Walgreens Pharmacy is the biggest drug manufacturers and distributors in the world. The financial information will be obtained from annual financial reports, which are availed to potential investors. This paper will identify the current financial position of the drugstore in addition to comparing its financial activities with those two major rivals in the pharmaceutical industry. The comparison will also incorporate procedures and products at Rite Aid Corp and Caremark Corp, which are the two key rivals of Walgreens Pharmacy. Similarly, the obtained information will be outlined in a way that management will use it to make decisions in future. Being a leading drug store in the United States, Walgreens Pharmacy has posted credible financial results in the present year, which could have been boosted by increased globalization.
Walgreens Pharmacy financial health
Since its inception in 1901, Walgreens Pharmacy has grown from a corner drug store into a huge chain of drugstores that are scattered all over America. Similarly, the operations have been on the increase so that today the chain does not only distribute drugs, but they also manufacture their own drugs in addition to home care and long term medical facilities for the terminally ill (Bacon, 2004).
According to the latest news from the company, the government’s idea to introduce Medicare Part D was a blessing in disguise as it enabled Walgreens Pharmacy to provide special medication for the elderly, who are beneficiaries of the program. Consequently, this move made the last five years, quite favorable for Walgreens Pharmacy as its sales have skyrocketed ever since. The increased sales have been behind the high profits, which were recorded as positive since 2006 so that the total revenue in the firm has not been affected by external conditions (Bacon, 2004).
Based on the capital structure analysis, Walgreens Pharmacy is an all equity financed company with investors owning 82% of the total company, while the owners possess a paltry 18%. Consequently, at the New York Stock Exchange, the Walgreens Pharmacy stocks are selling at $33.50 per share and a total 5 million units are traded each day. This has been significant towards elevating the profits being recorded at the firm as investors want to own a piece of the successful entity. Similarly, the diluted earning per share of the Walgreens Pharmacy stock has been on the rise from a low of 17.6% in May to 33.8% towards the close of the third quarter (Walgreens, 2011).
Consequently, the sensitivity analysis shows a positive growth rate so that at the beginning of 2005, Walgreens Pharmacy was growing at 34.73% per year. However, the next five years posted equally promising positive results until it reached 57.04% in June 2011. Similarly, the last quarter of 2011 is expected to post equally positive results, which may get the overall growth rate of 2011 to hit 60%. The balance sheet of Walgreens Pharmacy demonstrates a well laid out balance between assets and liabilities, so that the form is not only operating within its capacity, but also reaping maximally from its undertakings (Walgreens, 2011).
Other financial news from Walgreens Pharmacy shows that ever the Sharpe Ratio, which is used to measure the rate of excess return in relation to the overall risk in company investments is high. At the moment the Sharpe Ratio (include) stands at 31.1% while the Sharpe Ratio (exclude) is 29.2%. This portfolio fit shows that annually Walgreens Pharmacy has a risk-free rate of 2.3%, hence investments made by the company are less likely to pose financial threats to the firm (Walgreens, 2011).
From the discounted cash flow analysis, the net sales of the Walgreens Pharmacy stood in the 2011 financial year were 70,276.59 billion against expenses, which amounted to 69,502.90 billion, which resulted into an excess of over 2,000 billion. This exhibits a commendable cash flow analysis. Consequently, based on the fact that Walgreens Pharmacy is opening more drug stores all over America with intentions of going international, the annual growth rate is forecasted to stagnate and eventually decline as the cost of medical services continuous to increase (Walgreens, 2011).
Use of financial information in decision making
Financial information is relevant to the Walgreens Pharmacy managerial team, when making decisions as the information allows facts to be analyzed before committing company resources. For instance, the sustained high growth rate should be an incentive for Walgreens Pharmacy to move to the international market as it has proven its worth in the already existing market. Similarly, the products and service delivery attributes of Walgreens Pharmacy have remained outstanding as exhibited by increased consumer loyalty, which has seen the sales being high despite introduction of low priced generic drugs. This could act as a stepping stone for Walgreens Pharmacy to retain its current employees as they are behind the lucrative results posted by the firm (Bacon, 2004).
The other advantage posed by financial information during decision making is that it clearly points out the firm’s strengths, weaknesses, opportunities and threats in relation to other rivals. Consequently, management at Walgreens Pharmacy will utilize the information to their advantage so as to outdo competitors by overcoming its weak points. Similarly, Walgreens Pharmacy’s management should use the financial information to decide on the share of Walgreens Pharmacy, which should be leased to shareholders as well as what percentage should be owned by the company itself. Such decisions are only formidable, when financial information is obtained foremost and critically analyzed (Bacon, 2004).
The impact of globalization on Walgreens Pharmacy’s business strategies
Globalization has presented both positive and negative effects on Walgreens Pharmacy, for instance, current global trends show that multinationals that have succeeded in the market have diversified their products as well as availing a wider array of services, which endear them to customers. Walgreens Pharmacy has adopted this move as seen in company products, where drugs are not the only products on the list, but rather there are medical services as well as wellness programs for customers. Therefore, it has a wider variety of customers, some who may not be interested in the drugs, but rather the other services on offer. In this sense, globalization has enabled Walgreens Pharmacy to diversify its products though all fall under the pharmaceutical industry (Bacon, 2004).
