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Organizational Theory and Design ORG/716 Instructor: Gregory Berry 02/15/2016

Analyzing changes in top pharmaceutical companies' strategies, organizational restructuring, implications on leadership, and the role of innovation for growth and sustainability.

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Organizational Theory and Design ORG/716 Instructor: Gregory Berry 02/15/2016

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  1. Organizational Analysis Team C: Jerilyn Collins Lisa F. Peters Cassandra Shabazz-Williams Pariss Woolridge Organizational Theory and Design ORG/716 Instructor: Gregory Berry 02/15/2016

  2. Restructure of R&D • Small more focused (efficient and Effective) • More virtual R&D models • Restructure Sales force and Management teams • Business acumen • Cross functional experience • Innovative thinkers • Alliance with academic institutions • Building relationships and collaborating • Supplier/customer relationships • Holistic approach to healthcare • Integrated digital systems Corporate Strategy Changes CSW

  3. An Analysis of Corporate Strategy Changes Top Three Pharmaceutical Drugstores in US • Health Care Industry Changes • Affordable Care Act (Obamacare) • Aging Population • Offering Clinical Services 7800 Stores $38.6 Billion Sales • Merger allow the consolidation of services to provide more health Care & Wellness solution in Stores and online. • Merger repositioned Walgreen to aggressively compete with #1 competitor • Innovation – cost savings ~$1 Billion dollars • Health management • Strategic market access • Patient centered • Expanding their health care offerings • Coordinated care systems w/Doctors & ins companies • Minimize competition • More leverage to negotiate with drug companies (lower prices) 8200 Stores $28.5 Billion Sales Merger 4600 Stores $25.5 Billion Sales CSW

  4. CSW Market Position US Pharmacy & Drug Stores Industry Concentration based on Revenue

  5. Necessary Changes to Organizational Structure Walgreens (Current) Senior Team • Downsizing of Rite Aid 50,000 employees and layoffs of Walgreens employees to reduce duplications of jobs • Store closures • Convert to one centralized regional hub for both organizations • Combine administrative duties and department functions • Eliminate healthcare workers union (Rite Aid) and re-negotiate salaries of pharmacists • Realignment of cultures to create synergy The "Walgreen World " (2014) JC

  6. Necessary Changes in the Organizational Structure • Advantages and Disadvantages of Changes • Advantages • Fill gaps in geographical coverage in United States • Market penetration • Competitive advantage • Disadvantages • Job loss • Market saturation • Monopolistic JC The "Walgreen World " (2014)

  7. Implications to Leadership • Walgreen’s Strategy is to “Integrate, Consolidate and Develop” (Durham, 2016) • Leadership will turn Walgreens into a “Mass Specialist” • Long Term Objectives: • Expansion of instore clinics • Further retail acquisitions • Increase expansion of products to satisfy consumer health • Development of private label • Building Partnerships with entrepreneurs • Negotiate lower drug prices • Utilize Boots Alliance European Experience to develop future Omni channel Plan PW

  8. The company took an initiative to make the business entirely customer focused and thus decided to change the divisional structure into operational leadership structure. • The company provided autonomy and authority in decision making to the employees at all levels. • The company also took initiatives in changing the performance management system and also encouraged employee engagement. Change Process LFP

  9. Span of Control Walgreens will allow Rite Aid to function independently under their current name until full integration. CSW

  10. Promote higher levels of efficiency Design thinking Develop systems to drive change Place focus on desired goals and outcomes Competitive advantage Support change strategies Create employment opportunities Shift(s) in paradigms Organizational growth & sustainability Inspire extrinsic and intrinsic rewards Role of Innovation JC

  11. It is developed by integrating the business functions with the ever changing environment thus establishing an open link between them. • It is used to attain an overall development along with better and transparent communication. • Providing autonomy and responsibility to every employee is also another way of managing the system along with the provision of feedback. System Thinking Paradigm LFP

  12. Simon’s Theory of Administrative Behavior (Characteristics) • Simon distinguishes between the decisions a person makes to enter or leave an organization and the decisions they make as a participant. • Organizations simplify decisions and support participants in the decisions they need to make. • Organizations simplify decisions by restricting the ends toward which activity is directed. Goals supply the value premises that underlie decisions. Value premises (assumptions of desirable ends ) are combined with factual premises to make decisions. The more precise the value premises, the greater effect they have on decisions.  ("Simon's Theory Of Administrative Behavior", n.d.) Best System Thinking Paradigm JC

