1. 1.
“Loblaw Companies Limited: Preparing for Wal-Mart Supercenter”Kipenzi Herron and Emilsen
HolguinBus 511 Business Strategy and PolicyDr. Adolfo GorriaranJanuary 2010
2. 2. Agenda Loblaw Mission and Vision Statements Loblaw History Corporate Strategy
Industry Overview SWOT analysis Wal-Mart Market Entry February 2007: 100-day review
Summary Discussion Questions References 2
3. 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.2006
Annual Report, http://www.loblaw.com/en/lcl_ar06e/downloads/lcl_ar2006_e 3
4. 4. Loblaw HistoryLoblaw 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.
2006 Annual Report, http://www.loblaw.com/en/lcl_ar06e/downloads/lcl_ar2006_e 4
5. 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 offerings2006
Annual Report, http://www.loblaw.com/en/lcl_ar06e/downloads/lcl_ar2006_e 5
6. 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. 2006
Annual Report, http://www.loblaw.com/en/lcl_ar06e/downloads/lcl_ar2006_e 6
7. 7. Industry Overview (continue) 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. 2006 Annual Report,
http://www.loblaw.com/en/lcl_ar06e/downloads/lcl_ar2006_e 7
8. 8. 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, close to the community.
9. 9. SWOT: Loblaw’s Weaknesses
Operating margin dropped to 1% in 2006.
Return on average total assess of only 2.30% in 2006.
Stores are underperforming
Complicated corporate structure and weak management
Plagued with problems in its distribution systems: broken buyer- supplier relationships, delayed
delivering goods, 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
21 banners
10. 10. SWOT: Loblaw’s Opportunities
New management team and new business plan
Commitment to strategy: Simplify, Innovate, Grow
Growing its discount segment, 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
Joe Fresh Style line of clothing 10
11. 11. SWOT: 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. 11
12. 12. SWOT: Conclusions Although the Loblaw faced significant hurdles, the company has an
attractive set of strength and resources to restore its profitability and growth. We have identified
as alarming weak, its problems with distribution systems and tolerated poor management. A
retailed store’s distribution system and management are key success factors. The major threat is
that competitors are growing stronger while Loblaw’s consumer satisfaction is decreasing due to
the company poor performance. Loblaw’s best opportunity is to capitalize its experience on food
market. Loblaw’s commitments to simplify, innovate, and grow under the application of a new
business plan is the best opportunity that the company has to be a front-runner again.
13. 13. 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. In 2007 groceries accounted for 31%
of total sales 13
14. 14. February 2007: 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,” said chairman Galen
Weston Jr.Proposed actions by executing and analysts: Clear out excess inventory and improve
stocking Strong offering of private labels, de-emphasize national brands and eliminate redundant
sizes Reduce space allocated to general merchandise. 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 14
15. 15. Summary Loblaw has begun to reorganize its business strategy however it is evident that change
is imminent. 15
16. 16. 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? 16
17. 17. References• Canadian Council of Grocery Distributors (CCGD)
http://www.ccgd.ca/home/en/index.html• Loblaw Companies Limited, http://www.loblaw.com/ •
2006 Loblaw Annual Report, http://www.loblaw.com/en/lcl_ar06e/downloads/lcl_ar2006_eng.pdf•
Thompson, A. A. Jr., Strickland, A. J. III, & Gamble, J. E. (2009). Crafting & Executing Strategy: The
Quest for Competitive Advantage: Concepts and Cases, Sixteenth Edition. New York, N.Y.:
McGraw-Hill/Irwin 17
