Please use the mini case questions (noted below) to guide your solution to the case. Note that the answers to these questions are not solutions to the case; they are simply intended to guide your thought process)
What problems will the partnership between Walgreens and Village MD solve?
How will the partnership create value for its customers? Develop a value creation table after reading the Technical Note on Value Creation and the template below to illustrate your analysis
List at least two metrics that Walgreens should use to evaluate the success of its partnership with VillageMD. Elaborate your recommendations on the basis of these metrics.
Value Creation Table (template)
Value-in-exchange
Value-in-use
Customer Segment
Differentiating attributes
Perceived Benefits
Problem
Solution
ABC…
CDE…
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Three sections consisting of 1) Problem Identification 2) Quantitative Reasoning and Analysis 3) Recommendations
Problem Identification
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Quantitative Reasoning and Analysis
Conduct research to identify data (e.g., obtain data in the form of trends, statistics, ratings, etc. from the library and other sources) that can be utilized to provide additional insight into the case.
Draw appropriate conclusions based on the quantitative analysis of data, while recognizing the limits of this analysis.
Discussion and Recommendation
Identify and recommend a solution to the major problem in the case (there is likely to be more than one solution).
Briefly outline your solution and evaluate it in terms of its pros and cons.
Always ensure that your recommendations are supported by statistical evidence and provide spreadsheets as necessary.
Appendix and References
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CASE STUDY WALGREENS
Walgreens to Open Doctors’ Offices at Its U.S.
Stores; Retailer to invest $1 billion in VillageMD
to add physician offices, seeking to expand its
health-care services
Terlep, Sharon . Wall Street Journal (Online) ; New York, N.Y. [New York, N.Y]08 July 2020.
ProQuest document link
FULL TEXT
Walgreens Boots Alliance Inc., hit by slowing profits from prescriiption drugs, will attach doctors’ offices to
hundreds of drugstores as the pharmacy chain seeks to remodel itself as a health-care provider.
The largest U.S. drugstore chain by stores is pairing with primary-care provider VillageMD to open 500 to 700
clinics at Walgreens sites across the country over the next five years. Walgreens will pay VillageMD $1 billion in
equity and debt over the next three years in exchange for a 30% stake in the Chicago-based startup by the end of
that term.
Walgreens and rival CVS Health Corp. are in a race to become go-to treatment centers , particularly for patients
with costly, hard-to-manage chronic conditions. Both chains are seeking new ways to counter smaller revenue
from prescriiption drugs, which drive the bulk of their sales. They also are battling online rivals such as
Amazon.com that have drawn shoppers away from physical stores.
Insurers and hospitals, meanwhile, have been expanding their clinics or buying up physicians’ practices, making
more primary-care doctors employees of larger companies. For example, UnitedHealth Group Inc. has acquired a
network of doctor practices, surgery centers and urgent-care clinics.
“We heard from patients that they trust their local doctor and they don’t like changing their doctor,” said Alexander
Gourlay, Walgreens co-chief operating officer. “It became clear that you have to have a primary care doctor as part
of the model both physically and digitally.”
Drugstores and doctors’ practices are getting hurt by the coronavirus pandemic. Patients are putting off visits to
their health-care providers for fear of catching the virus during visits. Walgreens is part of a coalition behind a new
ad campaign to encourage people to return to their medical providers as the pandemic continues.
Walgreens in April said store sales had begun to fall sharply following an initial surge in demand in March as
Americans rushed to stock up in the pandemic’s early days. The company will report financial results for its Mayended quarter on Thursday.
VillageMD, a network with more than 2,800 physicians, has had a 15% to 20% drop in primary-care visits amid the
pandemic, said Tim Barry, the startup’s co-founder and CEO. He said the drop-off is less severe than declines of
40% or more in the broader industry.
Executives from both companies said the deal was advancing before coronavirus.
In adding primary-care doctors to its model, Walgreens is diverging from CVS, which has said that physicians aren’t
needed to create so-called health-care hubs. CVS is creating hubs inside its stores where patients would go to
seek medicine, consultations and lab tests to manage chronic conditions such as diabetes and hypertension.
Both drugstore giants say their ubiquity in American communities makes pharmacies a logical hub for people
seeking treatment for chronic ailments, which are often exacerbated as patients struggle to take their medications
regularly and adhere to medical regimens.
CVS, which acquired insurer Aetna Inc. in 2018 , said its health-hub model will drive down the cost of health care,
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savings that will then be captured by its new insurance arm. It aims to have 1,500 health hubs opened by 2021.
Walgreens, which has opted to partner rather than acquire insurers or other companies, said the VillageMD pairing
will benefit Walgreens financially by driving up prescriiption sales as well as sales of related medical products as
more patients visit the stores. The company also aims to make money off its 30% stake in VillageMD.
Walmart Inc., the country’s biggest retailer and a major pharmacy operator, is also adding medical services. The
company has opened a handful of clinics with doctors and dentists that offer flat-fee primary care, such as $25
dental X-rays and $40 office visits. The company plans to expand the clinics broadly across Walmart’s 4,700 U.S.
stores, said Sean Slovenski, president of Walmart U.S. health and wellness in an interview.
“The intent is to spread across the majority of the fleet, but the clinics won’t be the same across the entire fleet,” he
said last October soon after the first new clinic opened in Georgia. The first locations were stand-alone clinics next
to Walmart supercenters. Newer versions are inside existing stores.
Critics, including some industry analysts, health-care experts and physician groups, argue that Americans aren’t
ready to accept their local drugstore as a trusted health provider. Some also say the depth and complexity involved
in successfully treating chronic conditions can’t be addressed by pharmacy chains.
Health-care industry lines are being redrawn and providers are under pressure to revamp themselves. A high-profile
health venture backed by Amazon, JP Morgan Chase &Co. and Berkshire Hathaway Inc. has shown little to the
public three years after it was announced . The venture’s chief executive recently stepped aside .
Walgreens has been working with VillageMD since last year when the companies opened five joint VillageMD
locations in Houston. Walgreens’ Mr. Gourlay said patients’ adherence to medications improved at the pilot
locations, convincing the company the model should expand.
VillageMD, which has bought up primary-care offices across the country, will move existing physicians into the
Walgreens-adjacent clinics.
The cost of a VillageMD office visit will vary based on the patient’s insurance coverage and services rendered. Half
the clinics will be in medically underserved areas, and will offer a sliding payment scale to uninsured patients.
Walgreens said it hasn’t yet set the list of planned locations.
Sarah Nassauer contributed to this article.
Write to Sharon Terlep at sharon.terlep@wsj.com
Credit: By Sharon Terlep
DETAILS
Subject: Drug stores; Pharmacy; Pandemics; Cost control; Chronic illnesses; Primary care;
Coronaviruses; Discount department stores; Startups; COVID-19
Location: United States–US
Company / organization: Name: Walmart Inc; NAICS: 452112, 452311, 454110; Name: Walgreen Co; NAICS:
446110
Publication title: Wall Street Journal (Online); New York, N.Y.
Publication year: 2020
Publication date: Jul 8, 2020
column: Business
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