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Background

Since the mid-1990s, Boots has faced increased competition from virtually all parts of the marketplace. It has responded by merger, takeover, re-organisation, new investment and restructuring. Its success will depend on its own actions but also on the extent to which its competitors manage to take market share from them. This business profile update sets the scene for the battles to come. It has been produced with the kind assistance of Amy Silverston, freelance marketing researcher.

In October 2005, Boots announced a £7bn merger with its rival Alliance Unichem. This deal made Alliance Boots a major global player in the distribution of pharmaceutical and healthcare products. It also gave the Boots brand a greater profile in continental Europe. At the time of the merger, Boots owned 1,400 pharmacies in the UK, employing 68,000 staff, while Alliance Unichem had 1,200 outlets in the UK, the Netherlands, Italy, Switzerland and Norway, with 33,000 employees.

Until Alliance Boots was formed, analysts and investors had become increasingly dissatisfied with Boots' attempts to fend off competition from the grocery retailers, independents and niche operators in its key markets. In the 18 months to the merger being announced, the firm issued three separate profit warnings. Boots' ventures into new fields such as laser eye surgery, dentistry and chiropody had not been successful.

And yet the firm boasts some impressive credentials: it is the UK's most trusted brand. Its founder's philosophy of treating its customers fairly and acting with integrity means that, even now, the Boots brand still equates to quality, value and service in the eyes of many of its customers. So what action has Boots taken to deal with more competitive pressure and the new economy which emerges after the global slump? Read on in Ownership, Management and Strategy to find out.

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