A Comparison between Walgreens and Wal-Mart - Term Paper Example

? A Comparison between Walgreens and Wal-Mart A Comparison between Walgreens and Wal-Mart Wal-Mart and Walgreens command a significant market share in the retail industry. Thus, with regard retailing of various drugs around the nation, both Wal-Mart and Walgreens play a significant role in influencing clients’ options. Both companies started off with core objectives of providing efficient services with regard to effective delivery of services in the drug retail sector. With time, both companies have grown to reputable companies with regard various service delivery practices related to the retailing industry. There exists a thin line with regard to the existence of service advantages of the services offered by both companies. Thus, in comparing and contrasting both companies, an individual requires the necessary content for effective realization of the service advantages. In addition, the employment of various analytic tools such as Porters’ 5 forces would provide the desired distinguishing edge. Founded by Charles R. Walgreen in 1901, Walgreens has grown to be one of the largest drug retailing companies in the U.S. according to its official website; the company currently boasts of over 8000 locations across the nation. This represents a significant expansion of the company from its headquarters in Chicago, Illinois. Thus, the company provides services with regard to pharmacy, health and wellness. The company’s provision of these services is championed by the employment of various drugs stores and health service divisions in the country. Walgreens owes its origin to the establishment of small drug store in Chicago, Illinois in the early XX century. By the 1920s, the company’s stores had incurred a tremendous growth. The annual sales had increased to millions of dollars. The uniqueness of its services coupled by various company practices cushioned the company from the famous Stock Market Crash in 1929 and the subsequent Great Depression. Thus, the company continued to widen its market scope through various practices such as upgrading to computerized inventory systems. Thus, the company has become a leading player in the drug retail industry. On the other hand, Wal-Mart was founded by Sam Walton in 1962. The company represents an extremely enormous American multinational retailing company. Thus, according to the company’s official website, the company operates various departmental and warehouse stores around the world. The company has grown to be the leading retailer globally and the third largest public corporation. With more than 2 million employees around the world, the company boasts of the largest employee base in the in the globe. Headquartered in Bentonville, Arkansas, Wal-Mart owes its origin to the discounting ventures of its founder, Sam Walton. Walton employed the use of various discounted stores in the promotion of increased sales. Thus, Walton opened his first discounted store in Arkansas in 1962 which represented the birth of Wal-Mart Company. The company has, thus, rapidly expanded to become one of the leading companies in the world with regard to the retail industry. Comparative Analysis of both Wal-Mart and Walgreens Both Wal-Mart and Walgreen companies have engaged in cut-throat competition practices with regard to the dominance of the drug retail industry. However, it is necessary to note that upon the inception of Wal-Mart in 1962, Walgreens had been in operation for over 50 years. Thus, in order to gain rapid market share and competitive advantage with regard to Walgreens, Wal-Mart had to employ strategic competitive measures. Thus, Wal-Mart employed strategy that was centered on improving livelihoods. Enhancing people’s lives, thus, formed Wal-Mart’s mission (Amendola, 2012). This was accomplished through helping people to save money. Sam, Wal-Mart’s founder, wanted to improve people’s lives by lowering the high cost of living. Through the establishment of various strategies in Wal-Mart, Sam succeeded in creating a suitable platform for implementing his vision. Wal-Mart, therefore, facilitated savings amongst its customers by offering high quality products at extremely and relatively low prices. Through these practices, Wal-Mart was able to rapidly acquire market share eventually beating Walgreens and becoming the world’s largest company in the drug retail industry. Therefore, a comparative analysis of both companies can be outlined in terms of the following factors: Technology In a world that is marred by immense technological advancements, Wal-Mart has been quick to adjust and to adapt to the trends in technology. In a bid to make its operations relevant and significant locally, Wal-Mart has embraced the use of Facebook (the largest social media network in the world) in improving its local sales (Dishman, 2011). Through the program, users can be subscribed to information pertaining certain offers and new merchandise with regards to the chosen Wal-Mart store. In addition, location of the desired store can also be done online. This, in turn, ensures that users are kept abreast with different offers and merchandise from local stores. Thus, this process is aimed at boosting the significance of Wal-Mart’s local stores. It also creates a platform for Wal-Mart’s customers to interact and associate with the company. Moreover, in the continued efforts of keeping up with the trends in technology, Wal-Mart also launched iPhone and iPad applications. iPhones and iPads have already been embraced in the gastronomy industry, and Wal-Mart seeks to capitalize on such technological advancements to boost efficiency in customer service (Stephanie, 2012). The applications are uniquely designed to boost Wal-Mart’s efficiency with regards to weekly or monthly shopping. Through the implementation of such applications, customers can make purchases from the comfort of their smart phones and other Internet devices. This, in turn, relieves customers the hustle of physically going to the stores especially for routine products. Through the applications, additional information concerning different products can be availed to the customers, thus, enhancing their decision making. In keeping up with the company’s mission, the applications also assist the clients by providing updated costs