Cross Border Alliances Collaborative agreements with foreign companies in the form of strategic alliances or joint ventures are widely used as a means of entering foreign markets. They are also used as a means of acquiring resources and capabilities by learning from foreign partners. They are used to put together powerful combinations of complementary resources and capabilities by accessing those resources and capabilities of a foreign partner.

The Case Study below provides an example of a strategic alliance that Walgreens participated in with Alliance Boots. What was this partnership designed to achieve and why would it make sense for a company like Walgreens?

Case:

Read the case below and answer the questions that follow. Walgreens pharmacy began in 1901 as a single store on the South Side of Chicago, and grew to become the largest chain of pharmacy retailers in America. Walgreens was an early pioneer of the “self-service” pharmacy and found success by moving quickly to build a vast domestic network of stores after the Second World War. This growth-focused strategy served Walgreens well up until the beginning of the 21st century, by which time it had nearly saturated the U.S. market. By 2014, 75 percent of Americans lived within five miles of a Walgreens. The company was also facing threats to its core business model. Walgreens relies heavily on pharmacy sales, which generally are paid for by someone other than the patient, usually the government or an insurance company. As the government and insurers started to make a more sustained effort to cut costs, Walgreens’s core profit center was at risk. To mitigate these threats, Walgreens looked to enter foreign markets.

Walgreens found an ideal international partner in Alliance Boots. Based in the UK, Alliance Boots had a global footprint with 3,300 stores across 10 countries. A partnership with Alliance Boots had several strategic advantages, allowing Walgreens to gain swift entry into foreign markets as well as complementary assets and expertise. First, it gave Walgreens access to new markets beyond the saturated United States for its retail pharmacies. Second, it provided Walgreens with a new revenue stream in wholesale drugs. Alliance Boots held a vast European distribution network for wholesale drug sales; Walgreens could leverage that network and expertise to build a similar model in the United States. Finally, a merger with Alliance Boots would strengthen Walgreens’s existing business by increasing the company’s market position and therefore bargaining power with drug companies. In light of these advantages, Walgreens moved quickly to partner with and later acquire Alliance Boots and merged both companies in 2014 to become Walgreens Boots Alliance. Walgreens Boots Alliance, Inc. is now one of the world’s largest drug purchasers, able to negotiate from a strong position with drug companies and other suppliers to realize economies of scale in its current businesses.

The market has thus far responded favorably to the merger. Walgreens Boots Alliance’s stock has more than doubled in value since the first news of the partnership in 2012. However, the company is still struggling to integrate and faces new risks such as currency fluctuation in its new combined position. Yet as the pharmaceutical industry continues to consolidate, Walgreens is in an undoubtedly stronger position to continue to grow in the future thanks to its strategic international acquisition.

Note: Developed with Katherine Coster.

Sources: Company 10-K Form, 2015, investor.walgreensbootsalliance.com/secfiling.cfm?filingID=1140361-15-38791&CIK=1618921; L. Capron and W. Mitchell, “When to Change a Winning Strategy,” Harvard Business Review, July 25, 2012, hbr.org/2012/07/when-to-change-a-winning-strat; T. Martin and R. Dezember, “Walgreen Spends $6.7 Billion on Alliance Boots Stake,” The Wall Street Journal, June 20, 2012.

1. What was the partnership with Alliance Boots designed to achieve and why would it make sense for a company like Walgreens?

2.. What are some of the challenges that Walgreens is now facing with the merged entity?

The American Red Cross seemed in its true element following September 11, 2001. It was flooded with donations to do its highly needed and regarded work. Most of those donations went to its Liberty Fund. But shortly after it started to disperse the funds, the media began asking questions. And the American Red Cross soon wore a patina of tarnish. Learn about the research that evaluated Americans’ perception of the Red Cross and how research by Wirthlin Worldwide helped craft a new and highly effective donation solicitation process. www.wirthlin.com; www.redcross.org >Abstract

