Loblaw Strategy in Wake of Wal-Mart Entry Comparison of Loblaw's strategy and performance with Wal-Mart.

External and Internal analysis of Loblaw

PESTEL Analysis for Loblaw

Porter's Five Forces

VRIO Frameworks Analysis

Comparison of Loblaw's strategy and performance with Wal-Mart.

Loblaw's was the largest supermarket in Canada with a market share of nearly 35% in 2005 and 609 corporate and 427 franchised stores throughout every province within the territory of Canada. It is also the number one seller of branded consumer packaged goods by sales in Canada.

The corporate strategy of Loblaw is hinged upon the creation of private labels and the offering of a range of products under its own brand. the company has also consolidated its distribution centers and merged many of them to reduce costs along with the closure of stores that were unprofitable. The company seeks to totally capitalize on the fleet and manpower that it posses. One of the strategies that have proved fruitful for the company is the uniform pricing policy that has created a standard pricing throughout all the stores of the company in Canada. The standardization of the store designs and the renegotiated union contracts have helped the company in reducing overhead costs and smoothened business processes.

What a company does in the long-term as well as in the daily functioning to meet the short-term and long-term goals and objectives are described as the corporate strategy or business strategy. The vision and mission statements of companies are the principal guidelines for the formation of corporate strategies. In the case of Loblaw, the company mission is to become the best food and home retailer in Canada through the meeting and exceeding of customer expectations and by providing innovative products at prices that are not only affordable but competitive as well.

Leveraging and taking advantage of scale and constant execution towards profitable growth along with the consistent focus on customers, stores, and products are the means by which Loblaw intends to meet its corporate goals.

The company embarked on a three to five-year strategy in 2007 to simplify, innovate and grow which is its known corporate strategy.

However, the company faces tough competition from one of the world's largest retail companies -- U.S.-based Wal-Mart. The global retail and the general merchandise field is dominated by the one-stop shopping concept at Wal-Mart department stores. The known business strategy for Wal-Mart is to run successful and profitable superstores, hyper and chain stores in the U.S. The company offers a very large variety of products and a customer is able to purchase almost all the products that one needs at these stores. The pricing strategy at Wal-Mart is also customer centric with a focus on quality and affordability. Loblaw is threatened by the entry of Wal-Mart into the Canadian retail space which prompted the company to initiate the Real Canadian Superstore format as a strategic move in Ontario with the aim of protecting and increasing the market share and dominance in Canadian retail industry.

The Canadian company also tried to bring in transformations to its store through the introduction of the Real Canadian Superstore concept in 2005 well before the entry of Wal-Mart into the Canadian grocery market.

The company strategy since the advent of Wal-Mart into the Canadian retail market has been driven by ambition to drive down costs by gaining operational and size or scale efficiencies and creation value addition and differentiation of products and its stores. for example the promotion of its President's Choice brand and the various other private labels of the company. Loblaw also initiated plans to make the stores more customer-centric and in line with the super stores of Wal-Mart by using a multi-banner and multi-format approach.

However to compare the business strategy off Loblaw and Wal-Mart, the former has tried to provide competition in the areas where Wal-Mart is known to excel -- private labels and store reorientation, as well as increase profitability through efficiency in operations and size.

External and Internal analysis of Loblaw

PESTEL Analysis for Loblaw

Political - Loblaw functions in a very stable political environment and the laws and regulations for the retail industry in Canada are very well developed. The political stability in the country has enabled the company to draw out and formulate long-term strategies. In Canada political stability has created a less fragmented, more competitive and multicultural environment for the retail business. This mean that a few national brands dominate the market and Loblaw is the leader of the pack. The grocery...

and Canada are moving up. This has created more disposable income in the hands of the consumers and hence Loblaw should not be too concerned about price wars. With an established brand, quality products, and a fair pricing strategy, it can provide good competition to other companies in the segment including Wal-Mart. In times of good economic growth as seems to be the case in the last couple of years, the pricing strategy of the company would be of less importance for customers. It could also prove good for the company as it follows a strategy of gaining from size and scale.
Social -- One of the trends in the cultural values of societies in Canada is the continued growth in the suburban communities and people moving out of the cities to the suburban areas. Therefore, this social impact on the community also has an impact on Loblaw as it seeks to set up more stores in the areas where there is a greater concentration of people. This was evident in the company closing down the unprofitable store and opening up new ones in strategically located suburbs.

Technological -- as the retail business -- through retail chains and stores, tries to satisfy customers and make the shopping experience easier for them they are embracing various technologies. Customer centric business processes and strategies are vital for companies engaged in retail business to gain market share and enhance profits. With a focus on providing innovative products and services, Loblaw has also adopted technology. Moreover, such companies also need technologies to learn more about customer preferences and choice and as their buying habits which help them to formulate marketing strategies and offer the products, the customers require and in the manner that they desire. The size of operations of the retail companies, including Loblaw and Wal-Mart are huge and modern technology is required to track inventory and restock the stores. the companies extensively use modern technology in their supply chain too. Hence, for Loblaw keep a tab on the latest technologies and adopting them before its competitors do is crucial.

Environment -- with the rising concern for ethically sourced products and greener business processes, the demand for environment-friendly products -- eve in the retail stores, is on the rise. Thus, most of the retail companies now offer organic food and make use of technologies that are environment-friendly and save on energy consumption.

Legal -- given the well settled regulatory and legal framework in Canada with respect to retail trading and business, Loblaw has not been too involved in legal issues except for the occasional tickle from the trade unions.

Porter's Five Forces

Rivalry -- there is high competition from rivals in the Canadian retail industry. There are several domestic competitors to Loblaw like, Sobeys and Metro and international brands like Wal-Mart, Costco and Target have enhanced the competitive environment. Hence each of the companies -- and especially a market leader like Loblaw, faces strong competition.

The threat of New Entrants -- the resources -- logistical and financial, along with the long time to establish a successful brand, that is required to set up a new business in retail trading is quite high. This has prevented easy entry of new companies into the market.

Bargaining Power of Buyers -- when considered as individuals, customers to not have much of a bargaining power since they tend to shop at the nearest convenient store location and cannot bargain with the store or the company being obliged to pay the price that is demanded. Secondly, the loyalty programs also reduce the bargaining power of consumers. However collectively, consumers have a very strong bargaining power. Any change in the tastes of customers not complied by retail chains can result in a sharp fall in the sale. Moreover, the threat of customers going away to the rival companies provides significant leverage and bargaining power.

Bargaining Power of Suppliers -- suppliers have a low bargaining power as there are a large number of suppliers willing and ready to get associated with retailers -- especially with market leaders like Loblaw. Moreover, the market is dominated by a few players and hence the suppliers do not have significant bargaining power. The large and dominant players tend to dictate the terms of the contract and that of the relationships with their supplier. Therefore, the big retail companies have the ability to switch suppliers fairly easily and thus significantly reduce the bargaining power of…