Consider Walgreens. Most of their stores are leased from corporate owners, REITs or other entities. ...

Consider Walgreens. Most of their stores are leased from corporate owners, REITs or other entities.

a. What does Walgreens gain by leasing and not owning?

b. What do they lose?

Expert Solution

(a): Walgreens, by leasing and not owning, is able to maintain a light and clean balance sheet. Its business model and operations are more agile and flexible because of leasing and hence Walgreens is able to focus on boosting its long-term value by expanding its unique resources. It enables Walgreens to move faster in this highly dynamic and competitive world and also enables it to ensure long term sustainability for its business and operations.

(b): In terms of what Walgreens stand to lose by leasing and not owning is that barriers to entry in the industry is loosened and so more players can enter the industry by replicating Walgreens model. This may lead to crowding the marketplace and hence increasing the pressure of competition for Walgreens. Secondly the model of leasing if not supported by a long term strategic plan, may not deliver the advantages mentioned above and may often end up backfiring.

jeff jeffy answered 10 months ago

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