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“Loblaw Companies Limited: Preparing for Wal-Mart Supercenter”Kipenzi Herron and
Emilsen HolguinBus 511 Business Strategy and PolicyDr. Adolfo GorriaranJanuary 2010
2. Agenda :
a. Loblaw Mission and Vision Statements
b. Loblaw History
c. Corporate Strategy
d. Industry Overview
e. SWOT analysis
f. Wal-Mart Market Entry
g. February 2007: 100-day review
h. Summary
i. Discussion Questions
3. Loblaw Mission and Vision
 Loblaw’s mission is to be Canada’s 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,
Innovate and Grow
4. Loblaw History
Loblaw was acquired by George Weston Ltd. Loblaw was built as a food empire through
the purchase of grocery manufacturers, retailers and wholesalers. Credited with
inventing premium private brands in North America. In 2005, Loblaws 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). Loblaw’s President’s Choice and name control brands are the #1
consumer packaged good brands by sales in Canada.
5. Corporate Strategy
 Creation of private labels
 Consolidated of distribution centers
 Closure of unprofitable stores
 Maximized the use of Loblaw’s fleet
 Uniform pricing strategy
 Standardized store design
 Renegotiated union contracts
 Introduction of general offerings
6. Industry Overview
Canadian supermarket industry was valued at $73 billion in 2006. The grocery business
was less fragmented, more competitive, multicultural and dominated by national
companies.Canada has a well-developed discount grocery sector with very high
standards. The Province of Ontario is a key market in Canada and the biggest market for
Loblaw. Ontario’s 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.
7. SWOT:
Loblaw’s Strengths :
 Strong brand name

 Position of market share – sales number continue growing  7000 Private-label products (No Name and President’s choice)  President’s Organic product  President’s 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.  Stores are underperforming  Complicated corporate structure and weak management  Plagued with problems in its distribution systems: broken buyer. the company has an attractive set of strength and resources to restore its profitability and growth. delayed delivering goods.supplier relationships. .  Return on average total assess of only 2. Conclusions   Although the Loblaw faced significant hurdles. 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 Loblaw’s Opportunities:  New management team and new business plan  Commitment to strategy: Simplify.30% in 2006. close to the community. Innovate. 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 Loblaw’s 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 year’s 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. Loblaw’s Weaknesses:  Operating margin dropped to 1% in 2006. Grow  Growing its discount segment.

11. February 2007. Discussion Questions  What are Loblaw’s challenges?  What issues should Loblaw’s executives be most concerned about? Why?  What specific actions should Loblaw take to improve its competitiveness against Wal-Mart? . A retailed store’s distribution system and management are key success factors. 8. 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 10. and grow under the application of a new business plan is the best opportunity that the company has to be a front-runner again. Summary Loblaw has begun to reorganize its business strategy however it is evident that change is imminent.Proposed actions by executing and analysts:  Clear out excess inventory and improve stocking  Strong offering of private labels. We have identified as alarming weak. innovate.  In 2007 groceries accounted for 31% of total sales 9.” said chairman Galen Weston Jr. Loblaw’s commitments to simplify. 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.  The major threat is that competitors are growing stronger while Loblaw’s consumer satisfaction is decreasing due to the company poor performance. Wal-Mart market entry :  Wal-Mart poses a serious threat to other grocers  Economies of scale and scope  Everyday low pricing  Supplier influence  State-of–art distribution system  Wal-Mart built a super-centers and rapid expansion forthcoming. de-emphasize national brands and eliminate redundant sizes  Reduce space allocated to general merchandise.  Loblaw’s best opportunity is to capitalize its experience on food market. its problems with distribution systems and tolerated poor management.