>The Scenario

Whether it’s a landslide in California, a flood in Puerto Rico, fires in Colorado, hurricanes in Florida, or tornadoes in Texas, the Red Cross can be depended on to help not only the victims but also those involved in rescue and relief services. But each local independent chapter of the American Red Cross also responds to thousands of smaller events that disrupt peoples lives yet aren’t as likely to be splashed across headlines or lead the evening news, such as a fire in a single-family house fire or a family that loses its breadwinner when the father’s military reserve unit is activated to serve in the war in Iraq. While the magnitude of the disaster affects the visibility of the Red Cross’s relief efforts, the skilled professionals and volunteers who constitute the American Red Cross pride themselves on being where they are needed as quickly as possible, providing the services that are needed by those both directly and indirectly affected. In a single year the American Red Cross affiliated chapters respond to approximately 70,000 such disasters, both small and catastrophic, by providing disaster relief services, family emergency services, domestic preparedness for bioterrorism, critical lifesaving services, and 24-hour military assistance. The American Red Cross provides these services 24 hours per day, every day. And it provides them for free. A totally independent philanthropy, one receiving no government financial support, the American Red Cross relies on the generosity of U.S. citizens for the operating capital to fund its services. For decades it has followed a policy of raising funds by soliciting donations via advertising during the high-visibility period surrounding a disaster that has captured media attention. As its Web site details, “One of the best ways to help disaster victims, people in need where you live, and people around the world right now is through a financial donation.” Donors primarily are encouraged to give to (1) the Disaster Relief Fund, which “enables the Red Cross to provide shelter, food, counseling and other assistance to those in need across the country,” (2) their local Red Cross chapter, which “assists people in need” within a donor’s community, or (3) the International Response Fund, which “allows the American Red Cross to respond to people’s needs around the globe.” Its stellar reputation for speedy, quality assistance generates millions of dollars in donations each year. September 11, 2001, changed many people’s lives and it also dramatically changed the way the American Red Cross solicits donations. The sheer number of people affected was beyond the scope of any other domestic disaster addressed, including Oklahoma City, the San Francisco earthquake, and hurricanes Camilla or Hugo. Typically, the Red Cross develops a disaster plan by determining what will be needed in terms of resources—financial, services, and manpower—to respond to those in need. It is able to use its extensive disaster experience to estimate the amount of money necessary to address the needs, and it does this quickly, often within three to seven days. But it would take three Can Research Rescue the Red Cross? 2 weeks to estimate the dollars required to address the needs created by the acts of September 11. And services couldn’t and didn’t wait. Contrary to the perceptions of many U.S. citizens at that time, the Red Cross doesn’t maintain a huge pool of dollars, just waiting for the next disaster to happen. When a need occurs, the local chapter draws on its own local disaster fund, generated by its own fundraising efforts. Depending on the size and resources of the chapter, it might not have sufficient reserves to address a major disaster and so turns to the national organization. The chapter can gain assistance with advertising to solicit additional donations, as well as dip into the national Disaster Relief Fund, which contains dollars that poured in from donors after previous disasters but were not needed to provide services to those disasters’ victims or relief workers. The local chapter must replace funds taken from the national Disaster Relief Fund. Following September 11, advertising soliciting for donations began immediately, right along with disaster relief services. Using its prior experience, the Red Cross typically plans the advertising flight and stops advertising when it reaches a certain percentage of its monetary those funds needed by the families for disaster services and hold in reserve for “future disasters” those dollars it deemed unnecessary to expend. Then the media criticized the Red Cross for not distributing donations as fast as they were coming in. The Red Cross was caught between an angry tirade of accusations by the media demanding change and total involvement in providing disaster services, both to the victims and to the disaster relief workers who were operating under increasing stress and strain. On November 8, 2001, Daniel Borochoff, president of the American Institute of Philanthropy, testified to a congressional subcommittee of the Committee on Ways and Means investigating charity response to the September 11 terrorist attacks. “The Red Cross could have avoided a lot of donor confusion had it used the Liberty Fund exclusively to raise money for immediate disaster relief and direct victim aid and then cut off fundraising after that need had been met at about $250 million.” Explaining that the Red Cross’s Liberty Fund and the United Way’s September 11 Fund accounted for about 75 percent of all funds raised related to September 11, Borochoff claimed that rather than earning the organization the Nobel Prize, the Red Cross’s actions “have tarnished its high public standing and brought distrust and skepticism to the entire nonprofit field.” During this period of continuing attack, on the pages of newspapers and magazines and on newscasts, not a single donor requested his or her money back. But neither did a single supporter come forward to defend the long-standing Red Cross fund-raising policy of using the sympathy generated by a current disaster to raise money for “this and other disasters.” In this instance, the donations following September 11 were separated and deposited in the Liberty Fund. Borochoff testified that he believed the “Red Cross in its zeal to fundraise while the iron was hot raised more money than it needed for what it would ordinarily do in a disaster and behaved opportunistically by using this crisis to raise money for programs that were not a major part of its advertising—such as upgrading its phones…building a strategic blood reserve…[and providing funds for] physiological trauma counseling nationwide.” Behind the scenes, some officials within the Red Cross were second-guessing whether the Liberty Fund should have been established. Others were asking an even more important question: “If something ever happens like this again, what should we do differently.” Officers of the Red Cross began to suspect from the anecdotal evidence reported in the news that donors responding to the ads either didn’t read or hear the ads fully or didn’t perceive that donations not needed to address issues related to a specific disaster, one then in the media spotlight, would be used to respond to future disasters. The same officials questioned whether the problem went beyond donors responding to the September 11 ad campaign. Did donors simply not understand how the Red Cross raised money? Did it not understand how the Red Cross spent donor contributions? By November 14, the media dialogue became so intense that Red Cross CEO Harold Decker, appointed following Healy’s resignation, stated, “We deeply regret that our activities over the past eight weeks have not been as sharply focused as America wants, nor as focused as the victims of this tragedy deserve. The people affected by this terrible tragedy have been our first priority, and beginning today, they will be the only priority of the Liberty Fund.” More than 25,000 families were then in the database of those receiving direct payouts from the Liberty Fund. In that same press release, David McLaughlin, chairman of the American Red Cross Board of Governors, stated, “The people of this country have given the Red Cross their hard-earned dollars, their trust, and very clear direction for our September 11 relief efforts. Regrettably, it took too long to hear their message. Now we must change course to restore the faith of our donors and the trust of Americans, and, most importantly, to devote 100 percent of our energy and resources to helping the victims of the terrorist attacks.”

