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Loblaw Companies
Limited: Case
Assignment
SGMT 6000P: Strategic
Management
Individual Assignment #2
Submitted to Prof
...
is a market leader in
the Canadian grocery retail industry
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Wal-Mart, already a top retailer in Canada,
through initiatives e
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Sam’s club wholesale mega outlets, is accelerating its expansion
plans and is expected to bring Super Centres to Canada
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External Environment: Political/Legal: The presence of labour relation body e
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“United
Food and Commercial Workers (UFCW)” prohibits the companies to use unfair labour
practices which puts a legal check on company’s human resources department
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As a result, the price predictability in Canadian market is quite high
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This has created a differentiated segment for food retailers to capture
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This creates opportunities
to innovate food products related to ethnicity and cultural heritage, a differentiated
segment
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Technological advancement e
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Enterprise Resource Planning (ERP) in
supply chain makes operations more efficient
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Industry Outlook and Attractiveness Analysis (Porter’s 5-forces): Canadian grocery retail is
quite a mature industry with low margins i
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0
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e
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Suppliers: Bigger suppliers that own category-leading products (loss
leaders) can negotiate for price, shelf space etc
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So their bargaining power is high
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Buyers: Consumers have a lot of options to choose from,
ranging from super stores to local convenience stores, which provide low price, quality
service, and breadth of product assortment
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Substitutes: Due to rise in double income families and urban
lifestyle, the propensity of buyer towards substitutes such as fast food, take outs and
restaurants has increased
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So, the threat of
substitutes is high
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Since the scope of product differentiation is low and profit margins are limited,
global firms enter Canadian market by acquiring mid- size grocers e
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Wal-Mart had
acquired 122 Woolco stores
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Existing firms rivalry: Concentration of firms
in Canadian grocery industry, a perfectly competitive market, is pretty high (Exhibit 1)
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Since the sales strategies of grocery firms are
based on price and not on product and service differentiation, profit margins are low and
there is a strong competition in every segment
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Opportunities and Threats: Loblaw can innovate more to customize the products to cater to
the changing Canadian lifestyle
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Case
Page 1
more secure online payment systems for young buyers
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Firm Analysis: Resources - Tangible: Loblaw uses the cash flow generated in the business to
invest in the future
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Most of
the real estate is owned by the company and is in favourable strategic locations which
makes its operations smooth and flexible, and provides competitive advantage
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Multi-banner and multi-format approach
has enabled Loblaw to cover all price points in the grocery market and cater all segments,
ranging from discount to bulk
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President Choice (PC) private label program
has helped the firm build brand equity
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It has successfully positioned Real Canadian Wholesale club against the Costco Price club
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g
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Utilizing size and scale to its strengths,
Loblaw has maintained its cost of operations on lower side
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It has
created synergies by opening shops at gas stations and in-store franchisee restaurants
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Brands e
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President’s Choice has
helped to build high recognition and its strategically well located stores have resulted in
flexible operations
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Competitor Analysis: Wal-Mart used its unique strategy e
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”Every Day Low Prices” as a
competitive weapon to quickly dominate the market
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However, Wal-Mart has been accused of unfair labour practices, and has
limited expertise in perishables (Exhibit 3)
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Strategic Alternatives: 1) Differentiation: In Canadian grocery retail industry, target
customer segments are very price sensitive and needs of “mass” consumer segment don’t
differ much
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2) Cost leadership: This strategy will allow Loblaw to win market share by catering to cost
conscious and price sensitive customers
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Here Loblaw would need to use strengths of Size and Scale to establish
massive economies of scale with suppliers (Exhibit 2)
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In this highly competitive industry, the winner will be the one who
would create maximum value for the consumer at the lowest possible price while maintain
high quality of offerings
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In this way, Loblaw will be able to pass on the added value to its customer in
terms of low prices
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SGMT 6000P: Loblaw Companies Ltd
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Good
potential for product customization
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Exhibit 2) Drivers of Cost advantage for Loblaw
Economies of Scale
Long term relationship with Suppliers
High levels of Inventory in Stock keeping units
Size and scale are Loblaw’s biggest strengths
Economies of Learning
No unfair practices with labour
Good Brand Management practices and Marketing
strategies
Product Design
Product customization is possible e
...
Ready to Heat and
Ready to take
In store services and Loyalty programs
High Quality President Choice brand
Control label and Customer loyalty programs
Inputs costs
Own stores and stores located at favourable locations
Uses Cash flows to grow business
Exhibit 3) Differentiation Value Chain for Loblaw
Firm Infrastructure
Own 63% of real estate
Owns 606 stores which generate $15 million sales
Human Resource Management
Good labour relations
Strong say in the lobby of UFCW
Technology Development
IT department in place, however nothing much
has been done on Internet space yet
Inbound Logistics
High quality products and services
Operations
Wide variety of food products, with non-food and
daily household items
In store franchisee restaurants and other services
Synergies at gas stations
Outbound Logistics
Low price products
High quality delivery service
Marketing and Sales
Control label products
Multi banner and Multi format approach
Customer Loyalty programs
SGMT 6000P: Loblaw Companies Ltd
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Case
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