Wall Drug Store

I. Case Brief
II. Viewpoint:
Mr. Bill Hustead, President and CEO of Wall Drug Store
III. Time Context:
Early 1980s
IV. Problem Statement
How would Wall Drug Store expand its business operations in light of the increasing uncertainty in the
tourism industry?
V. Statement of Objectives
 To become the ultimate “must-see” tourist attraction in South Dakota.
 To reach Wall Drug’s full potential as a tourist destination.
 To provide exceptional experience to the visitor’s that they will never forget.
VI. Areas of Consideration
A. Internal Environment / Internal Forces

Background of the Company

In 1931 Ted grandparents had a little money that his grandfather had inherited from his father who was a
doctor. It was probably, oh, $4,000 or $5,000 which was quite a bit of money in that day and age. His
grandfather was a graduate from the University of Nebraska with a degree in pharmacy. He'd been
bouncing around from job to job, they got to keep in mind this was during the Great Depression and he
even took a job where he worked for just room and board. Anyway they had found out that there was a
drugstore for sale in Wall, South Dakota and his grandfather having a degree in pharmacy was interested.
So loaded up his wife and came out and looked at it. They thought the conditions were very bleak,
however it might be an opportunity. They went home and thought about it and decided to purchase the
store. So in 1931 they load everything up in a cattle truck, that they arranged to come out from Wall and
pick all their stuff up and move the couple with their son Billy in a cattle truck out to western South
Dakota. And on the way out, of course 1931 little Billy who was only 4 years old he turned to his mother
and he said why are we moving out to western South Dakota where all these rattlesnakes and sagebrush
and coyotes and dust and why are we leaving our little brick house in Sioux Falls and his mother said well
because your father's crazy, that's why. And his dad being the very sensitive child he was thought that he
would get out here, they'd go broke and he'd probably get put up for adoption. But they came out here in
1931 and of course during those times nobody had any money. There was not a lot of commerce going
on, but there was a lot of traffic going by on the Highway 14/16 and people were traveling on the way to
the Black Hills, Mount Rushmore was being constructed and Yellowstone National Park. In 1936 on a
real hot summer day his grandmother was noticing the traffic on the highway and all of a sudden was
struck with an idea and she got somebody to watch her son Billy who was then 9 years old and ran up
town to talk to her husband. And she says to her husband, Ted we got to let these people know that are on
the way to Mount Rushmore and Yellowstone that we have a business here. We have the soda fountain,
we have ice, we have ice water and we have things to sell. And he said, well how would we do that? And
she said, let's put up a sign, let's put up a sign on the highway and, you know, try to encourage them to
come into our business. And he said, well what should we advertise? And she said, let's advertise for the
ice water. It's 110 degrees in the shade and we've got ice and we've got water and gosh maybe that'll get
them in the door. Well his grandfather thought that was a little corny but it just might work. So he goes
out and he gets a high school, local high school student to help him and he puts up a series of signs. Slow
down the old hack, Wall Drug just across the railroad track free ice water. And in that summer they had to
hire nine local ladies in town to just wait on all the customers that came pouring into the store
immediately after they put up the first signs. And his grandpa, being the tenacious person that he was and
he's probably the only one in the family that would have done this, if he thought signs right beside town
are effective what would signs do if you put them up all the way going east into Minnesota and Iowa and
west going into Wyoming and over the Bighorn Mountains which he proceeded to try and do over the
next 10 or 15 years.

Internal Forces
Marketing A. Defining Target market:

Company current target market of Wall Drug

would be “ All walks of life” variety of product
had been offering since then.

B. Increasing the amount of Touch Point

- The main goal of this is to increase the
awareness for the company and reaching
the target market that the Company
envision – This will be accomplished by
doing a researched for the current
stability and strength of the company for
through this the management will be able
 to see the current standing.

C. Advertising
- The chronicles of the success of the
company was due to the brilliant idea of
Dorothy which is spreading the awareness
of the company – One basic ideas was to
create a placard of the main street in order
for the people to be aware the existence of
their store – because of this we will try to
innovate and improve more the said idea
by making logos. Photographs and maps.
These would consist of intriguing
photographs of a particular item in the
store. Moreover, creating a road map of
the store in order for the traveler/customer
to know exactly the location with no
hassle.

D. Sales and promotion

- One of the best idea to be created is to by
making an extraordinary promotion to
attract more customer – one of which
would be the most common one which is
providing coupons. This promotions
could geared towards South Dakota to
Hills. MT Rushmore. Badlands National
Park and Wind Cave National Park.
Providing discounts to all to some of the
tourist would be a perfect strategy to
attract more people.
E. Branding
- One of the basis of the every company
strength and success would be the
 “Branding” Hence, with the aid of
advertisement plus by contracting
different famous personality will be able
to build the branding of the company

Processes and system/Operation Every company aims for the success – one of the
principles of every American is to always strive
hard till the end. Hence, constant process
reengineering of the management process plus the
profound analysis of the company financial
stability, constant improvement of the company
advertisement for the continues awareness of the
existence from generations to generation –
enhancement of the constructions.