1. If you had been McLaughlin or Decker, what research would you want done?

2. Create the management-research question hierarchy for the research you think might help the Red Cross make decisions related to public relations efforts and future advertising soliciting donations.

3. What considerations should influence sampling decisions in any research the Red Cross would do on this issue?

An investment will pay $50 at the end of each of the next 3 years, $250 at the end of Year 4, $350 at the end of Year 5, and $500 at the end of Year 6. If other investments of equal risk earn 4% annually, what is its present value? Its future value? Do not round intermediate calculations. Round your answers to the nearest cent.

Present value: $   

Future value: $

An investment will pay $50 at the end of each of the next 3 years, $250 at the end of Year 4, $350 at the end of Year 5, and $500 at the end of Year 6. If other investments of equal risk earn 4% annually, what is its present value? Its future value? Do not round intermediate calculations. Round your answers to the nearest cent.

Present value: $  

Future value: $  

You are asked to apply dividend growth model to estimate the price of Beautiful Life Berhad given the next dividend per share of RM0.60. You are told that the required rate of return is 13 percent and a projected constant growth rate of 8 percent for Beautiful Life Berhad. Briefly describe four alternatives to stock common valuation.   

do not write less 350 to 400 words

1. What are the fixed costs of production measured in dollars?
2. For 6 tables, what is the average fixed cost, average variable cost, and the marginal cost?

A production engineer bought a heat exchanger whose value is $ 18500 with a useful life period of 10 years, this equipment is expected to produce income from year 1 for $ 3000, increasing by $ 800 per year. It is also known that annual operating costs are $ 350 from year 3. In year 5, maintenance must be done for $ 1500. If the rate of return is 12%, determine the present value of the investment.

5. Determine whether the data are qualitative or quantitative. If QUANTITATIVE, state whether the variable is continuous or discrete

a) the colours of automobiles on a used car lot

b) the numbers on the shirts of a girl’s soccer team

c) the number of seats in a movie theatre

d) a list of house numbers on your street

e) the ages of a sample of 350 employees of a large hospital

f) the make & model of the cars in the parking lot