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Walgreens: Differentiating to Lead

CASE STUDY, MARKETING MANAGEMENT, STRATEGIC MANAGEMENT
ET Cases, 19 pages

Case Preview

Walgreens: Differentiating to Lead

 

“We have a tremendous opportunity to differentiate ourselves and step out of the traditional drugstore format and create something completely new and unique. In the past we were a pharmacy with a front end that was convenience goods. We don’t want to lose that. We’re on the best corners of America for that reason. But we can move from just convenience to more health, daily living, and beauty.”1

– Gregory D. Wasson, President and CEO, Walgreens, 2013


As of July 2013, Walgreen Company (Walgreens), the US’ largest retail pharmacy chain2 was redesigning its stores and adding primary-care facilities, selling groceries, serving to more economically strapped customers and taking up many more initiatives in its stores to differentiate itself. This move by the company came in the wake of the digital revolution that changed the face of retailing and the approval of the Patient Protection and Affordable Care Act (PPACA) that promised healthcare for all US citizens and transform the healthcare industry in the US.

On March 23rd 2010, the US President Barack Obama signed a Federal Statute known as the PPACA into law. This Act along with the Health Care and Education Reconciliation Act3 was about to bring in a significant change in the US healthcare system. The PPACA commonly known as the Affordable Care Act (ACA) or ‘ObamaCare’ came into effect from January 1st 2014.

The ACA, which was aimed to expand public and private health insurance, introduced mechanisms to increase the quality and affordability of healthcare in the country. While, the hospitals, insurance companies and other healthcare providers would be affected by the ACA in their own way, the Act would also have its impact on the pharmacies and pharmacists. Because of the cheaper healthcare insurance costs and its availability to more people, the pharmacies would be catering to more patients/customers than ever before. As they were on the front-end of the healthcare system they were also expected to take the responsibility of promoting the ACA and educating consumers about their options under the law. Walgreens was getting ready for these changes in the system and the expected increase in competition in the industry, by offering more convenience services and differentiating itself from its competitors in the US healthcare industry..................

 

1 Geoff Colvin, “Walgreen Gets a Modern Makeover”, http://money.cnn.com/2013/07/25/leadership/walgreen-greg-wasson.pr.fortune, July 31st 2013
2 Ibid.
3 The Health Care and Education Reconciliation Act of 2010 is a law that was enacted by the 111th United States Congress, by means of the reconciliation process, in order to amend the Patient Protection and Affordable Care Act. It was signed into law by President Barack Obama on March 30th 2010.

Teaching Note Preview

Walgreens: Differentiating to Lead

 

Synopsis

On March 23rd 2010, the US president Barack Obama signed a federal statute known as the Patient Protection and Affordable Care Act (PPACA) or Affordable Care Act (ACA) into law. Commonly known as ObamaCare, this was about to bring significant changes in the US healthcare system impacting the whole value chains from hospitals to pharmacies and customers as well. It aimed to expand public and private health insurance, and introduced mechanisms to increase the quality and affordability of healthcare in the country. Because of the healthcare insurance costs getting cheaper and its availability to more people, the pharmacies would be catering to more patients/customers than ever before. And as they form the front-end of the healthcare system they were also expected to take the responsibility of promoting the ACA and educate consumers about their options under the law. This would increase competition between pharmacies to grab a share of the grown market.

Increased customers, in addition to increased competition and responsibility set the clock ticking for Walgreens, the US’ largest pharmacy chain. It started redesigning its stores and was adding primary-care facilities, selling groceries, serving more economically strapped customers, and taking up many more initiatives in its stores to differentiate itself from other players. Walgreens was getting ready for the increase in competition in the industry by offering more convenience services and differentiating itself from the competitors in the US healthcare industry. Would its differentiation payoff and keep it ahead of competitors? Would it be sustainable?

Prerequisite Conceptual Understanding/Before the Classroom Discussion

This case study presupposes a conceptual understanding of the business implications of the following concepts enabling an effective discussion leading to more practical solutions than a mere intellectual exercise. The participants were asked to read the following concepts from 14th edition of Marketing Management textbook to help them better connect the concepts:

  • • Philip Kotler, et al., “Chapter 2: Developing Marketing Strategies and Plans”, Marketing Management, 14th Edition (Indian Adaptation), Pearson Education Inc., 2013 – To understand how Walgreens used Michael E. Porter’s Differentiation Strategies (generic) to stay ahead of competition
  • • Philip Kotler, et al., “Chapter 11: Setting Product Strategy”, Marketing Management, 14th Edition (Indian Adaptation), Pearson Education Inc., 2013 – To understand the differentiation in products and services
  • • Philip Kotler, et al., “Chapter 12: Designing and Managing Services”, Marketing Management, 14th Edition (Indian Adaptation), Pearson Education Inc., 2013 – To understand about differentiating with services

 

Expected Learning Outcomes

  • • Walgreens’ serving business model/operating model during the last 112 years and illustrate the building blocks of its continued performance i.e., the CSFs of its enduring success
  • • The External business environment/forces that have either prompted/compelled Walgreens to alter its business/operating model
  • • The Differentiated business model of Walgreens and its sustainability

 

Positioning/Case Setting

This case study can be used for the following modules/topics in the Marketing Management Course:

  • • Differentiation
  • • Competitive Advantage

 

Assignment Questions

  • I. What is a differentiation strategy? What is the purpose of a differentiation strategy? How does it help a company? In what different ways can a company differentiate itself from its competitors?
  • II. What is Affordable Care Act? How would this Act affect the healthcare system of the US – the hospitals, the insurance industry and drug stores?
  • III. ..................

 

Case Analysis

The classroom discussion and analysis for this case study could be summarized through the Board Plan [Exhibit (TN)-I]. However, the classroom discussion was facilitated under three broad sections as explained in Exhibit (TN)-II....................

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Abstract


This case study enables an interesting analysis of the Critical Success Factors (CSFs) and the building blocks of the serving business model of Walgreens and its new differentiated business model. With the US President Barack Obama signing the Patient Protection and Affordable Care Act (PPACA) and instituting it into the federal law on March 23rd 2010, significant changes were expected in the healthcare system of the country. Apart from introduction of mechanisms to ensure that healthcare is driven by quality and affordability parameters, the law was also expected to increase pressures on the pharmacies as they were the front-end keepers of the value chain. Walgreens, the US' largest retail pharmacy chain, known for its customer service and innovative merchandise, as of 2013, was redesigning its stores and adding primarycare facilities, selling groceries, serving more economically strapped customers, and taking up many more initiatives in its stores to differentiate itself from its competitors. However, would Walgreens be able to create a competitive advantage with this differentiation? Would it be able to stay ahead of the pack? Will the new 'differentiated' model be sustainable?



Pedagogical Objectives

  • To understand Walgreens' serving business model/operating model during the last 112 years and illustrate the building blocks of its continued performance i.e., the CSFs of its enduring success
  • To discuss and debate on the external business environment or forces those have either prompted/compelled Walgreens to alter its business/operating model
  • To analyze the new ‘Differentiated’ business model and debate on the sustainability of its new model



This Case Pack Includes:
- Abstract
- Case Study
- Teaching Note (**ONLY for Academicians)
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