Opportunities & Threats Essay
Opportunities & Threats
The changing demographics of the American population will provide Walgreens with several opportunities to increase their sales. By 2010, the American population over 50 years of age is expected to reach 95 million (“SIC 5912,” 2006). This increase in the number of elderly Americans will provide Walgreens with an increased demand for prescriptions and thepotential to increase sales and revenue in that category. The aging American population will greatly impact the pharmaceutical industry. In 2002, 30% of Walgreens’ prescriptions and 42% of prescription sales were derived from older Americans.
Recent changes in Medicare plans allow Medicare participants to pay the same no matter where they shop, which will benefit not only Walgreens, but other companies that sell prescription medication, as well as the manufacturing companies of prescription drugs. This category is especially important as pharmacy sales rose 12% in the last quarter, significantly more than the 5. 2% increase in non-pharmacy sales (Miller, 2006). Prescription drugs currently constitute nearly 64% of Walgreens sales (Biesada, 2006). Despite this, Walgreens should also recognize the opportunities that lie in non-pharmacy related goods.
Though Walgreens currently sells several goods other than prescription drugs, the overall company sales do not reflect successful sales in these categories. According to the National Association of Chain Drug Stores the greatest growth opportunity for stores like Walgreens is increasing non-pharmacy purchases that existing shoppers make. It is interesting to note that the number of customers shopping at drug stores is generally declining. Even so, the frequency of returning customers has risen. Customers often visit drug stores to fill prescriptions, but also purchase cosmetic products and over-the-counter drugs.
These categories comprise 80% of purchases on these trips, but only 30% of these shoppers make impulse purchases. As such, Walgreens is presented with an incredible opportunity to increase sales revenue by using marketing strategies to increase the number of sales made for non-prescription drug products. In 2001, the average non-pharmacy drug store purchase was $19. 38. An additional $2. 00 for every purchase made would increase the average sales by nearly 10% (NACDS/American Greetings Research Council, 2002). Another opportunity for Walgreens that could potentially lead to company growth lies in expansion to international markets.
Today, Walgreens remains a domestic corporation, and as such, its target market is limited only to residents of the United States. However, as the United States market becomes saturated, Walgreens has the opportunity to expand to other countries. Although cultural differences and government regulations may necessitate changes in the Walgreens’ product line and business practices in other countries, the quality service and products provided by Walgreens will be universally recognized and will help to ensure the company’s success.
In choosing to expand internationally, Walgreens would be the pioneer and market leader, as its largest competitors, such as CVS, have yet to enter international markets. Due to the fact that the majority of Walgreens’ sales are derived from prescription drugs, intertype competitors are a large threat. In an effort to attract customers by providing a convenient, one-stop-shop, grocery store chains and discounters have ventured into the prescription drug market. Furthermore, the average American visits a grocery store 2. 2 times per week, but a drugstore only once a month (“SIC 5912…”, 2006).
Discounters such as Wal-Mart emphasize low cost, making it difficult for Walgreens to compete. These retailers also offer a broader range of products, and have a larger customer base. 138 million Americans shop at Wal-Mart every week and many may find it tempting to fill their prescriptions in the stores in which they already shop. Another threat to Walgreens is the rising cost of health care. The high cost of health care has motivated more and more people to search for lower cost alternatives outside of traditional drug stores.
These include the purchase of prescription drugs over the internet, particularly from countries such as Canada, where they are less expensive. For example, of the top 100 branded prescription drugs in Canada and the United States, 93% were less expensive in Canada, and in Canada the average branded prescription drug costs 43% less than in the United States (Skinner, 2005). Furthermore, there is a shortage of pharmacists, which is an additional threat to the continued success of Walgreens.
Studies estimate that there are currently 8,000 unfilled pharmacist positions and predict that there will be a shortage of 150,000 pharmacists by 2020. If Walgreens is unable to hire qualified pharmacists, the quality of service provided will definitely decrease, which will negatively impact the company’s sales. IV. Strategies Walgreens has traditionally followed an organic expansion strategy. This has recently changed through the acquisition by Walgreens of other companies such as Happy Harry’s and Mermark, a specialty pharmacy.
(Walgreens Corporation, 2006). In order to exploit its opportunities and neutralize the threats, Walgreens must focus on customer convenience. The quality of service traditionally provided by Walgreens is what made it a household name, and the factor that distinguishes it from competitors. Improved and more frequent training of current Walgreens staff and changes to store design are ways in which Walgreens can provide a more convenient shopping experience to customers. Another strategy would be to improve Walgreens’ online services.
This will not only allow Walgreens to expand to international markets, but will also reduce the need for pharmacists. Discounts and free shipping could be provided to online customers in order to allow Walgreens to be more competitive with other online drugstores.
Biesada, A. (2006b). Walgreen Co. Hoovers. Retrieved May 16, 2009 from http://www. hoovers. com/walgreen/–ID__11601–/free-co-factsheet. xhtml Miller, J. P. (2006, September 26). Walgreens net climbs 25%; drug sales jump. Chicago Tribune. Retrieved May 16, 2009 from http://www. chicagotribune. com/business/chi- 0609260258sep26,1,5174751
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 13 February 2017
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