Loblaw Strategy Analysis in Response to Walmart's Entry

Comparing Loblaw and Walmart Corporate Strategies

Loblaw 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 in the country. It was also the number one seller of branded consumer packaged goods by sales in Canada.

The corporate strategy of Loblaw is built upon the creation of private labels and the offering of a range of products under its own brand. The company has consolidated its distribution centers — merging many of them to reduce costs — and closed stores that were unprofitable. Loblaw seeks to fully capitalize on its fleet and workforce. One strategy that has proved particularly fruitful is its uniform pricing policy, which establishes standard pricing across all stores in Canada. The standardization of store designs and renegotiated union contracts have further helped the company reduce overhead costs and streamline business processes.

A company's corporate or business strategy encompasses what it does in the long term as well as in daily operations to meet short- and long-term goals and objectives. Vision and mission statements serve as the principal guidelines for forming corporate strategies. In the case of Loblaw, the company's mission is to become the best food and home retailer in Canada by meeting and exceeding customer expectations and by providing innovative products at prices that are both affordable and competitive.

Leveraging scale and maintaining consistent execution toward profitable growth — with a sustained 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 remains its overarching corporate strategy.

However, Loblaw faces tough competition from one of the world's largest retail companies — U.S.-based Walmart. The global retail and general merchandise field is dominated by the one-stop shopping concept at Walmart department stores. Walmart's known business strategy is to run successful and profitable superstores, hypermarkets, and chain stores in the U.S. The company offers a very large variety of products, allowing customers to purchase nearly everything they need in a single visit. Walmart's pricing strategy is also customer-centric, with a focus on quality and affordability. Loblaw was directly threatened by Walmart's entry 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 its market share and dominance in the Canadian retail industry.

Loblaw also attempted to transform its stores through the introduction of the Real Canadian Superstore concept in 2005, well before Walmart formally entered the Canadian grocery market. Since Walmart's entry, Loblaw's strategy has been driven by the ambition to drive down costs by gaining operational and scale efficiencies, while also creating value-added differentiation in its products and stores — for example, through the promotion of its President's Choice brand and various other private labels. Loblaw also initiated plans to make its stores more customer-centric and comparable to Walmart's superstores by adopting a multi-banner and multi-format approach.

In comparing the business strategies of Loblaw and Walmart, Loblaw has sought to compete in areas where Walmart is known to excel — namely, private labels and store reorientation — while simultaneously increasing profitability through operational efficiency and scale.