1.

Loblaw Companies Limited: Preparing for Wal-Mart SupercenterKipenzi 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
Loblaws mission is to be Canadas 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). Loblaws Presidents 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 Loblaws 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. Ontarios 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:
Loblaws Strengths :
Strong brand name

 Position of market share sales number continue growing

7000 Private-label products (No Name and Presidents choice)
Presidents Organic product
Presidents 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.
Loblaws 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
Loblaws 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
Loblaws 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 years 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.
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 stores distribution system and
management are key success factors.
The major threat is that competitors are growing stronger while Loblaws
consumer satisfaction is decreasing due to the company poor performance.
Loblaws best opportunity is to capitalize its experience on food market. Loblaws
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.
8. Wal-Mart market entry :
Wal-Mart poses a serious threat to other grocers
Economies of scale and scope
Everyday low pricing
Supplier influence
State-ofart distribution system
Wal-Mart built a super-centers and rapid expansion forthcoming.
In 2007 groceries accounted for 31% of total sales
9. 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
10. Summary Loblaw has begun to reorganize its business strategy however it is evident
that change is imminent.
11. Discussion Questions
What are Loblaws challenges?
What issues should Loblaws executives be most concerned about? Why?
What specific actions should Loblaw take to improve its competitiveness against
Wal-Mart?