PHARMACIES AND DRUG STORES INDUSTRY OVERVIEW 2016 2017 2018
ESTABLISHMENTS 47,423 48,364 49,362
SALES ($MILLIONS) 211,889 223,917 237,159
EMPLOYMENT 726,587 741,008 756,284
The retail drug store and pharmacy industry is comprised of large chains and small neighborhood pharmacies which provide prescription and nonprescription drugs and medicines. It is common for these stores to also sell health and beauty products as well as general merchandise. Sales for retail and drug stores in the US reached $223,917 million in 2017. There were 48,364 establishments recorded for 2017, employing 741,008 people. Going from 2017 into 2018, there is expected to be a 5.9% growth in sales, 2.1% growth in establishments and a 2.1% growth in employment (1). The
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These leading competitors account for 69.9% of the industry’s revenue (2). Chain stores currently account for nearly 50% of the prescription market in the Unites States (3). A key characteristic of competition in the current industry, as well as a trend for the next five years, is consolidation. By consolidating independently operated pharmacies, drug stores and small chains, the key industry players such as CVS and Walgreens will have the choice to either strengthen their market shares or diversify their product and services, offering to compete in healthcare (2). Discount supermarket chains are gaining more market share in the pharmacy business, pressuring industry leaders to adapt. Walgreens and CVS responded by proving the convenience of a drive thru as well as specialty services including pho processing, photocopying and loyalty programs …show more content…
The elevated level of competition can be attributed to an increase in prescriptions and growing external competitors. The increase in the number of drugs being prescribed has a positive correlation to the growing elderly population. Supermarkets, supercenters and warehouses are offering over-the-counter drugs at a lower cost and gaining an increasing share of the retail drug market. Walmart has broken into the top five retailers of drugs as a result. Concentration in the market reflects the consolidation of small chains and independently operated pharmacies and drug stores. As consolidation continues, rivalry will decrease (2).
THREAT OF NEW ENTRANTS- LOW
The US retail drug store and pharmacy industry has a low threat of new entrants. It is difficult to enter the market and offer the convenience and price of large drug stores with vast networks, a large number of locations and established relationships with distributors. The industry’s subjection to federal and state laws and regulations also deter new entrants (2).
SUPPLIER BARGAINING POWER-
Although this force has the least concern, it might be the key for Walgreens to position itself as the number one pharmacy retailer. Currently, Walgreens cannot rival the overall cost leadership strategy like Walmart. Walgreens has offered the differentiated medical services that customers can find convenience. However, if Walgreens can lower bargaining power of its suppliers, Walgreens would be able to use combination strategy that integrate overall low cost and differentiation together. The combination or hybrid strategy has been proven that can remain successfully better than overall low cost and differentiation strategies alone (Baroto et al.,
Bargaining power of suppliers analyzes how much power a business 's supplier has and how much control it has over the potential to raise its prices, which, in turn, would lower a business 's profitability. (Arline, 2015).
Mr. Walgreen knew if he was going to be successful in the pharmacy business, he had to learn as much as he could from other pharmacists. Mr. Walgreen worked a series of jobs with the top leading pharmacists named Samuel Rosenfeld, Max Grieben, William G. Valentine, and Isaac W. Blood. However, Mr. Walgreen found that these pharmacists were teaching him old fashioned complacent methods of running a drugstore. He asked himself, “where was the selection of goods that customers really wanted and what about the customer service?” Mr. Walgreen c...
...erience. Due to low switching costs and many competitors both entering and existing in the market to keep yourself out in front you have to prove to be different. Offering many options to save along with convenience will help Publix keep their market share for many years to come.
Rite Aid Corp. sells “prescription drugs and a wide assortment of general merchandise that they call ‘front-end products,’ including over-the-counter medications, health and beauty aids and personal care items, cosmetics, greeting cards, household items, convenience foods, photo processing services, and seasonal merchandise.” They are distinguished “from other national chain drugstores, in part, through their private label brands, their ‘stores-within-Rite Aid stores’ program with GNC and by their Internet presence. The sale of prescription drugs alone represents 59.5% of their total sales. Over-the-counter drugs and personal care items (10.9%), health and beauty aids (5.8%), and general merchandise (23.8%) account for the remaining 40.5% of their total 2001 fiscal year sales.
The suppliers bargaining power is generally strong because of the big monopolies and the high importance of purchasing components and operating system, therefore it decreases the profitability of the market players.
