Loblaw - Wal Mart Case

Daftar Isi
- Loblaw mission and vision statement

- Loblaw history
- Corporate strategy
- Industry overview
- SWOT analysis
- Wal-Mart Market Entry
- February 2007: 100-day review
- Summary
- Discussion Question
- References

Loblaw mission and vision statement
Loblaws mission is to be Canadas best food, health, and home retailer by exceeding customer
expectations through innovative products at great prices.
Loblaw is committed to a strategy developed under three core themes: Simplify, Innovative and
Grow.
Loblaw history
Loblaw was acquired by George Weston Ltd.
- Loblaw was built as a food empire through the purchase of grocery manufacturers, retails
and wholesalers.
- Credited with inventing premium private brands in North America.
- In 2005, Loblaw was the largest supermarket chain in Canada, with an estimated market
share of 34,9%.
- In 2008, Loblaw has 609 corporate and 427 franchised stores in every province and territory
in Canada (21 banners).
- Loblaws Presidents Choice and name control brands are the 1# consumer packaged good
brands by sales in Canada.
Corporate strategy
Creation of private labels
Consolidated of distribution centers
Closure of unprofitable stores
Maximized the use of Loblaws fleet
Uniform pricing strategy
Standardized store design
Renegotiated union contracts
Introduction of general offerings
Industry overview
- Canadian supermarket industry was valued at $73 billion in 2006.
- The grocery business was les fragmented, more competitive, multicultural and dominated
by nation companies.
- Canada has a well-developed discount grocery sector with very high standards.
- The Provinces of Ontario is a key market in Canada and the biggest market for Loblaw.
Ontarios sales declined 4.3% in 2006.
- Although sales in 2006 grew 2.49%, the growth was slower than the traditional year-to-year
increase of around 4.8%.
- New stores are increasing the average size of supermarkets in Canada.
- National and regional chains are getting a wider range of store innovations and an increased
spotlight on private labels.
SWOT analysis
Strength
- Strong brand name
- Position of market share sales number continue growing
- 7000 private-label products (No Name and Presidents choice)
- Presidents organic product
- Presidents choice bank and its loyalty program
- Large amount of fixed assets versus low amount of debt
- Economy of scale and large knowledge and experience in Canadian market.
- Wide geographic coverage (all Canadian provinces)
- Social responsibility initiatives, close to the community.
Weakness
- Operating margin dropped to 1% in 2006.
- Return on average total assess of only 2.30% in 2006
- Stores are underperforming
- Complicated corporate structure and weak management
- Plagued with problems in its distribution systems: broken buyer-supplier relationships,
delayed delivering goods, out of stocks.
- Loblaw is not doing fresh food as well as the others are right now
- Customers accustomed to prices driven by regular sale promotion
- Customers find difficult to navigate the superstores
- Lack of experience managing general merchandise inventory
- 21 banners
Opportunities
- New management team and dew business plan
- Commitment to strategy: Simplify, Innovative, Grow
- Growing its discount segment, becoming the low-price leader
- Openings to exploit emerging new technologies
- Proven product innovation capabilities
- Large on financial resources to grow the business and pursue promising initiatives
- Four-year contract with unions and elimination of 20% of its administrative workforce
- Lack of customer awareness about general merchandise deep discount pricing strategy
- Joe Fresh Style line of clothing
Threats
- Goodwill is continuously dropped in value
- Market/book ratio has been decreasing since 2002
- Intense competition
- Major Union problems
- Grocery sales are growing slower than others years average
- Canadian market is attracting foreign investors
- Wal-Mart experience in global market has continually pushed its general merchandise
dominance forward while developing its food business.
Conclusions
- Although the Loblaw faced significant hurdles, the company has an attractive set of strength
and resources to restore its profitability and growth.
- We have identified as alarming weak, its problems with distribution system and tolerated
poor management. A retailed stores distribution system and management are key success
factors.
- The major threat is that competitors are growing stronger while Loblaws consumer
satisfaction is decreasing due to the company poor performance.
- Loblaws best opportunity is to capitalize its experience on food market. Loblaws
commitments to simplify, innovate, and grow under the application of a new business plan
is the best opportunity that the company has to be a front-runner again.
Wal-Mart Market Entry
- Wal-Mart poses a serious threat to other grocers
a. Economies of scale and scope
b. Everyday low pricing
c. Supplier influence
d. State-of-art distribution system
- Wal-Mart built a super-centers and rapid expansion forthcoming
a. In 2007 groceries accounted for 31% of total sales
February 2007: 100-day review
We are not delivering the right value for money and we are not getting the credit with the
customer for investments that we do make, said chairman Galen Weston Jr.
Proposed actions by executing and analysts:
- Clear out excess inventory and improve stocking
- Strong offering of private labels, de-emphasize national brands and eliminate redundant
sizes
- Reduce space allocated to general merchandise. Devote more are to food or reduce the size
of stores
- Lower prices for selected items to retain its customers
- Improved differentiation between the smaller conventional Loblaw supermarkets and the
larger discount outlets
- Reconstruction of the famous Maple leaf Gardens in downtown Toronto
Summary
Loblaw has begun to reorganize its business strategy however it is evident that change is imminent.
References
- Canadian Council of Grocery Distribution (CCGD)
http://www.ccgd.ca/home/en/index.html
- Loblaw Companies Limited
http://www.loblaw.com/
- Thompson, A.A.Jr., Stricland, A. J. III, & Gamble, J. E. 2009. Crafting & Executing Strategy:
The Quest for Competitive Advantage: Concepts and Cases, Sixteenth Edition. New York,
N.Y.: McGraw-Hill/Irwin

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Daftar Isi

- Loblaw mission and vision statement

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