Table of Contents
Executive Summary 3
Identification 4
Analysis and Evaluation 5
Internal Analysis 5
External Analysis 7
Discussion of Alternatives 9
Decision Criteria 12
Recommendation 13
Action Plan 14
Contingency 15
Exhibit 1 16
Executive Summary
Loblaw requires a new strategy to compete against Wal-Mart’s Supercenters and also
competition from Metro Inc. and Sobeys. A team of consultants has undertaken the
responsibility of analyzing the current strategy and recommend solutions on how to gain a
bigger market share and increase loyalty with customers.
Loblaw is the market leader in Canada in the grocery industry but is experiencing
challenges in managing its new Supercenters. Most of the recent issues have stemmed
from the closing of Provigo stores compounded by huge losses in late 2006. Customers are
not satisfied with the offering of The Real Canadian superstores and think the prices are
too high. Employees are not able to address customer matters appropriately because they
are occupied with stocking issues and getting products from backrooms.
There are four alternatives available to Loblaw to address the concerns that have been
highlighted above and increase market share:
1. Improve inventory management
2. Change Product
3. Lower Prices
4. Merger or Acquisition
It is recommended that alternative one be implemented as it will improve operations more
than other alternatives and will increase profitability. Alternative one aligns best with the
business model and will facilitate the achievement of long term goals and objective of low
cost provider. Loblaw is a well established brand name with highest market share in
Canada, and it has been struggling to keep its prices low because of inefficient inventory
management.
Loblaw can investigate the other alternatives as they are also feasible and can facilitate in
achievement of goals and objectives. For alternative two, the company can eliminate
redundant sizes and ineffective promotions, focus on their strong private labels, and
de-emphasize national brands, and this will improve their focus on product with better
sales and profit potential. Alternative three will allow the company to achieve its low-cost
strategy and optimize the value chain. Alternative four looks at economies of scale and
cost reductions by means of synergies that can be found by merging with or acquiring
other companies.
If these recommendations do not achieve the desired results then a more detailed look at
the overall strategy and strategic vision is required which might result in a paradigm shift.
Identification
Past and Current Strategies
In the early days of the company, Loblaw was the new self-serve, cash-and-carry concept
of grocery retailing and was a hit with customers, who took advantage of quality goods at
lower prices.Loblaw then introduced the new way to shop for groceries with the
introduction of healthfully-cool equipped air-conditioning in its new super markets in an
attempt to attract an increasing number of suburban customers.
Galen Weston, as CEO, began cutting costs in the 1970s, while changing the look and feel
of the chain. Loblaw stores were redesigned and a new logo was adopted to project a new
brand image.
President’s Choice products were introduced in the mid 1980s, which quickly gained a
loyal following with customers, who loved the value it offered. Loblaw acquired Provigo
in the late 1990s, and in the mid 2000s, it started the Joe Fresh brand to diversify the
business and offer customers more than just the grocery shopping experience.
Currently, the company has an emphasis on Corporate Social Responsibility programs and
outlines Loblaw’s commitment to five pillars: Respect the Environment, Source with
Integrity, Make a Positive Difference in the Community, Reflect Our Nation’s Diversity,
and Be a Great Place to Work.
Current Problems/Issues
Loblaw is currently facing inventory problems, such as stale-dated food and empty shelves
which are common in the Real Canadian superstores since the reorganization of its
distribution system. Customers think the price at the supercenters are too high and feel that
they can get better value at other chains. Employees do not have the time to address
customer matters appropriately because they are always trying to handle stocking issues.
All these issues are having a compound effect on the profits and brand image which at one
point were industry trend setters.
Analysis and Evaluation
Internal Analysis
Current Vision
Loblaw’s current vision is to be the leader in low-price groceries in all markets, while
maintaining high quality products.
Strategy
Loblaw is using a low-cost provider strategy, as they are striving to achieve lower overall
costs than rivals and appealing to a broad spectrum of customers. Although the company
may not have the lowest cost on all products, the goal is to have the lowest overall cost of
goods sold. The introduction of the President’s Choice brand in the 1980s helped with this
strategy, as Loblaw was able to provide quality products to their customers, at a lower
price than some of the other well known brands.
Position
Loblaw is currently the market leader in the grocery industry. The Loblaw banner currently
holds stores in all twelve provinces and territories in Canada, with a total of 670 locations
operating under several different names. Quebec and Ontario hold the largest share of the
market, with 252 and 169 stores in each province respectively. Loblaw holds roughly 35%
of the market share for food sales in Canada in 2005.
Value Chain
In past years, Loblaw had a very effective value chain, with the old buyer maintaining
strong relationships with the suppliers. However, when the relocation of the corporate
headquarters took place in 2005, half of the buyers did not relocate from Calgary,
diminishing the strong relationships with suppliers. The move was detrimental to the
company, as it has lead to value chain inefficiencies that are resulting in lost sales.
