain regions. Through community leaders who create events in regions where they are connected to neighborhoods, the leaders organize flu protection awareness campaigns and organize winter and coat drives not forgetting fundraising walks. In 2011, there was a first aid campaign in commemoration of Tucson shooting victims, Walgreens organized and sponsored the Red Cross “save a life Saturday” meant specifically to train people on how to handle people in shock situations.
Fast forward to Walgreens Charitable activities in the community; two dominant activities feature here – Walgreen Charitable Donations and Walgreens Charitable Choice Program. Walgreens Charitable Donations is founded on the grounds that there is way of helping a hand irrespective of what has to be offered. Considering that Walgreens was founded in 1901, the company established and recognized there exists a very binding and strong relationship between running of good business and a well harmonized community. Having this in mind, Walgreens is open to receiving any donations meant for charitable service putting into consideration that the contribution ensures accessibility, outreach and education towards health, civic and community outreach, other organizations keen on research and treatment of diseases and finally faith-based organizations on the grounds that funding is not to be exclusively used for religious purposes. On the other hand, the Walgreens Charity Choice Program is geared to giving employees a platform where they can donate four different organizations for the sole purpose of improving wellness and health. The four organizations under the Choice Program are; Juvenile Diabetes Research Foundation, American Cancer Society, American Heart Association and United Way. This is undertaken and actualized through allowing employees to choose which amount is to be donated in every pay period that comes up. The aforementioned organizations are also responsible for raising awareness and education to the communities being served by Walgreens.
As part of giving back to the community and matching up to the company’s social responsibility status, on inclusion of people with disability in the Walgreen Program. Disability inclusion at Walgreen is fueled by the mantra, “one idea, big opportunity.” Perhaps all and sundry going through this piece must be wondering what this mantra is all about. The one idea initiative was sparked by the need to inclusively and innovatively look efficiency of workers, their productivity and job opportunities at distribution centers of Walgreen. Under the stewardship of Randy Lewis- senior Vice-president of supply chain and logistics, a way to create job opportunities for people living with disabilities, emerged. The idea came at a very convenient time when the Walgreen was focusing on technology investment for its distribution centers for the next generation. Through a combination of machines, systems and processes, a universal design was created to facilitate and create a conducive working environment for people with disabilities. Through engagement of local agencies, people with disabilities were sourced and trained on how to work in distribution centers and employed at the Anderson S.C distribution center; managers were also trained on how to relate and work with people with disability side by side. The same approach once considered as beneficial, practically executable, is adopting the same for its facilities in Washington DC.
As a responsibility of Walgreens to the community, the Flu Shot Program is aimed at ensuring the community people stay and live well. Walgreens has a human resource base of over 27,000 medical practitioners, through utilizing this pool of human resource, Walgreen is has taken up the role of community pharmacy in a new way which is aimed at better serving community members through provision of immunization services. Over the past two years, Walgreens has been able to give over 18 million immunizations which is just but one of the many ways the pharmacy department at Walgreens is expanding its role in the community. In partnership with the United States Department of Health and Human Services ever since in 2010, Walgreens has been able to offer uninsured and financially unstable people with over $10million worth flu shots. On the offset Walgreen also has an influence in the educational system through their connection with the Midtown Educational Foundation. Their partnership owing back to 25 years ago has helped Chicago children excel and access education through the Midtown Education Foundation. On a voluntary basis, employees at Walgreens donate their time for a mentorship and tutoring program for children from grades 4-12 so as to build on the children’s positive learning behaviors and further helps the needy children in society access opportunities for higher education by offering them scholarships to colleges.
