Analysis of the Strategy, Execution and Strategic Risk of Walgreens
1. Risk Presentation
April 17th 2009
Analysis of the Strategy, Execution and Strategic Risk of
Saturday, April 18th, 2009
GSB 621
Strategy Execution Frameworks
Spring 2009
Professors Mark L.Frigo and Richard Anderson
The Center for Strategy, Execution and Valuation
Kellstadt Graduate School of Business
DePaul University
Presented by
Michael Borowiak
Matthew Drake
Huei-Jie Kwo
Craig Johnston
Michael Nemmers
Jay Swaminathan
2. WHAT YOU’LL LEARN
o Key components of Walgreens’ corporate strategy
o Strategic risks Walgreens faces and how it attempts to mitigate them
o Risk metrics that Walgreens employs
o Specific risk disclosures
o Our conclusions
2
3. Notable developments
1901 Charles R. Walgreen Sr. starts the Walgreens chain
1916 9 stores incorporated as Walgreen Co.
1927 Walgreen Co. goes public
1975 Achieved $1 billion in retail sales
2008 Marks 34 years of consecutive earnings growth
2010 Target of 7000 stores
Company Snapshot
3
Share performance vs. S&P 500
(source FT.com)
Walgreen Co. (WAG) Fundamentals
Founded 1901
Headquarters Deerfield, IL
Sales Revenue (2008) $59 billion
Stores (2008) 6,443
Employeees (2008) 237,000
Products Pharmaceuticals/Retail
4. By 2008 Walgreens operated
6,443 retail locations in the
US, a 9.7% increase on 2008 4
6. Return Driven Strategy
6
• “Honesty and integrity are cornerstones upon which Walgreen
Co. was founded and upon which we operate.”
• “We believe that honest goods can be sold to honest people by
honest methods.”
• Organic growth has allowed the company the opportunity to
carefully select retail locations.
• Leader in innovation and technology.
• Capitalizes on businesses beyond pharmacy
• Centralized patient database
7. Risks in the Strategy
7
• Financial risk-profits affected from drop in Medicaid funding
• Outlook revised to negative as credit metrics weaken
• Caterpillar/Walmart partnership-lower costs for
employees-potential market of 75m people.
• Substantial growth in the generic drug market increasing
number of suppliers
• Increased competition from Wal-Mart
• Lack of viable locations and oversaturation in areas
will impact sales growth.
8. How risk is measured, monitored and managed (1)
8
Financial Perspective
Objectives Measures
• Increase
convenience and
profitability across
the entire
Walgreens chain.
•Increased
emphasis on risk
• Profit per
customer visit
• Appointment of
Bill Rudolphsen as
company’s first
CRO
Objectives Measures
• Enhancement of
the customer
experience
• Extensive use of
customer
satisfaction
surveys, supervisor
checks and
mystery shoppers
• Establishment of
an extensive
customer database
• Creation of
prescription
savings club
Customer Perspective
9. How risk is measured, monitored and managed (2)
9
Int. Business Process Perspective
Objectives Measures
• Reduction of cycle
time
• Improvements in
efficiency
• Extension of
partnership with
Kiva Systems and
focus on cycle
time, tote
utilization,
installation time
and training time.
Objectives Measures
• Continuously
improve employee
satisfaction and
employee
retention.
• Solicits
information from
employees via
employee website
• Annual
satisfaction survey
• Renowned
employee
development
program
Innovation and Growth Perspective
10. Risk disclosures (from 2008 10-K)
10
“Retail drugstore
and pharmacy
benefit services
industries are
highly competitive
and further
increases in
competition could
severely affect
us.”
“We are subject to
governmental
regulations and
procedures and
other legal
requirements.”
“Changes in
economic
conditions could
adversely affect
consumer buying
practices and
reduce our
revenues and
profitability.”
“Our profitability
can be adversely
affected by a
decrease in the
introduction of
new brand name
and generic
prescription
drugs.”
1 2 3 4
However, these are simply cautionary notes and not specific enough
11. “Have no rigid system in you
and you’ll be flexible to
change with the ever
changing. Open yourself and
flow.”
13. Risk Presentation
April 17th 2009
Analysis of the Strategy, Execution and Strategic Risk of
Saturday, April 18th, 2009 Research pages
Presented by
Michael Borowiak
Matthew Drake
Huei-Jie Kwo
Craig Johnston
Michael Nemmers
Jay Swaminathan
14. Research pages (1)
14
References
Walgreens Customer Satisfaction Survey.
(www.walgreenssatisfaction.com)
Sawyers, Michael A. “Walgreens coming to Oakland in 2009.” Cumberland Times News. Dec 30th, 2008.
