Strategic planning in organizations is usually done with the short-term to long-term objectives and goals in consideration. Short-term strategies are those that can be executed and implemented, say, within a year while mid term are 2 to 4 years. Long term covers periods of more than 5 years.Short-term strategiesi) New productsRite Aid Corporation intends to increase its generic drug sales from the current recorded levels.
The company also aims to take advantage of the more than 8,000 branded drugs that will cease to be patented during this financial year.The acquisition of Brooks and Eckerd drugstore chains during the last financial year will lead to the addition of new products to the already existing product lines. The integration of the Brooks and Eckerd drug stores with those of Rite Aid will enable the introduction of more than 8000 new products to the combined stores within the short term. This will enable the Rite Aid customers and associates get a variety of products.Introduction of in store clinics that will provide health and wellness products are also part of the short-term strategic plans for the company. The GNC ‘living well’ vitamin departments within the Rite Aid stores enables the company to provide customers with health and wellness products.
C.Booth derma line, new pure spring, new organic products are some of the new products launched that will ensure growth of sales (Rite Aid Corporation)(ii) Cutting costsThe major acquisition in terms of Brooks and Eckerd enables the company to grow the existing market substantially thereby providing economies of scale that will lead to significant cost savings hence improved profitability and efficient provision of products and services.The focus on product provision and marketing resulted in increased profitability through controlling of costs hence guaranteeing affordable products and services(iii) GrowthThe company will aim to integrate with the Brooks and Eckerd stores in its phase 2 plans. The phase 2 of the integrations involves the conversion of the Brooks and Eckerd stores into the rite aid corporation’s brand (The Expert Network)The company also expects to open approximately 125 new stores and relocated Customer World stores.
This is part of the long-term grand vision of opening over 1000 new stores over 5 years. Rite Aid Corporation also expects to acquire 12 pharmacy stores from Spartan stores Inc. within this financial year (Yahoo finance)Midterm plans(i) Planned projectsThe integration of the Brooks and Eckerd drugstores with the existing Rite Aid stores and systems will be done in phases. Phase 1 and 2 will be in short term i.e. within 1 year while the mid term will cover phase 3 and 4.
During phase 3, the Brooks and Eckerd stores will be remodeled in terms of color and decorations as well as change of external signs into Rite Aid Corporation’s signs.(ii) EfficiencyThe expansion of the company through the recent requisition of Brooks and Eckerd stores and Spartan pharmacies as well as continued new store openings enables the company to achieve operational efficiencies resulting from economies of scale.The company also plans to continue monitoring its expenditures. Rite Aid Corporation focused on cost saving measures that ensured increased profitability in the past. The management is therefore expected to continue with this approach in the near future.The company also plans to continue its operational effectiveness that has been affected in the store.
This operational effectiveness and efficiency was the key drive in the increased bottom line of its company. And as the management indicates that they will continue with what has worked well for the company in the past.Nexgen pharmacy management and dispensing system will ensure that the company attains efficiency in its operations(iii) Planned growthThe new store openings will continue as part of the company’s plan to have over 1000 new stores in a period of 5 years. The company plans to open 125 of these new stores in the current financial year.
Also in the pipeline is the constant look out of strategic partnerships and acquisitions that will lead to the enhancement of shareholders financial wealth in the short term as well as long run (Chief Family Officer)Five year plan(i) New opportunitiesThe company plans to form strategic partnerships and acquisitions that will ensure that it enhances its financial position as well as achieve its objective of becoming the top drugstore chain in the country.Apart from that, the company intends to continue on its focus on core drugstore categories that will facilitate the growth of front-end sales. This is to be achieved through the focus in pharmacy, health and wellness products and seasonal and cross merchandising. Promotions will also be used in promoting sales (Chief Family Officer)(ii) Company’s goalsRite Aid Corporation plans to be the leading drugstore and health and wellness provider in the country. This objective will be achieved through expansion, strategic alliances and acquisitions.Operational efficiency that will enable cost reduction is also the other objective of the company.
Efficiency and manageable costs will ensure that the company’s profits will continue to increase.(iii) Implementation of the goalsThe operational efficiency and cost cutting measures will be achieved through the use of synergies resulting from acquisitions thereby achieving economies of scale consequently reducing costs and expenses. The successful integration of the company with Brooks and Eckerd will enable the company to achieve most of its goals. This is why senior executives including the COO handle the process of integration.Company performanceThe company posted a net income $ 26.8 million compared to $ 1,273 in 2006 and $302.
5 in 2005. This is a huge drop in net income from the 2006 financial year amount. The drop would be minimal save for the huge tax benefit of $1,229 million received in 2006 compared to $13.24 million in 2007 (Hoovers)The drop in income led to the both basic and diluted earning per share being negative.
In 2006 the basic EPS was $2.36 while the diluted EPS was $1.89. These figures dropped to a loss of $ 0.01 in 2007 for both basic and diluted EPS.The total assets of the company increased from $6.
9 billion in 2006 to over $7 billion in the year 2007. This is despite the drop in shareholders equity. The equity dropped from $1.6 billion in 2006 to $1.7 billion in 2007 (deficit) (Hoovers)The cash flow from operations also dropped marginally from the amounts realized in the proceeding years. The operating cash flow dropped from $417 million in 2006 to $309 million in 2007.
The investing cash flow shows a similar trend. The capital expenditure has been increasing largely due to expansions and acquisitions.The company did not perform badly given the massive expansion through new store openings and acquisitions, which require substantial resources.(b) StrengthsStrong growth areasThe areas of operations in the company that registered strong growth include same store sale, which registered a growth of 3.4% compared to 1.1% in financial year 2006.
Same store pharmacy sales also grew substantially in year 2007. The same store pharmacy sales grew by 4.4% in 2007 compared to 0.3% in 2006.
The pharmacy sales also grew by 2.2% in 2007 compared to 2.0% in 2006.Financial statement strengthsThe increasing revenue indicates that the company is growing although this is negated by the rise in cost of goods sold.
Increasing revenues shows that the company is able to generate more sales. The growth in the amount of total assts also indicates that the company is registering growth. The working capital of the company increased from the 2006 figures. This means that the company’s liquidity position strengthened.
Weakness-problem areasThe areas of the company that seem to be struggling are the front-end sales. All the front-end sales including same store front-end sales registered a drop in growth compared to the previous years. Front-end sales growth in 2007 was 0.1%. The corresponding period of sales growth was 3.
8%Same store front-end sales also showed a similar trend. The growth rate dropped from 2.6% in 2006 to 1.9% in 2007.
Financial statement weaknessesThe negative EPS is one of the greatest weaknesses of the Rite Aid Corporation financial statements. The company should be seen to be rewarding its stockholders and that means the EPS should be positive.The increasing debt is also another drawback of the company’s financial statement. Too much debt in the books does not inspire the confidence of potential investors.The drop in operating cash flows also weakness the company’s financial statement.
The company should be able to generate increasing operating cash flows given the increase in sales.