Globalization has also presented an opportunity for Walgreens Pharmacy to avail drugstores, whose attendants speak the customer’s native language. This is relevant as at times some customers may be visiting areas, where common languages are not used fluently hence by use of the dail-a-phamacist tools, customers are attended to successfully. This initiative has proven to be important, especially when purchasing personal effects such as contraceptives, especially in an overly crowded drugstore (Bacon, 2004).
Globalization has also enabled Walgreens Pharmacy to establish online shops for customers who could be quite busy that they have no time to visit the drugstores or those in regions with no drugstore. However, a good number of Walgreens Pharmacy online customers originate from distant regions, where Walgreens Pharmacy has not yet set shop hence posing a potential international market. The company’s website has presented immense opportunities for customers to review a Walgreens Pharmacy product, which is a way of collecting data on existing products by the company. Similarly, online marketing allows customers to compare prices as well as efficiency of products before making their purchase hence they only buy products upon satisfactorily undertaking their research (Bacon, 2004).
Globalization has created platforms for competitors to emerge, a move that has resulted in Walgreens Pharmacy developing exclusive strategies so as to gain a competitive advantage over the rivals. However, much of the global rivalry is only evident in online marketing and advertising.
Walgreens Pharmacy Competitors
Rite Aid is one of the key competitors that poses a major threat top Walgreens Pharmacy in terms of market share and popularity. Its major operations are in retailing of drugs hence it does not manufacture its products. Having opened its doors in 1962, Rite Aid has experienced its fair share of ups and downs with the most recent financial problem being the 2007, accounting scandal that resulted into imprisonment of key management members. This scandal led to a huge financial problem in the company and investors begun pulling out. Similarly, the stocks dropped and have continued dropping ever since 2007 until now when they are trading at a paltry $1.10 (Walgreens, 2011).
These financial woes at Rite Aid acted as an opportunity for Walgreens Pharmacy to purchase a good number of the Rite Aid drug stores that had been marked for closure. Similarly, the market share and customers who were originally owned by Rite Aid moved on to Walgreens. The timing of the Rite Aid’s problems was at a time when Walgreens Pharmacy was expanding, therefore, it was a coincidental advantage when Rite Aid floated the proposal to Walgreens Pharmacy regarding the purchase (Breidenbach, 2010).
Caremark Pharmacy, on the other hand, began operating in 1963, when it specialized in beauty care products and it was not until 1967, when pharmaceutical products were introduced. The financial health of Caremark has been increasingly successful owing to the endless mergers and acquisitions that have been witnessed (Rowland, 2006). These has enabled to firm to withstand harsh economic times in addition to retaining a growing market share, which is commendable. This has made Caremark Pharmacy the greatest rival threatening Walgreens Pharmacy’s existence.
However, Caremark Pharmacy has been on the news for a long period due to image tainting events such as fraud and inappropriate business practices, which have ruined its reputation among clients. Walgreens Pharmacy used this technological advantage to make its own image even better by satisfying customers in addition to keeping clear off controversies. This has endeared Walgreens Pharmacy to a commendable portion of Caremark’s customers.
Benchmark analysis of the three companies
Unlike its two rivals, Walgreens Pharmacy has adopted the best practices culture, where seasoned employees are given opportunities to teach fresh employees responsibilities that are related to their duties. This is evident from top management to junior employees as the chief executive officer at Walgreens Pharmacy was under the mentorship of his father the then CEO who founded Walgreens Pharmacy. It is, therefore, vital to note that these three pharmacies are run as family businesses, where the successor is an immediate descendant of the predecessor (Bacon, 2004).
The rivals, for instance, Rite Aid does not employ best practices during mentorship and this explains the reason behind imprisonment of key management members (Breidenbach, 2010). Consequently, their predecessors failed to undertake adequate measures during mentoring that would have resulted in imparting of best practices on the current office holders. On the other hand, Caremark has been faced by numerous challenges regarding its business practices as fraud amongst other dubious activities has been recurrent. Among the business practices under investigations include customer prescription transfers upon completion of mergers as most customers complain that their records are never transferred to Caremark hence they fail to understand the role of each in the merger (Rowland, 2006).
The other best practice technique employed by Walgreens Pharmacy and absent among the rivals is upholding employee retention in addition to operating within the required guidelines. This has enabled Walgreens Pharmacy to sustain its credibility among customers and the entire public (Bacon, 2004).
The other similar attribute of these three pharmacies is that all of them operate shops in nearly the same locality that is in the United States as well as online. Consequently, distribution is top on the list while customers are served as per the prescriptions they present at the store. Consequently, all three firms have invested in additional products such as wellness programs for clients and commendable community involvement projects for beneficiaries (Breidenbach, 2010). Walgreens Pharmacy, Caremark Pharmacy and Rite Aid all operate under a single headquarter such that all their branches are run in a similar manner. This has been vital in sustaining a single corporate image in addition to making it easier for customers to shop freely in either of the numerous drugstores under individual brand names.
Walgreens Pharmacy has managed to withstand tough episodes of rivalry and economic hunchbacks to emerge the leading drugstore in America. However, its competitors are following closely behind, especially for Caremark whose finances are almost at per with those of Walgreens Pharmacy. However, Walgreens Pharmacy has a competitive advantage that is not present for the competitors in that it has sustained itself over the years amid the challenges posed by globalization. In conclusion, Walgreens Pharmacy, Rite Aid and Caremark Pharmacy share a lot in terms of business operations and products, but the best practices among the three pose a huge difference.