Walgreens Value-Add Chain As a pharmacy retailer, Walgreens has no manufacturing operations. The retailer adds value by developing expertise in the procurement process of finished goods and managing them before selling them to customers with appropriate service. Walgreens would focus on procurement activities as primary rather than support activities. Figure 2 illustrates the model of value-add chain for retail industry. Partnering with Vendors. In April 2013, Walgreens has entered into an innovative long-term partnership with AmerisourceBergen, one of North’s America’s largest pharmaceutical services companies (“Walgreens and Alliance Boots Announce Strategic,” 2013). The relationship has provided Walgreens and AmerisourceBergen benefits from greater opportunities to improve their service levels and efficiencies, while reducing costs and increasing patient access to pharmaceuticals (“Walgreens and Alliance Boots Announce Strategic,” 2013). Also, Linda Filler, chief merchandising officer at Walgreens, delivers a presentation that she loved partnering with suppliers at the 2015 NACDS Annual Meeting in Palm Beach (Walden, 2015). Purchasing …show more content…
goods. As a retailer business, it is necessary to plan well. Demand forecasting, merchandise planning, and assortment planning become the key of purchasing activity. For Walgreens, the management of wide variety of mix products that Walgreens offers to its customer need to be even more emphasized because Walgreens does not just offer drugs, but also convenience. Merchandising and procurement team members at Walgreens expertly analyze consumer trends to select and obtain the mix of products that Walgreens offer its customers ("Merchandising and Procurement," n.d.). Moreover, demand forecasting, merchandise planning, and assortment planning could assuage the complication of the next activity. Managing inventory. Inventory is one of retailers' highest managing cost. Rooney Sides, vice, vice chairman of the retail practice at Deloitte LLP, said “if I hold too much inventory out of the stores, then it looks like I’m out of business” (Ziobro, 2016). Geoff Walden explained a more efficient supply chain means less inventory, which allows for more funding in elements like novel store formats (2015). Walgreens has been ahead of its competitors since 1994 regarding strategic inventory management systems, which previously had not been applied to the pharmaceutical chain industry ("Walgreens Inventory," 2012). This technological approach dealing with issues of inventory, such as over and under stocking, greatly benefitted Walgreens in the long run, and it allowed Walgreens to expand efficiently over 8,000 locations ("Walgreens Inventory," 2012). “We’re continuing to learn from all of our formats, and we’ve got a strong team measuring all the learnings from the different formats,” said Filler (Walden, 2015). Operating Stores. There are clearly two examples that Walgreens acts on this activity. The first example is the increased capacity to help customers find effective health and beauty care products and be instructed in their use. “Beauty advisors exemplify the mission of bringing great, talented, trained associates to the aid of our customers,” said Filler (Walden, 2015). Secondly, photo personnel have established better, newer ways of doing things. “Our customers have really responded,” Filler noted (Walden, 2015). Marketing and Selling. Each retailer has different marketing strategy, such as Walmart with always low-price strategy or Target with high-low pricing that offers deeply discounting on some products during a period of time. For Walgreens, the word convenience has been used. Walgreens is the place where customers can go to fill their prescriptions, while they also grab their pills, milk, magazines and deodorant at the same time (Ireland, 2010). Walgreens' marketing strategy is to offer the convenience to its customers. Filler is a big believer in optimizing the entire value chain with the consumer in mind (Walden, 2015). Thus, Walgreens listens to their customers using Facebook and online reviews. Walgreens also has a promotional effectiveness tool, the store point of sales (POS) systems, to evaluate marketing (Walden, 2015). Support Activity: General Administration.
