3. History of the Firm
Business Definition
• Founded in 1919; Loblaw Grocetarias
• By 1947, 113 stores in Ontario; sales of $50M
• Controlled by third generation of Weston family
• Largest food distributor in Canada
• 24th largest grocery retailer in the world
• Sales of $23.1B in 2002
• 122,300 employees
4. Industry Definition & Strategic Problem
Business Definition
• Canadian grocery retail industry
• Mature industry; low margins (0.5 - 2%), modest growth (4% per year),
and strong price competitions
• Loblaw’s existing strategy has been successful: drive down costs +
product & store differentiation
• Wal-Mart, largest retailer in the world, may bring
Supercentres to Canada
• If Wal-Mart competes in Canadian grocery, maintain
current strategy or adopt new strategy?
Loblaw leads
the market
with 32%
market share
5. PESTLE Analysis
Environmental Analysis
• Canada: lowest food prices in the world; 2% inflation
• Rise of double income families
• Immigration and ethnic grocery
• Organic foods
• Online grocery shopping
• Standardization for ERP systems and ECCnet
6. Porters’ 5 Forces
Industry Analysis
• Suppliers: national brands and “loss leaders” vs. shelf space,
promotion execution, and private labels
• Consumers: low switching cost, price sensitivity vs. brand loyalty
• Competitors: high concentration, top 5 chains, low margin & strong
competition in all segments
• New Entrants: small independents, acquisition by global giants
• Substitutes: fast-foods, restaurants, take-outs
7. Key Success Factors
Industry Analysis
• Operational efficiency ! lower costs, lower prices
" Integration: supply chain, logistics
" Information Technology
" Process innovation
• Accessibility & geographic presence
• Product & service offerings ! customer loyalty
" Differentiated or value-added
" Breadth of selection and stock availability
• Brand equity ! customer loyalty
8. Resources, Capabilities, & Core Competencies
Firm Analysis
• Brand equity and loyalty; President’s Choice
• Experience and expertise in fresh groceries; rigid integration
• Real estate ownership; operational flexibility and location
• Low costs from scale advantage
• Multi-banner & multi-format; covers all price points and segments
• Regional appeal and community character retained
• Differentiated products & services
• PC customer loyalty programs; shoppers data
9. A Quick Look at Wal-Mart
Competitor Analysis
• Largest retailer and 6th largest grocery retailer in the world
• Cost leadership; "Every Day Low Prices" strategy
• Scale economies and superior resources (e.g. finance, IT)
• Questionable labour practices and issues with UFCW
• Bargains hard with suppliers
• Limited expertise in perishables
• Failed to penetrate German and Japanese markets (why?)
10. Wal-Mart’s Value Chain & Value Proposition
Value Chain
Sales
Infrastructure
Procurement
Outbound Logistics
Operations
Infrastructure
Technology
Procurement
Inbound Logistics
Marketing
Operations
Procurement
11. Loblaw’s Value Chain & Value Proposition
Value Chain
Sales
Infrastructure
Procurement
Outbound Logistics
Operations
Infrastructure
Technology
Procurement
Inbound Logistics
Customer Service
Operations
Procurement
13. Alternatives & Business Strategies
Strategic Recommendations
• Challenge Wal-Mart’s cost leadership?
• Avoid head-on competition? Differentiate?
• Exploit Wal-Mart’s weaknesses/Loblaw’s strengths
" Loblaw’s resources & capabilities; core competencies
" Relevant to success factors?
" Imitable or unique? Transferable or replicable?
" Sustainable competitive advantage?
Think about
the fates of
Target and
K-Mart
14. Expanding the Pie?
Strategic Recommendations
Include:
Ethnic grocery
Organic foods
Local sourcing
Cooking
classes
15. So what actually happened?
Loblaw Today
• 2006: Launch of Joe Fresh brand
• 2009: Acquired largest Asian food retailer T&T for $225M CDN
• 2011: Opened store in Maple Leafs Garden
Over 1,100 new control label products
• 2012: Banished artificial colours and flavours from PC products
• 2011 market shares: Loblaw 29.9%, Wal-Mart 4.3%
• Now 181 Wal-Mart Supercentres in Canada
Loblaw
continues to
dominate the
Canadian
grocery
business