  13. Best System Thinking Paradigm Simon’s Theory of Administrative Behavior (Characteristics) • Participants in high positions make decisions with a higher value component, people in lower positions make decisions with a higher factual component. The top makes "what" decisions, the bottom "how" decisions. Choice of ends can only be validated by fiat or consensus, choice of means empirically. • Goals can be delegated to different units which simplifies the decision making process for participants. Scott notes that "from this perspective, an organization's hierarchy can be viewed as a congealed set of means-ends chains promoting consistency of decisions and activities throughout the organization". p. 46 • Overall, Simon helps us understand how the decisions of hundreds or thousands of individuals in an organization can be directed toward ultimate organizational goals. ("Simon's Theory Of Administrative Behavior", n.d.). JC

  14. Best System Thinking Paradigm – Development, Usage &Management • 4 key marketing points and strategies to emphasis Walgreens thinking process: • New Beauty Experience: • Introduction to new brands, consultant model and enhancements • Rationalizing Merchandising Mix • Developing into a Health and Beauty Model • Increase in more disciplined promotional strategy • Investing in Omni channel • Incorporating photo printing capabilities into smartphone apps as profit generator • Ex: Apple Pay incorporated into Walgreens rewards program • Walgreens “One Plan” progress • Reorganized field management structure • Improvement in efficiency of customer service • Consolidation of distribution centers • Reduction of costs and working capital PW

  15. Bells, S. (2015). Walgreen-Rite Aid Deal: How would it impact the industry? Retrieved from http://finance.yahoo.com/news/walgreens-rite-aid-deal-impact-182614606.html • Bird, J. (2015). 10 emerging healthcare trends for 2016. Retrieved from http://www.fiercehealthcare.com/story/10-emerging-healthcare-trends-2016/2015-12-08 • Galliers, R. D. & Currie, W. (2011). The Oxford Handbook of Management Information Systems: Critical Perspectives and New Directions. OUP Oxford. • Farrell, M. (2016). Regulatory fears over the Walgreens-Rite Aid merger. Retrieved from http://blogs.wsj.com/moneybeat/2015/12/10/regulatory-fears-over-the-walgreens-rite - aid-merger/ • Luciew, J. (2016). Here's how much Rite Aid Execs stand to make from Walgreens take over. Retrieved from http://www.pennlive.com/news/2016/02/heres_how_much_rite_aid_execs.html • Luciew, J. (2016). Rite Aid’s merger with Walgreens could still be derailed by this big issue. Retrieved from http://www.pennlive.com/news/2016/02/rite_aids_merger_with_walgreen.html References

  16. Johnsen, M. (2014). Walgreens outlines new operational leadership structure. Retrieved on: January 3, 2016, from http://www.strategy-business.com/article/00195?gko=242ae • Johnsen, M. (2016). Walgreens Boots Alliance outlines 3 growth initiatives at shareholders meeting. Retrieved from http://www.drugstorenews.com/article/walgreens-boots-alliance-names-- initiatives-shareholders-meeting-will-fuel-growth • Orr, T. (2016). Rite Aid shareholders announce sale merger with Walgreens. Retrieved from http://fox43.com/2016/02/04/rite-aid-shareholders-announce-sale-merger-with-walgreens • Simon's Theory of Administrative Behavior. (n.d.). Retrieved from http://faculty.babson.edu/krollag/org_site/encyclop/simon.html • Stern, C. (2015). CVS and Walgreens are completely dominating the US drugstore industry. Retrieved from http://www.businessinsider.com/cvs-and-walgreens-us-drugstore-market-share-2015-7 • Wagner, M. & Orvis, W. (2013). Changing Structures and Behaviors at Walgreens. Retrieved on: January 3, 2016, from http://www.strategy-business.com/article/00195?gko=242ae References

  17. Wahba, P. (2015). Walgreens-Rite Aid deal could lead to elimination of 3,000 stores. Retrieved from http://fortune.com/2015/11/05/walgreens-rite-aid-store-closings/ Walgreen World . (2014). Retrieved from http://www.sec.gov/Archives/edgar/data/104207/000119312514343198/d791091 d425.htm References

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