Administration is a support activity that is important to the entire value chain because it consists of many activities, including finance, accounting, legal, quality, and importantly information systems. As the pharmacy retail industry, information systems will certainly help the retail backward to its suppliers, demand forecasting and planning, inventory management, operating stores, and distributing information to the customers. Walgreens has seen the importance of this support activity and provided necessary support services, such as information technology, legal, construction, and facilities maintenance, as well as professional services that enhance Walgreens overall business operation and efficient execution ("Social Responsibility,"
n.d.). Support Activity: Human Resource Management. Not only does human capital management important for retailer business, but also it is the supporting foundation of every organization. Human resource activity consists three minor activities; hiring, developing and training, and retaining human capital. The hiring process at Walgreens takes candidates through series of question-and-answer sessions to reveal experiences related to the desired position and any other personality traits which mesh well with the existing work environments. Walgreens has advances in employee training that are making customer service more personal and friendly ("About Walgreens," n.d.). Support Activity: Technology Development. Walgreens has a mobile app (Walden, 2015). “But there is a part of a merchant’s role that’s about imagining the future, and being sure that we move with innovation and imagination and creativity towards a future state, so there is an art to it, with a judgment factor that may not always be data-fueled. That’s important to a merchant’s capabilities,” Filler said (Walden, 2015). Support Activity: Services. Most retailers' service activity is returns and refunds, but Walgreens offers even more. Walgreens states on its website as "we offer a wide range of convenient healthcare services for the whole family" (Our Services," n.d.). Of course, Walgreens has returns and refunds, but Walgreens also gives more services that the other drugstore chain companies do not have. Those health services can be divided into three groups; prevention & wellness that provide many types of vaccine and testing, treatment for illness and minor injuries, and monitoring & management ongoing health conditions (Our Services," n.d.). Walgreens also provides the other kinds of services to make customer convenient. Pharmacy Chain Industry's Five Forces Analysis The five forces model is used to evaluate and examine the nature of competition and attractiveness of an industry. The model describes the competitive advantage by suggesting that there are five factors that determine the attractiveness and long-term profitability of an industry (Bells, 2016). The analysis includes the degree of rivalry within the industry, the threat of substitutes, bargaining power of buyers, bargaining power of suppliers, and the threat of new entrants (Bells, 2016). The Degree of Rivalry within the Industry. The drugstore industry’s demand is driven by the aging population, increasing awareness of health issues, and advances in medical treatment that has increased in US. However, the degree of rivalry is high because of multiple competitors such as drug retail chains, supermarkets such as Kroger, and mass merchandisers such as Walmart and CostCo (Bells, 2016). Secondly, drugstore chains has commodity products with low switching cost. These reasons makes competitive rivalry even higher. The Threat of Substitutes. The threat of substitutes is also high. The mass merchandisers, for example Walmart, have seen the increasing awareness of health issues, and diversified into this market. Surprisingly, 2,800 stores out of Walmart 3,200 stores around the country have pharmacies (Baeb, 2001). Now, Wal-Mart is appearing in many of those markets, offering the lowest price on front-end merchandise, and responding with price cuts of its own sacrificing profit margins in a bid to sustain sales growth (Baeb, 2001). It is clear that big box stores can be substitute. Bargaining Power of Buyers. The bargaining power of buyers is high due to low switching cost as mentioned earlier. People tends to buy from the most convenient store. Also, customers for health products tend to be more focused and well-educated. The next section, customer information, will show the general environment of drugstore's customers in details. Bargaining Power of Suppliers. The bargaining power of suppliers is not so high because drugstore chains have wide spread network of suppliers (“Walgreens and Alliance Boots Announce Strategic,” 2013). Retailers mostly have the force to neutral their suppliers bargaining power. The aforementioned information about Walgreens and AmerisourceBergen long-term partnership is one of the example how a retailer can neutral the bargaining power of suppliers. The Threat of New Entrants. From the same reason earlier, forming alliances cause lower potential entrants. The new firm will have a hard time to build the appropriate pharmaceutical supply chain as good as the firms that have already established one. Moreover, the regulation makes this business even more complicated, especially Medicare Part D and the Affordable Care Act. The laws for each state are also different to each other. For the details of regulations and laws are discussed further in Key Issues and Future Scenarios & Issues Facing the Firm section. On the other hand, the more complicated regulation has been, the harder for the new firm can get into this industry. Thus, the threat of new entrants tends to be medium. Figure 3 below summarizes the five forces model that has been mentioned earlier. The model is used again in company analysis part for the specific company, Walgreens.
Earlier on this paper, the industry five forces analysis has been discussed generally. In this part, the paper analyzes Walgreens ' actions based on industry five forces model and suggests the next actions that Walgreens would rather do to maintain and improve its power in each five areas. This section will go into each force of five forces model in the order of priority, including bargaining power of buyers, the threat of substitutes, the degree of rivalry within the industry, the threat of new entrants, and bargaining power of suppliers.