of listed products. This would, in turn, result in increased awareness in consumer spending, thus, helping the customers in their budgeting endeavors. On the other hand, Walgreen has lacked the muscle to keep up with Wal-Mart with regard to the advancements in technology. Although the company also operates online social marketing accounts such as Facebook and Twitter, the company is yet to come up with concrete and unique, tailor made services for its clients. This, in turn, has led to the rapid popularization of Wal-Mart at Walgreens’ expense. This gives Wal-Mart a service advantage over Walgreens with regard to effective employment of modern technology. Pricing Based on the history of both companies, pricing represents the largest platform for competition amongst the companies. This implies that both companies have been involved in various price wars with the Wal-Mart company savoring the last laugh because of its large market share base. In the latest development, Wal-Mart announced an immense waiver on the sell of monthly prescriptions of generic drugs. The company has to convince its customers that such a mass merchant pharmacy is better than other seasoned drug distribution chains such as Walgreen. Therefore, pricing offers a necessary platform for wooing the clients. Walgreens reaction towards the move by Wal-Mart outlined the company’s inability to match Wal-Mart’s price cuts. Walgreen reacted by failing to rival Wal-Mart’s price reduction with a corresponding price reduction of their own. Thus, Walgreen pointed to its seasoned distribution of generic drugs, arguing that it offered the best value for pharmacy patients. This, in turn, complicates the search for service advantage. Walgreen represents an immensely strong and seasoned company with a higher convenience factor as compared to Wal-Mart. Nevertheless, the price wars present an avenue for Wal-Mart’s competitive advantage and if prolonged could pose an immense threat to the mere existence of other purely pharmaceutical companies such as Walgreen. Porter's Five Generic Strategies Therefore, in order to expound on the strategies employed by both companies in consolidation of market share and promotion of sales, the Porter’s analysis is considered. Porter's five generic strategies encompass the following aspects: Cost leadership strategy Differentiation strategy Focus strategy 1. Cost Leadership Strategy According to Porter, cost leadership strategy calls for cost effective operations. However, the quality of the products or service should not be compromised. Thus, in the retail industry, both Wal-Mart and Walgreen have capitalized on cost leadership strategies. However, Wal-Mart has been more effective in terms of reduction of product cost, thus, enhancing a cost saving process for the customers. Consequently, this resulted in immensely increased sales and market share. 2. Differentiation Strategy According to Porter, differentiation strategy is necessary in order to develop uniqueness of the business. Thus, both Wal-Mart and Walgreen have capitalized on differentiation strategies in various ways. This has resulted in the employment of impeccable research and innovation process in terms of marketing and customer interaction. The quality of delivery of products and services has also been significantly improved through various practices. 3. Focus Strategy The focus strategy requires that a firm concentrate on a certain segment of the market. This process is geared towards creating a competitive advantage with regards to its competitors. Therefore, this aspect has not been fully employed by Wal-Mart, since the company tends to concentrate on a diversification process in increasing its market share. This, in turn, explains why the company comes second to Walgreens Company which mainly specializes in the provision of pharmaceutical services as evidenced by the following table: Revenues in billions No. of stores Percentage revenue from prescriptions Prescriptions filled (in millions) Walgreens 61 6678 65 617 CVS Caremark 49 6900 68 729 Wal-Mart 28 4258 NA 277 Other strategic ventures by both companies In order to thrive in the world’s retail industry, both Wal-Mart and Walgreen have to employ certain business strategies (Stephanie, 2012). These strategies include corporate, competitive and diversification strategies. Thus, these strategies can be outlined as follows: Growth strategy. Wal-Mart has embraced the expansion of is market share through various growth strategies such as diversification. However, Walgreens still dominates the drug retail industry through its specialization on pharmacy as evidenced by the table. Acquisition strategy. In this regards, both Walgreens and Wal-Mart have been involved in acquisition of various companies. This has significantly contributed to the growth process of both companies. Cost strategies. Wal-Mart has taken a leading role in initiating various cost strategy initiatives. This is evidenced by its price differentiation, which not only makes it popular but also depicts a commitment to its mission of improving lives. Nevertheless, Walgreens experience and specialization provides it with the necessary competence advantage over Wal-Mart, hence, contributing significantly towards its dominance of the drug retail industry. References Amendola, E. (2012). Wal-Mart Stores Inc. New York Times. Retrieved August 30, 2012, from http://topics.nytimes.com/top/news/business/companies/wal_mart_stores_inc/index.html Dishman, L. (2011, August 11). Inside Walmart's App Strategy to Turn User Experience into Sales. Forbes. Retrieved August 30, 2012, from http://www.forbes.com/sites/lydiadishman/2011/11/08/inside-walmarts-app-strategy-to turn-user-experience-into-sales Stephanie, C. (2012, July 25). Retailers’ Idea: Think Smaller in Urban Push. New York Times. Retrieved August 30, 2012, from http://www.nytimes.com/2012/07/26/business/retailers expand-into-cities-by-opening-smaller-stores.html?ref=walmartstoresinc Walgreens – Your Home for Prescriptions, Photos and Health Information. Welcome to Walgreens. Retrieved August 30, 2012, from http://www.walgreens.com/ Walmart Stores – we save people money so they can live better. Walmart Stores – we save people money so they can live better. Retrieved August 30, 2012, from http://www.walmartstores.com/default.aspx Read More