Group:

Kiran Chadaram Nianjiu Li

Vi Ngo Sebastien Rosner

Varun Sharma Jeremy Wong

History of the Firm

Business Definition

•  Founded in 1919; Loblaw Grocetarias

•  By 1947, 113 stores in Ontario; sales of $50M

•  Controlled by third generation of Weston family

•  Largest food distributor in Canada

•  24th largest grocery retailer in the world

•  Sales of $23.1B in 2002

•  122,300 employees

Industry Definition & Strategic Problem

Business Definition

•  Canadian grocery retail industry

•  Mature industry; low margins (0.5 - 2%), modest growth (4% per year), and strong price competitions

•  Loblaw’s existing strategy has been successful: drive down costs + product & store differentiation

•  Wal-Mart, largest retailer in the world, may bring Supercentres to Canada

•  If Wal-Mart competes in Canadian grocery, maintain current strategy or adopt new strategy?

Loblaw leads the market with 32%

market share

PESTLE Analysis

Environmental Analysis

•  Canada: lowest food prices in the world; 2% inflation

•  Rise of double income families

•  Immigration and ethnic grocery

•  Organic foods

•  Online grocery shopping

•  Standardization for ERP systems and ECCnet

Porters’ 5 Forces

Industry Analysis

•  Suppliers: national brands and “loss leaders” vs. shelf space, promotion execution, and private labels

•  Consumers: low switching cost, price sensitivity vs. brand loyalty

•  Competitors: high concentration, top 5 chains, low margin & strong competition in all segments

•  New Entrants: small independents, acquisition by global giants

•  Substitutes: fast-foods, restaurants, take-outs

Key Success Factors

Industry Analysis

•  Operational efficiency ! lower costs, lower prices

"  Integration: supply chain, logistics "  Information Technology "  Process innovation

•  Accessibility & geographic presence

•  Product & service offerings ! customer loyalty

"  Differentiated or value-added "  Breadth of selection and stock availability

•  Brand equity ! customer loyalty

Resources, Capabilities, & Core Competencies

Firm Analysis

•  Brand equity and loyalty; President’s Choice

•  Experience and expertise in fresh groceries; rigid integration

•  Real estate ownership; operational flexibility and location

•  Low costs from scale advantage

•  Multi-banner & multi-format; covers all price points and segments

•  Regional appeal and community character retained

•  Differentiated products & services

•  PC customer loyalty programs; shoppers data

A Quick Look at Wal-Mart

Competitor Analysis

•  Largest retailer and 6th largest grocery retailer in the world

•  Cost leadership; "Every Day Low Prices" strategy

•  Scale economies and superior resources (e.g. finance, IT)

•  Questionable labour practices and issues with UFCW

•  Bargains hard with suppliers

•  Limited expertise in perishables

•  Failed to penetrate German and Japanese markets (why?)

Wal-Mart’s Value Chain & Value Proposition

Value Chain

Sales Infrastructure Procurement

Outbound Logistics Operations

Infrastructure Technology

Procurement Inbound Logistics

Marketing Operations

Procurement

Loblaw’s Value Chain & Value Proposition

Value Chain

Sales Infrastructure Procurement

Outbound Logistics Operations

Infrastructure Technology

Procurement Inbound Logistics Customer Service

Operations

Procurement

Zero-Sum Game

Industry Lifecycle

Includes: Low margin Slow growth Price competition

Alternatives & Business Strategies

Strategic Recommendations

•  Challenge Wal-Mart’s cost leadership?

•  Avoid head-on competition? Differentiate?

•  Exploit Wal-Mart’s weaknesses/Loblaw’s strengths

"  Loblaw’s resources & capabilities; core competencies

"  Relevant to success factors?

"  Imitable or unique? Transferable or replicable?

"  Sustainable competitive advantage?

Think about the fates of Target and

K-Mart

Expanding the Pie?

Strategic Recommendations

Include: Ethnic grocery Organic foods Local sourcing

Cooking classes

So what actually happened?

Loblaw Today

•  2006: Launch of Joe Fresh brand

•  2009: Acquired largest Asian food retailer T&T for $225M CDN

•  2011: Opened store in Maple Leafs Garden Over 1,100 new control label products •  2012: Banished artificial colours and flavours from PC products

•  2011 market shares: Loblaw 29.9%, Wal-Mart 4.3%

•  Now 181 Wal-Mart Supercentres in Canada

Loblaw continues to dominate the

Canadian grocery

business

… according to Wal-Mart

The World

thank you! merci!