Boots Company Facts Home Page (Out dated)

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Boots
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OPERATIONS AND PRODUCTION

THE BUSINESS

FINANCE

STRATEGY AND POLICY

HUMAN RESOURCES MANAGEMENT

MARKETING

Boots
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What is their field of operation?

Boots operate within the Personal Well Being Industry.

The company has recently been streamlined to focus on its core competencies:

  • Boots the Chemists
  • Boots Healthcare International

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What are their main products?

Representations of Boots' products
  1. Health: Pharmacy products
    This represents about one quarter of the company's sales. Over-the-counter medicines used to be regulated under Resale Price Maintenance (RPM), so that smaller local chemists would survive. The effect of RPM was to keep prices artificially high. Larger firms, such as the major supermarket retailers, could have charged less for these medicines. Eventually, the benefits of protecting small pharmacies were outweighed by the lower prices that could be gained by letting supermarkets compete. So the RPM was abolished. More on this period can be read in Biz/ed's Wanna Argument (http://www.bized.co.uk/current/argument/arg9.htm).
  2. Beauty and Toiletries
    Boots is the leading UK retailer in a number of cosmetic brands, such as No. 7.
  3. Baby, Food and Photography
    • Baby-related products are good for increasing 'footfall' (a retail term for the number of people entering the store)
    • Sandwiches
    • Food items for customers with special dietary requirements
    • Digital cameras and in-store technology to produce prints from memory cards
  4. Opticians, Dental care and Wellbeing services
    • Opticians and eye care, including LASIK clinics.
    • Dental care is a growing part of Boots' services. Private dentistry in the UK is worth £2bn annually.
    • Boots' Wellbeing beauty treatment centres were shut down in 2003.

Images: www.freeimages.co.uk; beauty products by Isaac Esteban, stock.xchng

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What are their main brands?

The Boots brand is associated with being dedicated to health and beauty.

  • Boots' 'No. 7' cosmetics brand was launched in 1935. Over the years there have been numerous relaunches and new product additions. The brand is still active today; indeed, it is the leading cosmetics brand in the U.K.
  • Over-the-counter consumer healthcare products owned by Boots Healthcare International. This business develops and markets brands such as Nurofen, Strepsils, E45 and Clearasil.

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Where is their head office?

Boots Group PLC
1 Thane Road
Beeston
Nottingham
NG2 3AA

The Beeston site has been operational since Boots opened its first factory on the site (producing soap) in 1929.

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When did the company start?

John Boot began in business in 1849, opening The British and American Botanic Establishment in Goose Gate, Nottingham. It was his son, Jesse, who first incorporated the family name, trading as M & J Boot, Herbalists, from 1871.

Harvesting lavender

Did you know that Boots the chemist began as a herbalist? © Photolibrary Group

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Who are its shareholders?

As a Public Limited Company, Boots' shares are listed and traded on the Stock Market.

A Breakdown of the Top Ten Boots' Shareholders (by percentage of shareholding) - October 2003

Shareholder No. of Shares (000) Percentage
Merrill Lynch Investment Managers 39 469 5.01
Silchester International Investors 35 667 4.53
Delaware International Investors 33 683 4.27
Legal and General Investment Management Ltd 32 621 4.14
Barclays Global Investors 28 704 3.64
Scottish Widows Investment Partnership 23 105 2.93
Lazard Asset Management 18 854 2.39
Fidelity Investment Services Ltd 15 951 2.02
Boots Co plc & Associates 15 262 1.94
State Street Global Advisors 14 534 1.84
Total 257 855 32.71
Capital Issued 788 115

Source: Boots Web site 'Analysis of Shareholding' (http://www.boots-ir.com/boots/shareinfo/analysis)

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What is the company's structure?

The company has two core businesses: Boots The Chemists and Boots Healthcare International. The overall structure is summarised below:

The Boots Company PLC
Boots Retail (UK & Ireland) Boots Retail International Boots Healthcare International
Boots the Chemist Wellbeing Services Supply and Support Services 66 stores and more than 100 so-called 'implants' mostly in SE Asia. Crookes Healthcare
Store development
Bootsphoto.com
Advantage card
Boots.com
Boots Opticians
Boots Dentalcare
Boots Footcare
Insurance
Supply chain
Logistics
Manufacturing
Properties
IT
UK Sales and Marketing of BHI products

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What is their Mission Statement?