Walgreens was founded in 1901 measuring 50 feet by 20 feet by Charles R. Walgreen, Sr.. Mr. Walgreen was born near Galesburg, Illinois and his family later relocated to Dixon, Illinois at town about 60 miles north of his birthplace. Mr. Walgreens’ father was a farmer who turned into a businessperson and saw a great potential of the Rock River Valley (Walgreen, n.d., p.1). At age 16, Charles Walgreen had his first experience working in a drug store. He didn’t always have pleasurable experiences but it was a job with pay. He had an accident at a shoe factory that cut off his left middle finger from the top joint. This injury also stops him from playing any sports at school. After a year and a half with the drug store, Mr. Walgreen left to pursue something bigger in the big city-Chicago.
Since 1901, Walgreens has had a strong passion for customer service. The founder, Charles Walgreens, goal was to create a drugstore that was like no other. He said that for as many drugstores as he had worked at, he had never worked for one that had a focus for good customer service and low prices. Walgreens has grown by leaps and bounds since 1901 and is now recognized as the leader in the market with over 7000 stores. Charles Walgreen had an eye for good managers. He said he was able to pick people that he knew were smarter than him so to promote them and make them the heads of his drugstores. As a store manager, not only is it your job to run a store which includes ordering, customer care, and inventory control, but also it is your job to manage the staff. As a part of managing staff, it is their responsibility to hire, train and develop, and terminate if need be. While there are many jobs to choose from when it comes to HR and employee staffing, I choose this one because it is by far to me the most intense.
We strive to be the number one provider in the United States by investing not only in our company and technological advancements, but also in the communities in which we serve. Whether our customers are new to this world or our veterans, we know that our company can provide them with the newest and most effective products and services, while promoting the healthy communities in which they live. Through our valued employees, CVS is able to provide quality services and quality products. Retail Pharmacy Growth Strategy: CVS has managed to grow considerably in the past few years with the help of acquisition of beneficial companies and integrated the operations of these companies by creating synergy to drive higher margin and greater economies of scope. CVS is building more and more pharmacy stores in convenient locations.
In business, the mantra that success comes to those who can recover from setbacks is widespread all over the world. One of the organizations that poignantly illustrate this element is Costco. Costco is a warehouse firm that was founded in 1976 in San Diego. Although many people may envy the company as its owners enjoy huge success in the warehouse and retail industry, what the majority of individuals do not know is that in the first year of operations, Costco lost $750, 000, but after 3 years, the company had $1miilion in profit, 900 employees, and 200000 members. This shows that in business, the strategy can be the difference between success and failure. This essay describes how Costco has undergone evolutionary changes from its inception
In the 1960s through the 1970s, companies realized strong engineering, design, and manufacturing functions were strong market strategy keys to create and capture customer loyalty. As the demand for new products rose in the 1980s, these market requirements were to increase their flexibility and responsiveness to adapt existing products and processes or to develop new ones in order to meet customer needs. As manufacturing improved in the 1990s, managers began noticing material and service inputs involving suppliers and their major impact on an organization’s ability to meet customer needs. As a result of these changes, organizations now find that it difficult to manage their own organizations. First, they must be involved in the management of their network of all upstream firms that provide directly or indirectly, as well as the network of downstream firms, which are responsible for delivery and market service of the product to the end customer. In order to succeed, managers have to realize that they cannot do it alone and they must work together on a daily basis with the whole organizations in their supply chains. Because supply chain management involves all functions within an organization, managers need to know what a supply chain is, why it is important, and the impact of supply chain management on the success and profitability of their organization. Today, Wal-Mart topped the list of the America’s biggest companies on the Fortune 500 list, “with sales of almost $345 billion — more than a quarter of a trillion dollars” (Forbs). Wal-Mart’s supply chain management is becoming recognized as a core competitive strategy.
Walmart’s ownership and execution of the supply chain is a core competency that sets them apart from the competition. They have minimized the turnaround time to replenish inventory back into the stores. They also have agreements with suppliers to deliver products direct to the stores. Walmart owns 158 distribution centers strategically located in close proximity to many Walmart stores. The distribution centers employ 7,000 truck drivers to deliver truckloads of merchandise to the 10,700 retail stores with their tractors and trailers, as the inventory system dictates.
