Loblaw
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Loblaw’s is the largest food distributor in Canada with sales touching the mark of $23.1 billion in 2002, it stands on the first position for grocery retail market share in Canada of 32% which is approximately the total sum of market share of the 4 leading competitor in Canada. The idea began in 1919 as Loblaw Grocetarias, climbed to the gross sale of $50 million from 113 stores. The company has never looked back from there on and as Exhibit 1 distinguishes between the stores, the company has more than 8800 points to service the customer needs.
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Low cost products through size and operations efficiency along with product differentiation by encouraging President Choice & other private labels and stores by following a multi banner/format approach.
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The capital and control over the Canadian market makes the company the leader and competitors being the follower. The company has serviced the customers not only in grocery needs but also day to day other needs such as gas stations, non food items.
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The biggest winner for the company had been the multi format approach. The company also holds about 60% of the real estate where they operate giving the benefit to change. The company refurnish the stores every 5 years when the industry norms are 7 years.
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The company grows with internal investment and always strive in increasing the individual store market share. This makes it easier as individual store adapt to the environment and have a local appeal.
External scan of environment — Using the PEST model in Exhibit 2, this outlays the future growth potential in this industry. The industry is very attractive because of the growing number of immigrants there is a need to change the focus towards speciality chains is revolutionizing the old concept of big supermarkets where the profit is low. The new trend of buying habits of busy customers has led to the growth in the online grocery shopping. The competition from foreign investors is growing day by day because of the change coming in the industry and attractive market for European retailers and Wall mart. The no political restriction and high economic and social factors with the required change in technology makes the industry very attractive.
Porter’s Model suggests that the industry is very attractive.
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Rivalry among the existing competitors – The main competitors for Loblaw were: Sobeys, Metro, A&P, Canada Safeway, Whole Foods, Costco and Grocery Gateway. The intensity of rivalry is high as competition is based on low cost, higher levels of efficiency and serviceability to fulfil customer needs.
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Barriers — It is difficult to get into this industry as most of the biggies are with high capital and resources to wipe out the small people because the industry competition is based on low cost along with differentiation. But we have seen that the small independent stores are increasing in number. But the industry holds no barriers for big players like wall mart to enter.
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Substitute — No substitute for grocery products.
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Power of Suppliers — Retailer supplier relationships were characterized by power plays. Smaller suppliers had less power, as their business was in the hands of a few buyers. Larger suppliers had more power because of the big market share they possessed. But for Big Retailers like Loblaw �s and Wall Mart this is not a worry.
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Power of Customers — There are many retailers present in the industry so the bargaining power of the customer is very high. The changing demand and need of the customer is what the business has to follow to be competitive. Easiness for the customer is the game.
Issue: The Company is feeling the heat of the competition that is going to be created once Wall mart decides to enter this industry. The fear is because Wall Mart is very efficient with the low cost strategy as the world knows and on top the Wall Mart has the capability because of the biggest buyer in this world. One indication, that how big the Wall Mart affects is the example of suppressing the inflation in the US economy. Wall Mart has already booked the first position in the merchandise retail and a profiting venture from second year of business in Canada. Wall Mart can outperform Loblaw’s because it has what it needs to be a winner in this industry. To analyze Loblaw below is the SWOT analysis:
Strength
– Biggest Market Share in Canada. No.1 grocery retailer in Canada.
– President choice market label.
– Customer loyalty, Multi format and local adaptable stores.
– 8800 stores and service points for customers.
– Great public reach.
– Real Estate holdings and internal investment.
– Best benefit to the employees in Canada.
– 18 year work experience managers.
Weakness
– Low profitability industry.
– Lack of efficient operations.
– No ERP system.
– No barrier for new entrants.
– High Salary and Wages.
Opportunities
– Develop ERP and standardize it.
– Open new speciality stores.
– Capture the ethnic and organic food industry.
– Develop in house retail technology to drive cost down.
– Verge in new internet grocery shopping trend.
– Capture the double income families.
Threats
– Wall Mart efficient in low cost model.
– Technology available to Wall Mart to outperform.
– Better supplier relations with Wall Mart.
– Global Competition for takeovers.
– Rapid change in customer needs with variety of competition available.
Expand to global market with company brand — If the expansion is done to countries where the profit margin are still high as compared to Canada and where the exploitation is almost necessary then the company can increase the revenue. The sales will go up and hence