"Boots aims to be the place for health and beauty customers. We want to secure market leadership in the UK and build on our brands' growing success internationally."

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Who are their main competitors?

Since the abolition of RPM, Boots have faced competition from the major supermarket groups. In 2004, Tesco for example, are understood to be preparing a price-cutting campaign across a range of products. This campaign will focus on more than 600 products including health, beauty and baby items including medicines, dental care and baby wipes. Each of these could be seen as occupying traditional Boots' territory. Tesco are believed to be prepared to spend £70 million on the cuts.

In the market for prescription medicines, where Boots is the leading player, the main competition comes from UniChem (who own Moss Pharmacies) and SuperDrug.

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A look at a key feature of Boots' business

What happens when you find your key markets being squeezed by the largest supermarket retailers, your plans for new products in new growth markets in tatters and your major shareholders needing 'guidance' over the future profitability of the company? In Boots' case you take action across a whole swathe of your business activities:

  • Cost cutting
  • Price discounting
  • Store renewal and refurbishment
  • Focus on core activities
  • Roll out low cost model of overseas business

Each of the above is underway or has already been acted upon since 2003 at Boots. A closer look at each of these policies shows not only how great the threats are to Boots' core business, but also the seriousness with which the danger is viewed.

  • Cost cutting
    The company set up a plan called 'Getting in Shape', aimed at saving £100 million by 2005-06. Three thousand jobs have been cut or are planned to go. One thousand jobs went from a Boots factory in Airdrie, Scotland; seven hundred were cut when Boots' beauty salons were shut down; fifteen hundred either have gone or will go by 2005 in human resources, finance and I.T. at company headquarters in Nottingham. The redundancies are part of a plan to save £100 million in business costs.
  • Price discounting
    Christmas 2003 saw Boots making large price cuts in its 1300 stores in a 'three-for-two' promotion. Further discounts to the value of £40 million have been planned for 2004.
  • Store renewal
    Following the appointment of a new Chief Executive, (Richard Baker, formerly of supermarket chain Asda-Walmart, who took over in September 2003), there has been a new emphasis on improving the basics of Boots' high street retail effort.
    Baker found that simple but important things like keeping shelves stocked and handling point-of-sale (POS) transactions effectively, were not being performed well at the stores. As well as modernising its I.T., the Boots stores are expected to open for longer and on Sundays.
A closed Boots store in Bristol.

The process of store renewal has meant the closure a large Boots store (above) in Bristol, to be replaced by a smaller, smarter version (below) one street away.

A new smaller, smarter version of Boots.
  • Focus on core activities
    Boots' forays into niche markets such as its Wellbeing beauty treatment centres, as well as its ownership of car and bike accessories store, Halfords, have been abandoned. Under the threat of new competition, the firm has decided to focus on its core activity, running the Boots the Chemist retail business.
  • Low cost model of overseas business
    In keeping with many U.K. retailers, Boots has tried to break into new markets in continental Europe and beyond.
    Typically, there are three main ways to expand into overseas markets:
    1. Open identical stores to those in your domestic market
    2. Take over an existing retailer in your target market and trade under their name - strategy used by Sainsbury supermarkets in the USA (see Sainsbury business profile)
    3. Licence the sale of your products to an existing retailer in your target market.
    Boots has tried the first of these options, but has retreated from this strategy after finding it too expensive. Instead, it plans to use the third option, which appears to be less risky, as it involves no upfront set up costs. The firm already has a similar relationship with a retail chain in Hong Kong and Taiwan, and now plans to do the same in the U.S. market.

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Can I have some financial information about the company?

1999 2000 2001 2002 2003
Turnover (£m) 5,045 5,189 5,226 5,332 5,327
Operating Profit (£m) 562 565 580 626 544
Dividend per share (p) 23.8 25.2 26.3 27.4 28.6

Source: Boots Web site 'Financial Data' (http://www.boots-ir.com/boots/financialdata/)

Does this data suggest why Boots felt the need to set up a cost-cutting operation in 2002-03?

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What is the company's vision for growth?

Boots' stated goal is to modernise, become more efficient and be more customer focused. They say that in the past, the business has been a steady performer, but has not 'punched its weight' given the strength of its brand.

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What sort of people work for the firm?

Like many major companies, Boots offer opportunities for graduate and undergraduate careers. In addition to these programmes there are:

  • retail jobs
  • opportunities for optometrists (in Boots' Opticians business)
  • pharmacists' roles - Boots employs over 3000 pharmacists
  • dental care jobs for dentists, practice managers, dental nurses, hygienists and receptionists

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Do they have an equal opportunities policy?