To get started, we first need to understand what Crocs' value chain is and how that process plays a role in the strategic direction of the company. The authors of our text, views the value chain as "the entire series of organizational work activities that add value at each step, from raw materials to finished product. In its entirety, the value chain can encompass supplier's suppliers to the customer's customers"(Robbins & Coulter, 2009, p.430). At Crocs, the entire series of organization work activities may be broken down even further using Porter's value chain model of viewing a manufacturing (or service) primary and secondary activities as a "system made up of subsystems, each with inputs, transformation processes and outputs"(Ifm.eng.cam.ac.uk, 2011). A diagram, compliments of Porter(1985) can be seen below:
When looking at Target’s value chain, it is evident that they apply aspects of both design and corporate responsibility while thinking through every decision they make to ensure it lives up to their values and helps the world. Starting at the top, they look at design. Design is what they call the heart of the business. Looking at every detail from the big picture to the small things that make a Target shopping experience, the goal is to do it with greater efficiency, style and smarts. (Corporate Responsibility Report, 2014).
Value chains are essential elements of successful businesses, and how to gain a competitive advantage by analyzing them is the most important aspect. In Porter’s value-chain model, he points out that there are two types of business activities: primary activities, which include inbound logistics, operations, outbound logistics, marketing, sales and service; and support activities, which include procurement, technology development, human resources management, and firm infrastructure. In order to gain an edge, companies should focus on these activities to improve or create products that will satisfy their customers.
From the manufacturers’ warehouse to the shelves, the business must orchestrate a symphony of the right products to the right places at the right times. Walmart serves customers and members more than 200 million times per week in retail outlets, online and on mobile devices. The company is able to offer a vast range of products at the lowest costs in the shortest possible time (Chandran, 2001). The main reason for this incredible growth of Walmart is because its distribution centers are highly automated.
Wal-Mart is known to beone of the best supply chain companies in the world. Throughout the years Wal-Mart has adapted strategies that keep up to their name. Unlike many retailers, Wal-Mart purchases goods directly from manufacturers, skipping a few steps of the supply chain cycle. Buyers use advanced negotiation skills to make sure they are receiving the best price on purchases. Wal-Mart also has their own trucks picking up from warehouses, reducing the price significantly on transportation. Long term relationships with vendors are extremely emphasized to understand prices and cost structure. These practices build Wal-Mart to its name and keeps low prices for retail customers all over the world. Supply Chain studies have shown that in 1998, Wal-Mart would fill up stock in 2 days compared to their competitors which would complete it in 5. Part of the reason Wal-Mart would replenish so
Value chain analyses a firm 's internal activities such as planning, production, and development, packaging and distribution so as to create value for clients. The function of the value chain is to identify the sources for cost reduction along with quality improvement. It means value chain is used to identify the strong and weak points, positive and negative points, the scope of improvement; in a nutshell, the advantages and disadvantages of the activities taking place in the system. The value chain is also called as a strategic analysis tool and it is a well-known concept in business management industry.
Wal-Mart Stores, Inc. is a renowned retail goods superstore that sits atop the Fortune list at number one. It would be very difficult to find an individual who is unaware of Walmart’s position as the largest brick-and-mortar retail chain in the world. The company has thrived over the past few years and is continuing to grow by effectively managing its store operations and distribution strategies. One of the major contributors to the business consistently meeting market expectations is directly attributable to their management approach. Walmart has revolutionized the way retail companies manage their supply chains in more ways than one. But, perhaps the most revolutionary was the practice of unprecedented coordination with suppliers (Chekwa,
Many organizations do not achieve the profits they anticipate by using incorrect methods or models to determine the true costs of products and services. This failure to correctly assess the costs associated with business not only affects the profit margin, but the organizations competitive advantage as well. In order to asses whether the organization is failing to realize optimum resource allocation, the organization should look at the methodology first popularized by Michael Porter titled the Value Chain Analysis (VCA). "VCA seeks to define the entire chain through which goods are supplied to a customer" (Booth, 1997, 2). The VCA can be a powerful tool in increasing an organization's competitive advantage; by correctly pricing products and assessing the true costs of materials and labor, organizations can align the improvements in efficiency, quality, and profits with its strategic objectives.