1. Location Intelligence Conference 2006 John Baronello Manager, Strategic Modeling Walgreens Market Strategies L.L.C. Walgreen Co, 847.315.4837 John.baronello@walgreens.com Advanced Spatial analysis is changing location strategy at Walgreens: How science transforms the process of decision making.

2. Walgreens Bio: $42.2 Billion in sales $1.6 Billion in earnings 480 Million prescriptions sold 170,000 Employees 4,950 stores in 45 states (+ Puerto Rico) REAL ESTATE GOALS 7000 stores by 2010 475 openings/year Company Figures MPR Reviews  1,000 Locations/Year

3. Advanced Spatial Analysis Transformed Market Planning & Walgreen’s Ability to Make Profitable Location Decisions Brief History of Walgreens Market Strategies 2006 Next Generation 2000 9 Site Analysts, “dirt kickers” –Restricted Productivity –Best Estimation of TA –Analog Forecast ScanUS Desktop Forecast Sales & Dilution Do not address optimal strategy or network effects Very limited quantitative evaluation Ability to Understand the Network & Optimal Location Strategy 30 Market Managers/Analysts –Market Concentration ESRI Enterprise GIS 4 GIS Managers/Analysts –Enterprise GIS strategy 3 Strategic Modeling Managers/Analysts –Advanced Modeling & Optimization Advanced Location Strategy Segmentation Model GIS Network Optimization Model Optimization of Growth Vehicles in Markets Location Intelligence integrated with Marketing, Advertising, etc. Advanced Quantitative Methods Utilized to Derive Strategy

4. Culture Shock of Art & Science at Walgreens: Strategic Modeling How did Walgreens Market Strategies change so drastically in 6 years? Enterprise GIS, Advanced Modeling, Optimization Methods, & Development of Market Strategists –Hammering location relationships and data that supported our strengths and repeatedly proving the link to ROI. Evolving Market Managers from Site Analysts –Defining the “generalist” & “specialist” Spatial Modeling Techniques Applied to Strategy Evaluation Implementation!!! Implementing Advanced Analytics for Strategy Evaluation: The specialist & generalist equilibrium Generalists need specialists to simplify complex systems with modeling Specialists need generalists to “see the system” How the specialists and generalists interact: Location Models need to be analyzed spatially Logic of the models need to be clearly defined & analyzed spatially Goodness of fit is the least important attribute