Boots Report

1.1 Executive Summary

As Boots is one of the leading British health and beauty chains, this report will portray its factors that explain its accomplishments. Discussing Boots’ background helps the readers understand the motives and reasons for the strategic actions the executive director, Richard Baker, has taken in order to help Boots remain at the top of the market.

In addition, the report will assess the political, economical, social, and technological (PEST) factors; and strengths, weaknesses, opportunities and threats (SWOT) affecting the presentation and performance of the businesses within the chemist sector in the present, past and future. Political factors, such as legislation abolishing the retail price maintenance on over the counter drugs; economical factors like interest rates and inflation; social factors, such as peoples’ lifestyles; technological factors, such as security advancement will all be discussed throughout the report.

Threats, such as competition from leading supermarkets as Tescos, has forced Boots to cut prices, invest in newer products and machinery to help Boots’ evolvement and development to rise against their competition. Competition is one of the greatest factors that Boots faces, therefore it will be examined in the report.

Through research and analysis the level of sales for Boots the Chemist and for the retail chemist sector as a whole, it has become apparent that there has been a decrease in sales; However, strategic plans to merge with Alliance Unichem, which holds more than 30% of the UK drug distribution market, will give them the opportunity to expand financially and efficiently.

The report’s main aim is to discuss Boots’ factors which have lead to decline in sales in the past and how the future will look like. This has been done through the PEST and SWOT analysis.

1.2 Introduction and History

Boots the chemist is UK's leading health and beauty retailer. It has more than 1,400 shops in UK and Ireland. Boots is an international business that as well as securing market leadership is building and marketing its own brand No7 with significant success. Its parent company is called Boots Group plc that consists of Boots The Chemist Limited, Boots healthcare International, Boots Opticians and Boots retail International.

The history of Boots’ success was started back in 1877. That was the time when Jessie Boot opened his first pharmacy. The young gentleman, then age of 22 was committed to multiplying his customers by cutting the prices of selling goods. At that time it was not that straightforward because all the leading pharmacies had price-fixing policy. However it did not discourage him. In order to reach his target he started advising customers to pay cash rather than take things on credit so the cash flow would be higher and he would be able to lower the prizes. He put a lot of effort into advertising as and even employed a bell-ringer that was wandering around Nottingham's streets and informing the public about a new strategy. This resulted in doubling the shop's takeover and becoming the busiest retailer in pharmacy sector.

The second successful idea that Mr. Boot introduced to his customers was employing the young chemist who provided poor patients with prescriptions. Boot was concerned about people’s lives and at the time it was extremely expensive to get diagnosed without mentioning prescriptions.

After all the success he decided to turn his business into a private company which he renamed "Boot and Company Limited" with himself as chairman and managing director. In addition, driven by a triumph of his shop he wanted an expansion. As a result, he opened his first shop outside Nottingham in 1884. Furthermore, through his marriage to a daughter of a bookseller, Boot expanded the stock to books and stationery, broadening his customers’ satisfaction.

Thanks to his innovative strategies, by the end of 1900, Mr. Boot expanded into East Anglia and the West Midlands, owning 250 stores.

Government legislations had a significant influence on Boots prosperity as well. It is worth mentioning The Pharmacy Act of 1908 that "confirmed the legal right of large companies and stores like Boots to offer dispensing services." The second important act was The Health Insurance Act of 1911 which increased a medical support to "ordinary working people". This event was followed by a remarkable growth in the number of prescriptions that leaded to Boots 2.5 million turnovers in the1913. On top of that Boots made its name during the First World War by supplying the front with "water sterilizers, vermin powder, anti-fly cream, aspirin and saccharin"( Boots,2005).

1.3 Levels of Sales

Boots the Chemists, health and beauty retailer, has possibly the largest range of quality, brand name personal products. 90 % of the UK’s 60 million population visit a Boots store at least once a year. The company has an annual turnover of around 3 billion Sterling pounds from a network of some 1,300 stores (Branding Asia.com (n.d)). This year’s annual report demonstrates that it has been a period of intense change for Boots. Despite some challenging competition, such as Tescos, a depression in consumer economy and higher interest rates in which it lead sales at the Boots the chemist outlets to fall by 0.8% (Boots annual report, 2005).

At Boots the Chemists, sales of Health ranges rose by 1% and in beauty and toiletries up by 3.5%. As Richard Baker, the chief executive reported, that this was a reasonable performance in a tough market.

In general, sales at Boots the chemist rose by 1.5% during the fiscal first quarter. Boots noticed that the quarter made a good performance in Beauty, especially a good growth in cosmetics and it is planning to invest more money in that part of its business. In addition, revenues increased by 1.9% on a year earlier. On the other hand, Boots supposed that its sales declined by 1.6% in the second quarter, twice as fast as the rate of decline over the previous three months, while beauty and toiletries maintained their growth until it reached 3.3% higher after 6 months. However, weak demand for photo products and electrical had a big impact on the sales in which it dropped by 3.4% in the 2nd quarter to 3% in the end of the first half. Despite a decline in consumer confidence in the second half of the year, sales in Boots the Chemists rose over again by 3.8%

(Manchester Evening