The SWOT analysis: The study of the firm's Strengths, Weaknesses, Opportunities and Threats called SWOT analysis, a key step in flushing out known performance issues that are important to the growth of the organization addressed in the corporation strategic plan. The issues identified in the SWOT analysis help leadership to come up with a plan and strategy to achieve the overall mission of the company (Strategic Planning, n, d). Target Corporation is one of the largest public retailing company in the US having more than 1700 stores serving guests nationwide. Target group and its brand position are evaluated in the market using SWOT analysis.--
Threat of new entrants is relatively high. Companies forming alliances are potential rivals. Even if earlier such company was not considered to be a threat, after merging with some research and development company or forming alliance with another pharmaceutical company it would become a rival to Eli Lilly. The threat is however weakened by significant research and development costs necessary to successfully enter the business. Eli Lilly’s focus on a relatively narrow market of sedatives and antidepressants weakens the threat of new entrants, but other products that form lesser part of company’s sales such as insulin and others are exposed to high threat of new entrants. The need of obtaining certificates and licenses also weakens the threat of new entrants. Discussed above leads to the conclusion that threat of new entrants is medium.
Although monopolies appear damaging at times, there are arguments that they are an advantage to society. Monopolies in the pharmaceutical industry drive companies to pursue research and development (R&D) efforts to gain new patents. According to a 1992 study, among the 24 US. Industry groups, pharmaceuticals dedicated 16.6% of their amounts to basic research, while all other industries averaged at 5.3% (Sherer 1307). This fact validates the incentive pharmaceutical companies have to get a patent and acquire more power. Pfizer encourages R&D because of the incentives and a want to obtain patents to receive more profit. Pfizer has to promote itself to be successful, creating a good brand image that consumers will trust. If the company can advertise successfully, more consumers will purc...
The rivalry aspect of Porter’s Five Forces that influence’s the grocery industry finds that there is a high degree of competition for consumer’s business among the dominate retailers as well as those companies trying to take any share of the market they can get. The large retailers engage in intense competition among each other as well as other stores that are competing for sales. Price wars drive down the profit margins for individual items and new and improved store design to bring in customers increases fixed cost. Improved distribution lines affect distribution and storage cost is competitive adjustments that the major retailers use to stave off the increasing competition. The last area of rivalry that the major companies use is the relationships they have with their suppliers to sign exclusive deals or lower cost than those prices paid by competing firms. As more retailers such as Wal-Mart and Target add groceries to their sales floor the competition increases as well as the stores that offer individual grocery items in their stores such as Dollar General, Walgreens and CVS. The grocery rival...
My current employer, Mayo Clinic, is a world renowned not-for-profit hospital that has been established for 150 years. Mayo Clinic is the first and biggest integrated not-for-profit medical group practice in the world and is a well-known brand name that is recognized world-wide. Working for an organization where the primary value is the needs of the patient come first, the organizations domain is held to a higher standard. The mission statement is to encourage hope and contribute to health and well-being by providing the best care to all patients through integrated clinical practice, education and research (Strategic statement of Mayo Clinic, 2012). The vision statement is that Mayo Clinic will offer an unparalleled experience as the most trusted partner for health care (Strategic statement of Mayo Clinic, 2012). In the medical field, innovations, research and technology motivate the business to perform and deliver care in a new standard. Mayo Clinic has a logo of three shields that are interlocked, presenting patient care, research and education.
The relationship with powerful suppliers can potentially reduce strategic options for the organization. 2 Bargaining Power of Customers Similarly, the bargaining power of customers determines how much customers can impose pressure on margins and volumes. Customer bargaining power is likely to be high when They buy large volumes, there is a concentration of buyers. The supplying industry comprises a large number of small operators.
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The SWOT analysis is a useful tool for identifying our personal strengths, weaknesses, opportunities, and threats to our plans and goals. According to a “Fuel My Motivation” article (2010), this analysis considers internal influences that can positively or negatively affect our ability to achieve our goals. The internal factors are our strengths and weaknesses. Also considered are opportunities and threats, which are external influences that can have a positive or negative impact on the ability to achieve our goals. I will share how the self-assessment instruments and self-exercises in this course have contributed to assessing and understanding my strengths and weaknesses. I will also discuss techniques I will use to leverage my strengths and understand my weaknesses. In addition, I will consider opportunities that I can take advantage of and the threats that can possibly impede my progress.
INTRODUCTION The Unites States spends more per capita on prescription drugs than any other country in world.1 In 2015, the US spent over $1000/person on prescriptions and was between 30% to 190% higher than 9 other high income countries studied.2 Total expenditure on pharmaceuticals in the US ranges between 10% (in pharmacy settings) to almost 17% of National Health Expenditure in all health care settings.2.3 Factors that determine a country’s expense on pharmaceuticals include volume of drugs/country’s population, drug utilization per person, type and mix of drugs used (generics vs brand names drugs) and drug prices.1 Estimates of rise in prescription drug spending from 2010 to 2014 showed that changes in the mix of drugs prescribed toward higher price products or price increases for drugs that both drove average price increases accounted for 30% of the observed increase in drug expenditure.2 Other factors