Boots the Chemist Business Analysis

As research consultants at Wood Mackenzie, research has been conducted regarding the internal and external factor involved with Boots The Chemist (BTC), and the pharmaceutical industry. Findings revealed that the Over the Counter segment is highly competitive as supermarkets have entered the market since the abolition of the Retail Price Maintenance (RPM). Wood Mackenzie found that the pharmaceutical industry is affected by Political, Economic. Social and, Technological factors. These sources revealed that BTC is amongst many other companies that are faced with adversities in the industry’s environment.

However, as consultants, an assessment has been made into the areas that offer opportunity to the company for further growth. It has been suggested that Boots the Chemist focuses its attention on its core operations and integrates more interactive on-line services into its pharmacy. Boots the Chemist began operations in 1883 after a series of growth; it has since become a household name for retail of Over the Counter pharmaceutical products with more than 1,300 outlets throughout the UK.

The company was an early developer of the department store concept and has diversified into related services such as Boots Opticians and the retail of products outside of the pharmacy range. As research consultants at Wood Mackenzie, this report focuses on the assessment of Boots the Chemist, regarding their past and current market position, performance, competition the company faces, and its share price. An analysis of the Over The Counter (OTC) pharmaceutical industry sector has been applied, with consideration of future projections for Boots the Chemist and the sector as a whole.

Does Boots need all their chain branches? An audit and cost-benefit analysis should be conducted along with market research to identify which branches are doing the best and which areas would benefit from the store or which areas are overly concentrated with Boots stores. Therefore taking action by reducing the number of stores and focusing on improving the remainder of stores would reduce costs and provide essential capital that could be reinvested in other parts of the business. The Over the Counter medicines market has shown a ‘4.

1% growth in the year to December 2003, reaching a value of i?? 1,973 billion, compared to just 1% increase in 2002’ (sourced from Chemist and Druggist 2004). Over the Counter (OTC) medicines are those chosen by the consumer as opposed to prescribed drugs/medication from a doctor that is selected on their behalf. Within the OTC market there are medicines that are only obtainable from a licensed pharmacy with a registered pharmacist present. There are however in addition medicines that can be bought on without guidance.

These are identifiable by the General Sales List Medicines and can be purchased from a variety of retail outlets. It is this that allows supermarkets such as Tesco to capitalise in on the OTC market. Also the change in recent legislation passed in May 2001 has lifted price fixing on OTC medicines. This has meant that prices on some drugs have been cut by as much as 50% by big retailers and perhaps the cause of falling sales of ‘Boots’ as consumers purchase medicines conveniently at there local supermarket. At present the grocery market claim a 24% share of sales in the OTC market.