Rite Aid is the nation’s third largest chain and continues to post huge losses. In 2009 the company posted losses of around $ 1 billion; however in 2010 their losses are around $335 million. While this is a 66% improvement from 2009 numbers it will be impossible for Rite Aid to continue to stay in business posting these types of losses. Poor strategic planning over many years can be the only excuse for a company of their size to continue to post losses year after year.
Since January 1, 1999 Rite Aid stock prices have fallen 97% and their debt has increased significantly. Their expansionist strategy they used when acquiring Brooks/Eckerd, bogged the company down in debt and created market overlap. Instead of closing some of the overlap market stores they chose to keep them open, hoping to position themselves into a competitive advantage by saturating the market. They also were hoping to gain other markets by expanding their geographic territory. With all of these changes in place, Rite Aid was figuring on winning the geographic cost-competitive advantage.Rite Aid’s strategic planning has failed to produce the desired outcome for it investors.
It has also failed to meet the three successful business strategy tests; • Does the strategy fit the situation?• Has the strategy yielded a sustainable competitive advantage? • Has the strategy produced good financial performance? In fact, it seems that Rite Aid has missed many of the basic business strategy methods since 1999. Their solution to competition was to open and acquire new stores to give them an advantage. Unfortunately for them, it only caused their debt to rise to the point where there revenues cannot pay down their debt.To battle their losses Rite Aid has begun to close stores, trimmed stores hours and replaced salaried employees with hourly workers. But it seems that no matter what Rite Aid seems to change in their strategic plans, they continue to be the company that can never turnaround.
Their change in objectives always seems to be grand, instead of small conservative corrections.To change their situation Rite Aid needs to attract new customers and reduce their debt. It is a fact that Rite Aid’s pharmacy files are diminishing, proving that either they are losing customers to competitors or their customers are dying off and not being replaced. Rite-Aid should then create and advertise a new promotion that will attract customers and create a differentiation advantage.They should also try to reduce their overhead and stores to help eliminate their mega-debt load. Unfortunately, Rite Aid chooses to lease 95% of their stores anywhere from 10 to 22 years under a “non-cancelable lease”.
Under this kind of duress I find it hard to believe that any strategic planning can overcome Rite Aid’s horrific planning up to this point. More than likely, their only option in the future is to merge or be acquired at a low price by one of their stronger competitors.