Boots' own Web site makes the following statement:

"We're committed to encouraging everyone to contribute in an environment where they feel respected and valued. We constantly monitor the make-up of our workforce in terms of ethnic origin, gender, age and disability. We've been running a series of briefings which help people acknowledge and value the many ways in which we're different. These sessions communicate what harassment and discrimination actually mean, how to recognise them when a colleague is being affected, and how to take action."

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Can you give me an example of HRM at the company?

Transforming a company from a multi-activity operation into a more defined business can mean major changes for managers and staff. How these are dealt with can be crucial to the future success of the organisation. During the year 2002-03, Boots engaged in a programme of focus group meetings for all of their retail employees, with the aim of informing and engaging everyone in the business; this involved more than 52 000 staff. The key objective of the meetings was that all staff develop a better understanding of Boots' markets, customers and competitors.

Dealing with staff and union negotiations over redundancies in 2003-04 and beyond, will be a more serious test of Boots' attitude to human resource management. The omens do not look good at the time of writing. In mid-January, Amicus, the UK's largest private sector union which represents Boots' staff was less than impressed with the lack of consultation over the planned 900 redundancies at the company's Nottingham headquarters. The union had a series of complaints about the planned job cuts:

  • Lack of consultation. Amicus said that this case shows the need for a strengthening of UK employment law.
  • Staff learned of the job losses through the media. Nev Jackson, Amicus' East Midlands Regional Secretary said, "To read (in the paper) that your job is under threat is soul destroying and totally unacceptable".
  • The effect of the job cuts in Nottingham will be multiplied through the community, causing local suppliers and other businesses to lose jobs.

It seems as if 'Getting in Shape' runs the risk of alienating the very people on whom Boots relies to improve the company's performance: its employees.

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By how much has their workforce grown over recent years?

At 31st March 2003, Boots employed a total of 68 740 people, equivalent to 47 050 full time equivalent workers. This compares with a total number of employees in 1997 of 82 520. This is clearly quite a significant reduction in staffing. How do we account for this? At least part of the answer comes from how the structure of the organisation has changed over recent years. In 1997, for instance, Boots owned Halfords (car and bike sales and accessories retailer), as well as A G Stanley and Do It All (home improvements and DIY retailers). These three businesses accounted for about 15 000 employees and are no longer owned by Boots.

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How are Boots' employees motivated?

Boots has a reputation for being a traditionally 'paternalistic' business. Its roots are based in the philosophy of looking after customers and staff and, as a result, caring for the communities in which it operates. This philosophy involves:

  • treating its employees well
  • involving them in the business
  • offering a 'stake' in the company through participation and share ownership
  • being proud of the way the business discharges its corporate social responsibilities
London by night.

Boots' philosophy of looking after its customers and staff might extend to employees being given a free day trip to visit a famous landmark. © Photolibrary Group

Recognising the importance of motivation, many companies (and Boots is a good example of this) are keen to stress the chances for self-development, the recognition of good work and the sense of achievement that workers can enjoy in their jobs. These factors - 'motivators' as Herzberg termed them - are vital for company success. The adverse impact on motivation that results from the 'Getting in Shape' strategy, is hard to quantify. But it is clear that Boots will have to try hard to regain the trust of its employees, if it is to benefit from proper staff motivation in the future. The short term impact of the cost cutting may be to boost profits and therefore keep shareholders happy, but if this is achieved, in part by damaging the bond between the company and its employees, it may be a short-lived improvement.

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Can you give me some information about a recent marketing campaign?

In response to the tougher trading conditions expected to result from greater competition from the supermarket retailers, Boots embarked on a programme of price discounting in the third and fourth quarters of 2003-04. A large 'three-for-two' gift promotion over Christmas 2003, helped to boost like-for-like sales by just over 4% during this period.

In 2004, the company intends to continue its price discounting. Named 'Lower Prices You'll Love', the programme currently means that more than 1500 products (12% of counter sales) are at lower prices than a year before. The company aims to continue to invest in this area, planning to spend £5 million on price cuts in the fourth quarter of 2003-04.

Boots's customer loyalty card, named 'Advantage', is strongly associated with their marketing campaigns. The Advantage card is held by nearly 15 million consumers. It is linked with half of all sales in Boots the Chemists.

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