LOBLAW COMPANIES LIMITED: Questions for case hand-in by Tony Fang Posted on March 14, 2011 Prepare an 800-1,000

word response addressing the following questions. Using only the information in the case: 1. Discuss the pros and cons for Walmart introducing its Supercenters stores to Canada. Make a recommendation based on your analysis that includes, at minimum, a discussion of the industry attractiveness for Walmart. 2. Provide an action plan for Loblaw to use to counter the Walmart threat. Identify both the issue (threat) and discuss what Loblaw should do to prepare for Walmarts Supercenter entry. Include whether you think Loblaw needs to change its strategy by identifying its present strategy and proposing a new strategy. Walmarts introduction of its Supercenters in Canada is a benefit to customers. This introduces a new player, with a known name, into the market. Competition will drive prices down as well as Walmarts known price wrangling with its suppliers. Right now consumers go to a variety of places to purchase an assortment of goods. With the introduction of the Supercenters consumers can do all their shopping in one place. Walmarts use of IT to drive costs down is pushing the way corporations utilize technology to become more efficient. Although Walmarts solutions are developed in house, its competitors would also look for ways to utilize IT in its supply chain. The Walmart effect helps the economy keep inflation under control. By introducing the Supercenters this effect will expand to cover a wider range of goods, increasing the effect on inflation. While the Supercenters have pros, there are many cons associated with their arrival into the Canadian market place. The major one is the workers wage problem. Walmart does not pay its workers very well and has successfully prevented unionization of workforce. Although Walmarts prices are low, the fact that they pay its employees less then some competitors offsets this benefit. Another con to Walmart introducing their Supercenters is it will make this market harder for new entries. Why would a supplier give an independent store lower prices when Walmart has already squeezed them and Walmart has a bigger consumer base. This will limit the choice of stores consumers can shop at and when the remaining stores close down, Walmart then would have control over suppliers and customers. The trend of supermarkets in Canada is decreasing since 1997 while the number of convenience stores has increased. This maybe a trend Walmart has to look into further to see if a supercenter is viable in the Canadian market. Since Walmart already has presence in Canada, by bringing their Supercenters to Canada they can consolidate some stores to one location. The industry is very atractive to Walmart. The amount of food customers are purchasing is growing, and in terms of global ranking Walmarts food sales is in the top 10 while Loblaw is 24th. Since Walmart already has

presence in the Canadian market, it is extremely easy for them to build the Supercenters and gain customers. New entrients, buyouts, and mergers happen all the time in this industry. Only a few of the bigger companies like Loblaw, Sobeys, Metro, etc have the biggest piece of market share. In terms of global sales however, Walmart is much higher then the companies in Canada. If Walmart was able to grow bigger within Canada, Walmarts global ranking would be much higher. Although the control label program currently only constitutes 26 percent of overall sales, the growth however indicates the market is looking towards these brands as an alternative. The problem is Walmarts competitors control these labels so there is a risk here that needs to be migrated, whether to introduce their own label program or bring in the label as at a loss to attract customers. The action plan for Loblaw to counter the Walmart threat focuses on # key competitive advantages that Loblaw currently holds on the industy. By focusing on their competitive advantage Loblaw can make Walmarts barrier to entry harder and by controlling the supply side raises the cost of goods for Walmart. 1. Support the control labels program to raise awareness of cheaper alternatives a. With Loblaws popular Presidents Choice label, the company can stay unique in its stores are the only ones that will offer this brand. 2. Market this label more aggressively and make it unique to other national brands like indicating how much cheaper it is, or the health benefits it will provide. a. Expand the stores to include other household items 3. Introduce a pharmacy location in some of the major stores. 4. Bring in a line of clothing for kids. 5. Expand the customer loyalty programs to include other 3rd party stores 6. Work with other vendors to support cross industry access of points collected within Loblaw stores. 7. Provide a way for customers to transfer points in and out of Loblaws loyalty program. The threat of Walmarts Supercenter can potentially eat at Loblaws core business, groceries. When a customer is shopping at a Walmart Supercenter, the potential of picking up everything there vs going out again to a Loblaws is high, and therefore a loss of a sale for Loblaw. By increasing their Presidents Choice brand and expanding their customer loyalty program, Loblaw can get a head start against Walmart when they introduce their Supercenters. Loblaw should not compete with Walmart head on, offering unique products that can only be found at a Loblaw chain will attract customers. Loblaws currently strategy of owing all their real estate, control label program, multi-format approach, and expanding to other industries have placed them at the top holding 32 percent

of the Canadian market share. This strategy works in comparison to Loblaws competitors and have help them stay on top of the current Walmart stores. Loblaw does not really have to change its strategy to compete with the new Supercenters but they should expand on the current strategy as indicated in the above action plan. This allows Loblaw to gain a head start and use their current advantages to create a bigger barrier of entry for Walmart. The fact that Loblaw owns 63 percent of the real estate allows them to adapt quickly to new threats and take advantage of any opportunities that may come up.