Further, The Wall Drug Store is a complex of

retail shop. It includes a drug store, a soda
fountain, two jewellery stores, two clothing stores,
a restaurant with four dining rooms, a western art
gallery, a bookstore, and shops selling rocks and
fossils, camping, and backpacking equipment’s,
saddles, and boots as well as several souvenir
shops. There were major expansions in business
such as the establishment of its gasoline station
called “Wall Auto Livery” together with
continuing the expansion of the old store in
downtown Wall. Apart from these is the
construction of the Mall which is a new addition
in the old theatre location. Whereas the
development of the Mall represent a distinct
change I the development of Wall Drug’s
operations. Wall Drug is more than a store. It is a
place of amusement, family entertainment, a
gallery of the West, a gallery of South Dakota
 history, and a place that reflects the heritage of the
West.
Resources The success of the company does not only rely on
the good product and service but definitely It
highly depends on the human resources
Management department.

The entails an effective and highly organized

management team will properly lead to achieving
the goals and aspiration by having people that
would carry out the task and responsibilities
accordingly.

The people that they should look for are those

who knows the core values of Wall Drug – also
Company should provide a good environment and
a kind of leadership that will make the employees
feel that they being valued, respected and highly
appreciated.

Further, the process that the company will follow

will be the Hierarchical management style in
order to have a unified since of direction form the
upper management down to the lower part of the
management structure.
Financial The company was not prosperous and in a good
shape until the Dorothy, the founder’s wife came
up with the idea of making use of sign’s along the
interstate. Since then, the businesses’ sales grew
annually and series of expansions and
developments were made for Wall Drug. Whereas
all the previous developments had been financed
out of retained earnings or short-term loans. In
effect, each addition was paid for as it was built or
added.
External Forces
Legal and Regulatory Congress passed the Highway Beautification Act
in the year 1965, which was designed to reduce
the number of roadside signs. However, there has
been slow compliance with this legislation by
many states, including South Dakota, since many
states in less populated areas have many tourist
attractions, and find road signs the only practical
way to advertise these attractions. Nevertheless,
new legislation is being proposed by the Federal
Highway Administration of the Department of
Transportation as of 1983 that could have an
impact on Wall Drug and other tourist-dependent
establishments, since there has been little
enforcement of the sign legislation since there has
been less money available for federal
enforcement.
Industry Changes 3rd generation family member to run Wall Drug
but he is not without his credentials, he even did a
stint at the Harvard Business School. During the
interview, he quoted from one expert, Greald
Zaltman, whose book “How Customers Think:
Essential insights into the Mind of the Market”
seems to lead Hustead’s thinking on marketing
and promotion. Noted Zaltman,”A great mismatch
exists between the way consumers experience and
think about their world and the methods marketers
use to collect this information.” Zaltman calls for
creative questioning that probes the unconscious
values underlying consumers’ reactions to
products and marketing campaigns. As a
proponent of market research, Zaltman has his
detractors but concepts that rely on the subliminal
 brain functions and images seem to have
translated to Wall Drug signs. No doubt,
Hustead’s Wall Drug has valued greatly from
Zaltman which is probably why, in some circles,
it is considered the greatest roadside attraction in
America!
Economic
Social/ Customers Wall is a small town of 770 people s of 1980. It is
situated right on the edge of the Badlands and 52
miles east of Rapid city. The Wall Drug store is
located on the main street of Wall, South Dakota,
with a population of 700. For miles in either
direction, people in autos have been teased and
tantalized by the Wall Drug sign, many have
heard of the place through stories, in press, or
have heard their parents or friends speak of the
Wall Drug. When people arrive at Wall (those
westbound usually after driving 40 miles or more
though the Badlans), they are greeted by the large
Wall Drug sign on the interchange and an 80-foot-
high, 50-ton status if a dinosaur. The business
district of Wall is two blocks long and is about
three blocks to five blocks from the interchange.
The town has eleven motels and a number of
gasoline filling stations.
Environment

SWOT analysis:

