Loblaw Companies Limited Harvard Case Solution & Analysis

Identification

The problem that Loblaw Company is facing is that Wal-Mart has decided to expand into Canadian market with the introduction of wholesale mega stores. This will initiate price wars amongst the local grocery stores as the entrance of Wal-Mart/Sam’s club wholesale stores will give more options to consumers so as to choose from an array of products. Now a strategy needs to be devised for Loblaw to compete with this giant multinational retailer in order to sustain its market share and competitive positioning. Moreover, before recommending an alternative, it should be kept in mind that the consumer preference for food is changing in the industry; therefore, the demand for readymade organic food is high.

Recommendation

The recommended alternative for Loblaw is to expand its business. Doing so will help it position itself more firmly in the market where consumers are hesitant to try out new stores. Moreover, taking advantage of the fact that Wal-Mart is not having expertise at perishables which is the market demand, Loblaw can move a step ahead in fulfilling consumers’ demands. President’s choice and financial services related to Presidents choice will help Loblaw in expanding its customer base and increasing customer penetration, frequency and basket size. As the company can offer points on every purchase, which customers can redeemed in the form of free groceries or discounts on other products. As more demand for organic food is increasing, what customers need to do is, they need to focus on shelving more of the readymade meals and organic food. For promoting what its shelf contains, Loblaw needs to promote itself by availing the widespread use of internet amongst Canadians. In addition to this, they need to take notice of its debt financing, which can harm the company in future. As most of the assets of the company are company owned, hence, they need to make use of these to the fullest. With an excessive market establishment in the market place, expansion into new horizons will help the company to boost its sales even more. Increasing the store size to accommodate the need of more products can be done. Further, they need to overcome the distribution and supply chain management issues in the market place. The implementation of an ERP program will help the company to achieve its supply chain efficiency. In addition to this, Loblaw needs to focus on organic products, which is the demand of time. These should be in terms of groceries and also in meat items. Nevertheless, the company has a good image in the mind-set of consumers, which is hard for Wal-Mart to replicate.

An appendix, annotations, and/or notes

Analysis

  • INDUSTRY ANALYSIS: Porter Five Forces

1.      Bargaining Power of Buyer (High)

Consumers of the retail industry have high bargaining power due to intense spending habits. There are two types of customers in the market place; one type of customer is a quality shopper and the other is a price sensitive shopper. As there are a lot of choices for buyers and there are numerous buyers; hence, buyer power is high. Moreover, national brands have more competitive pricing and quality that fits with consumers’ demands.

  • 2.      Bargaining Power of Supplier (Medium)

The already existing retailers hold strong supplier relationships. Suppliers that are already in a relationship with the existing retailers can bargain on the prices, which can drive margins top the lower end of the spectrum. Nevertheless, suppliers can integrate forward threatening the retailers or the retailers can backward integrate producing goods of their own e.g. in this case start producing their very own organic foods. However, both ends are strong and therefore the supplier power is medium.

  • 3.      Threat of New Entrants (Low)

The industry is highly concentrated with high capital costs. In addition, the Canadian grocery market is already saturated; hence, it is not easy to enter the market and beat the local retailers. Quality is the prime focus and not every entrant can be trusted for the quality of the local retailers, which they are already delivering to their customers. In addition to this, a strong distribution channel will further lead to prevent competition.

  • 4.      Threat of New Substitutes (Medium to High)

As there are many products of almost same brands with every retailer; therefore, it is evident that threat of substitutes is high in this industry. The local retailers hold both branded and unbranded products, which are substitutes for each other. However, the threat can be reduced by product diversification or bundling strategies.

  • 5.      Rivalry amongst Existing Firms (High)

There is high level of competition amongst the local retailers. Some have differentiated in terms of quality while others give discounts on bulk purchases. This has helped in achieving economies of scale for the existing retailers, which the new entrants can’t beat. The acquisition of almost every prime location by most of the giant and well-established retailers has helped in preventing competition from the new entrants. The industry is characterized .................

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President of Loblaw Companies Ltd. must decide what to do in response to rumors of introducing Supercenters Wal-Mart (the union of food and non-food) in Canada. Potential launch Supercenters in Canada was seen by observers as a threat Loblaw, the market leader in the Canadian grocery. Wal-Mart is a vigorous competitor, and every day low prices strategy Supercenters Wal-Mart can get rid of the traffic from various banners Loblaw's. "Hide
by Charlene Zietsma, Ramasastry Chandrasekhar Source: Richard Ivey School of Business Foundation 23 pages. Publication Date: January 12, 2005. Prod. #: 904M82-PDF-ENG

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