Financial Performance Overview
The figures supporting Walgreens market stock price are nothing short of exemplary; ranked as the 5th best company across the globe running slightly above 8,680 drugstores in the United States with an accommodation of 73,000 healthcare practitioners, it is estimated that Walgreens serves 70% of the American population. Considering this figures and an international deal with Alliance Boots, the future value stock price of the company look bright if future prospects and their previous performances are to be taken into context. Currently, the healthcare for countries across the world is building up as a percentage of their GDPs. It is considered that the healthcare industry has a mature market which consecutively made great revenue returns for the industry I recent years specifically for Walgreens. The United States alone compared to other developed nations spends over than twice the per capita valued at around $8,508. With these figures in mind, it is forecasted that by 2038, it is estimated that healthcare expenses will go up by nearly 22% of the nation’s GDP for both public and private healthcare services. The Common Wealth Fund suggests that already, the United States healthcare expenses are considered to go up to the levels of $4 trillion by 2018 and $5.5 trillion by 2023. In 2018, households are anticipated to represent 25% of this value and in 2023 private are at a valued estimate representation of 25%. Averagely, the global pharmaceutical market is estimated to be worth around $1.6trillion or higher values by the time we clock 2020; United States as a single unit on its own is valued to make estimate sales of around $425 Billion. With this figures of the United States, it is clear that the Walgreen is leading in regards to profitability ratios if the industrial performance is to go by. For the financial year 2013/2013, Walgreen recorded profit sales at around 28.91% against the industrial figure of 16.94%. With an operating margin of 5.68% and a net profit margin of 3.74% in the same year, the company exemplifies traits of success if these figures are to be compared to the markets operating margin of 3.27% and net profit margin of 2.14%. All these successes are related to the management strategies adopted by the company leaders.
Three years back, Walgreens adopted a restructuring initiative commonly referred to as “Rewiring for Growth” purposefully designed for cost reduction and productivity improvement in various departments of the company. They have since reduced severance in their benefits and other expenses to make them accrue the profits as observed above. In 2011, they dropped their partnership with pharmacy giants Express Scripts following the two having fallen out. At risk there was $5billion which the company easily threw away an estimated 7% of Walgreens general revenue. To beta this third party market play, Walgreen adopted direct retailing services to their customers. In September this year, upon announcing 2014’s fourth quarter earnings was estimated to be at around $0.75 an increase for the previous year’s 0.73% EPS which was recorded in last year’s same quarters. Following this earnings release, Walgreens dropped Kermit Crawford as their Chief Executive Officer and adopted Tim McLevish who took up the position of executive vice president and the chief financial officer positions. Probably, these changes were made after considering the forecasted figures of the 2016 which suggest a downward guidance to $4.25. At the same time Walgreens moved forward with its acquisition of the Alliance Boots Inc. and maintained its headquarters in the United States a move that was considered rush for it is estimated to lose the company close to $4 billion in tax for the next five years putting into consideration the tax inversion of the United States. Significantly, the stock price dropped at an estimated 15% just in one single day.
In 2011, the returns on assets and equity is steadily slipping, the stock has for long been running at around $42 per share a distinguished 14% over its past 2006 peak where sales were excessively booming. To beat such a incident, Walgreen needed to create a relationship with drug-plan administrators as opposed to depending on sales from mailings. It is a good move that they have turned to stocking booze and other products to boost their sales. Back to the inversion issue being suggested by many American based company considerations the high local taxation rates. Currently, many companies in the pharmaceutical industry are in a tug-of-war battling the ever increasing costs and reimbursement pressures has made most companies to consider lower tax countries where they have set shop as their headquarters to evade this pressure. In 2013 only Walgreens tax rate was at 36% in excess considering that the bulk of the revenue being taxed is earned from the domestic market. In the event that Walgreen would opted for inversion they would have saved up to 20% of what they were taxed thus pitting a situation where they would have saved close to $4billion in a period of five years had they moved their headquarters to Switzerland following the Alliance Boots acquisition thus increasing their EPS by 15%.
Walgreen did not take up this inversion strategy simply because it posed potential risks such as protractions with the IRS and even lead to litigation would stretch out for even close to ten years and in the long run affecting their general market standings. In essence, by Walgreen acquiring the Alliance Boots, it was laying the foundation for a cross-divisional market for their future sales. This alliance brings together a combined entity of over 11,000stores that go beyond the borders of the United States broadening their market portfolio resourced with exquisite business and retail brands that are well acknowledged. The worldwide problem of the rising costs of prescription drugs not only in United States but also across the globe will be attended to by existing global and large scale operations that this companies already have; it’s an added advantage which if utilized to its fullest will register positive sales results for Walgreens. For 2013 fiscal year only, Walgreens already achieved a combined synergy sale of $154million, with the 2013 figures in mind; the combined sales synergies for 2014 are estimate to be around $300-$400 million. The success culture being emulated by Walgreens will b achieved by having in place a confident, aggressive, willing learners and tech savvy management which is keen to transform the company to the new depths it is seeking to achieve. The current Chief Executive Officer is insistent on the norm that the pharmacy department specifically the drugstores must be given more concentration for it is virtually the engine that keeps the Walgreen train moving considering 90% of the sales done by Walgreens is as a result of pharmaceutical sales.
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