STRENGTHS

 Scale of operations. Wall Drug is such large scale of operations, the corporate can exercise strong
buyer power on suppliers to reduce the prices. It can also achieve higher economies of scale than
 competitors because of its size. Higher economies of scale results in lower prices that are passed
to consumers.
 Competence in information systems. The corporate achieves significant cost savings because of
its extensive information systems that tracks orders, inventory levels, sales and other related
information in real time. All this information can be instantly accessed, analyzed and decisions
made at each store. Effective management of supply chain and logistics is one of the most
important factors for success.
 Wide range of products. Wall Drug can offer wider range of products than any other. It sells
grocery, entertainment, health and wellness, apparel and home related products among many
other categories and offers both branded and own label goods. Wide range of products attracts
more customers.
 Cost leadership strategy. This strategy has helped Wall drug to become the low cost leader in the
market. This strategy requires selling products ant the lowest price possible and providing a no
frill services to achieve higher economies of scale and attract masses of consumers and that is
exactly what the company is doing.
 International operations. Foreign markets open up new opportunities for Wall Drug growth and
provide new experience for the company as it operates quite differently abroad than in the home
market.

WEAKNESSES

 Little differentiation. Wall drug has no differentiation compared to its competitors, which might
hurt the company in the future if commodity prices or average consumer income would increase.
In this case, low cost leadership strategy wouldn’t be as effective as it currently is and Wall Drug
main competitive advantage would erode.
OPPORTUNITIES

 Retail market growth in emerging markets. Retail markets grew by at least 5% on average in
emerging markets in the last year, opening huge opportunities for Walmart’s revenue growth. The
business currently operates in Brazil, Mexico, China and India markets. Walmart should increase
its presence in these markets to sustain future growth.
 Rising acceptance of own label products. The sales of private label products have increased by
more than 40% over the last 10 years. This reveals increasing consumer acceptance of
supermarket chain products compared to national brand products. Wall drug has an opportunity to
increase the number of private label products sold at its stores and earn higher profit margins.
 Trend toward healthy eating. The current trend of eating healthier food has resulted in higher
demand for grocery products. Wall Drug has an opportunity to expand its grocery stores to earn
more income from this trend.
.

THREATS

 Highway Beautification Act, concerning roadside sign advertising.

 Actual brand recognition and potential for growth could remain stagnant.
 Increasing resistance from local communities. Wall drug superstores have a negative impact on
local retailers and communities.

VIII. Alternative Courses of Action

1. Expand into international market.

2. .Develop a strategic alliance with international travel agency.

VII. Analysis of Alternative Courses of Action

1. Expand into international market.

 ADVANTAGES DISADVANTAGES
Cost in the establishment of international
Increase in business growth
expansion.
Stay ahead of competition Risk in compliance.
Be able to access new markets. Managing of international personnel.
Increase in sales and more potential
customers. Formulation of new concepts as a marketing
Gain international identity to potential strategy.
tourists and clients.

2. Develop a strategic alliance with international travel agency.

ADVANTAGES DISADVANTAGES
New market strategy, wherein customers
will book to the travel agency to visit the
Conflict of interest.
historical Wall Drug Store.
Increase in sales and volume of customers.
Decrease in local competition. Increase in financial expense.

VIII. Conclusion
Decision Matrix
Criteria ACA 1 ACA 2
Effectiveness 3 1
Sustainability 3 1
Service Innovation 2 1
Profitability 3 1
Rate of Success 3 1
Total 15 5
Average 3 1

Legend:
1- Least Favorable
2- Moderately Favorable
3- Highly Favorable

Definition of Terms:
  Effectiveness- Producing the intended or expected result.
 Sustainability- Able to maintain at a certain rate or level.
 Service Innovation- Optimal client-based service to attain loyalty and recognition.
 Profitability- Able to meet the target Return of Investment.
 Rate of Success- Possibility of achieving desired objectives.

Therefore, Wall drug can expand their business internationally, but they should remain consistently with
their strategy. While Wal-Mart make a decision to expansion their business in global or internationally,
they should continue expand the same strategy and standardize the local market conditions while open
stores in internationally and rural place.

IX. Plan of Action

I. Function/Activity In Charge Time Frame

NEGOTIATION TEAM
Proposal of new attraction concepts and ideas
Top Management 1st Quarter
which will entice customers in all ages a
satisfaction in Wall Drug Store’s quality service.
FINANCE
Finance should be able to deliberate the budget
relevant to the undertaking of the proposed Finance Executives
project and determine its underlying operating 1st Quarter
Accounting Officers
cost duly presented through financial reports. To
be able to forecast the projects sustainability and
profitability.
OPERATIONS Chief Operation Officer Quarterly
Based on the outlined plan of operations the
company must be able to first have a survey on
what kind of attraction should they build for its
target market. Plus technology and equipment
integration should be prioritize in the
undertaking of new attractions and must do
safety control.

MARKETING

The company should be able to have a market

development and aside from using signage’s the
Marketing Executive Quarterly
company must also make us of technological
platforms so as to improve its brand awareness
in its market niche.
AUDIT Auditor Quarterly