(http://www.times-news.com/local/local_story_364141412.html)
Hoovers Company Factsheet.
(http://www.hoovers.com/walgreen/--ID__11601--/free-co-factsheet.xhtml
Walgreens.com Press Room.
(http://news.walgreens.com/article_display.cfm?article_id=5078 )
Frederick, Jim. “Walgreens still on target for 7,000 stores by 2010.” Drug Store News . Sept 24th, 2007.
(http://findarticles.com/p/articles/mi_m3374/is_12_29/ai_n21053466/)
Walgreens.com About.
(http://www.walgreens.com/about/history/creed.jsp
http://www.walgreens.com/about/press/facts/fact3.html)
Press release-author unknown. “Electronic prescriptions soar at Walgreens.” 13th April, 2008.
(http://www.marketwatch.com/news/story/electronic-prescriptions-soar-walgreens/story.aspx?guid={A8A10423-B28D-
44D1-88ED-A5DF9C8FC30C}&dist=TQP_Mod_pressN)
Ernst, Jerry. “New Walgreens draws heavy traffic opening day.” The Davison Flagstaff. 11th Dec, 2007.
(http://blog.mlive.com/flintjournal/business/2007/12/new_walgreens_draws_heavy_traf.html )
15. Research pages (2)
15
References (cont.)
Walgreens.com Investor Info
(http://investor.walgreens.com/releasedetail.cfm?ReleaseID=337062)
Walgreenshealth.com Company Info
(http://www.walgreenshealth.com/whc/clientPortal/companyInfo/jsp/about_us.jsp)
Rigby, Bill. “Walgreen to cut Washington state Medicaid business.” Reuters.uk.com. 30th Mar, 2009.
(http://uk.reuters.com/article/governmentFilingsNews/idUKN3053697020090330)
Author unknown. “Research Update: Walgreen Co. ‘A+’ Corporate Credit Rating Affirmed and Off Watch; Outlook Stable.”
S&P Credit Research. Oct 9th, 2008
(http://www.alacrastore.com/storecontent/spcred/675982)
Havrilla, Mike. “Generic Drug Industry Consolidation is Underway.” Straighstocks.com. 18th Jul, 2008.
(http://www.straightstocks.com/current-market-news/generic-drug-industry-consolidation-is-underway/ )
Burritt, Chris & Wolf, Carol. “Wal-Mart’s Retail Muscle Helps Expand Drug Sales.” Bloomberg.com. Mar 26th, 2009.
(http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a88njE7I7byM)
Press release-author unknown. American National Business Hall of Fame. Date unknown.
(http://www.anbhf.org/pdf/walgreen.pdf)
16. Research pages (3)
16
References (cont.)
Baker, Ronald J. “Using Key Predictive Indicators p118. “Measure What Matters to Customers.” 2006.
(http://books.google.com/books?id=WN17cLEYquUC&pg=PA118&lpg=PA118&dq=increase+convenience+and+simultane
ously+increase+profitability+across+the+entire+system&source=bl&ots=fDwlJ5B9eP&sig=XA7PxmKXC5-
4E4SIBlr8XVjbDdI&hl=en&ei=qmLlSaTCGMjqnQerraCnCQ&sa=X&oi=book_result&ct=result&resnum=1)
Walgreens Company F3Q08 Earnings Call Transcript.
(http://seekingalpha.com/article/82359-walgreen-company-f3q08-qtr-end-05-31-08-earnings-call-transcript)
Seaman, Marley. “Walgreens 2Q profit down 7% on restructuring.” Wtopnews.com. Mar 23rd, 2008.
(http://www.wtopnews.com/?nid=111&sid=1259118)
Press release-author unknown. “Kiva Systems Chosen by Walgreens to Double Distribution Center Capacity.”
Pharmacychoice.com. 11th Mar, 2009
(http://www.pharmacychoice.com/News/article.cfm?Article_ID=334302)
Walgreens employee website
(www.employees.walgreens.com)
Walgreens 2008 10-K report
(http://investor.walgreens.com/index.cfm )
Prescription Drugs Canada Online Portal
http://www.prescriptiondrugscanada.org/
17. Research pages (4)
17
References (cont.)
Frigo, Mark. L and Litman, Joell. “Driven: Business Strategy, Human Actions and The Creation of Wealth.’” 2007
Frigo , Mark L. and Litman, Joel. “Strategic Risk Management: Aligning Strategy, Execution and Risk.” March 2009
Graphics and Photographs obtained from
Flickr.com
FT.com
Walgreens.com
Google Images
