Running head: LOBLAW COMPANIES LTD

Loblaw Companies Ltd Name Course Institution Lecturer Date

LOBLAW COMPANIES LTD Loblaw Companies Ltd Introduction The outstanding issues of the Loblaw Companies Limited (Loblaw) include shifting lifestyle of people, cost of operation and sustaining market share and competition. For this

reason, Loblaw Companies Limited should take note of its major rivals Sobeys Inc. and METRO INC. Analysis of issues Shifting lifestyle of people. People have become more alert on the need to live a healthy life, which has resulted to conscious selection of what they consume to avoid heart diseases associated with high fat and cholesterol foods. In addition, high calorie foods have also started to fade from the menus as people adjust. In replacing the shelves, Loblaw Companies Limited has now adopted to the organic foods to appeal its customer, who otherwise would have been lost. Cost of operation The fact that the cost of living is continually moving up, Loblaw Companies Limited cannot escape the heat resulting from expenses realized from daily running of its branches or stores. In addition to this are the salaries that continue to swell year after year as the labor market dictates. Sustaining market share and competition

LOBLAW COMPANIES LTD Loblaw Companies Limited has been a successful franchise, but the other two

competitors will continue to eat into the customer base of the company. This is also be affected by the variance in the pricing and value for money. Loblaw Companies Limited integrated strategy To start with, the management has introduced the one-stop shop centre for shoppers, which saves time for customers. This has benefited the company as far as maintaining clients who do not necessarily buy food products, but other non-food items and services. In addition, the company has introduced organic foods and low fat products to cater for the healthy conscious individuals. To promote this, Loblaw Companies Limited has consistently marketed its services. However, the company should find a way of providing food stuff based on culture and ethnicity to attract another category of customers who do not get some food unless when in local shops. Companys External Environment The external environment presents factors independent of a company that influence the way it conducts its day to day operations. These may include suppliers, political environment, fiscal policies, the natural environment and other players competing for the same resources and customers. (Porter, 1998). Arising from the case, it is emerging that the Loblaw Companies Ltd is grappling with issues of quality control, training and development of their staff to be abreast with the requisite skills required to operate in this kind of environment by coming up with healthy foods to promote the modern lifestyle. The sale of high calorie and food foods has led to loss of confidence among customers in this industry prompting increased advertising budgets to regain confidence and build on the image through advertising of the new menu. There is a dire need to

LOBLAW COMPANIES LTD invest in training and development on food preparation to ensure timely and professional services to the clients. It would be appropriate for the company to establish rapport with renowned chefs to ensure that relevant training is conducted on its staff. Porters 5 Force Analysis Five forces analysis assumes there are five forces that determine how competitively a

company can deal with a situation. (Porter, 2008). An analysis, using five forces porters model revealed that the competition is very stiff, demand in the industry is declining, and some of the competitors have resorted to mergers to survive the turbulence. Winning customers from immediate competitors from other Canadian companies is also very easy as the environment is characterized by low switching costs. The analysis also revealed that the industry is not experiencing high risk of new entrants due to existence of high barriers to entry. In addition, the bargaining power for customers is low and South Loblaw Companies Ltd is not highly dependent on suppliers for their operations. Loblaw Companies Ltd operate in an environment where the threat of substitute products is not experienced as most destinations are feasibly reachable by plane. Arising from this situation, this industry presents unsuitable scenario for new entrants due to stiff intra-industrial rivalry coupled with skyrocketing cost of raw materials. It is against this backdrop that the Loblaw Companies Ltd has emerged as the largest in terms of market share. This implies that it is enjoying customer loyalty despite its reluctance to take quality control as a priority consideration. (Harvard Business Review, Jan 2008). The Loblaw Companies Ltd is currently positioned as the industry leader by market share. This places the company at a vantage position because serving a large volume will enable economies of scale to be experienced and hence lower the operating costs. However, other new

LOBLAW COMPANIES LTD entrant into the market are emerging as a low cost operating company despite the fact that it serves a smaller proportion of the market. This should act as a wakening call to Loblaw Companies Ltd as customers may shift their loyalty to the new entrant if it positions itself as a low cost leader in the market. The customer base is however declining resulting from a number of challenges raging

from need for healthier lifestyles by clients, economy wide recession, and industry deregulation. This has an implication on consumer behaviour and the cost of conducting business. The deregulation will result into relaxed conditions of entry into business and this is likely to result surfacing of a new crop of competitors further aggravating the industrial rivalry. Regulations on non-stop and thorough plane service are likely to increase the cost of operations and hence eat into the companys profitability. The companies operating in this environment can engage in collaborative efforts to lobby for favourable operating environment. The key success factors in the hotel and hospitality industry have been identified as operating costs, advertising, customer service, employee salaries, rent, and quality of food. Based on this Toronto Stock Exchange, Loblaw Companies Ltd has been continually increasing in the capital base. (TSX Inc., 2012). In addition, Loblaw Companies Ltd is leading in terms of low operating costs, liability repayment ability and on the stability in growth in market value. In Canadian hospitality companies, Loblaw Companies Ltd is one of the best performing companies. This implies that Loblaw Companies Ltd needs to conduct a process benchmarking to establish the secret behind the low cost of operation in other emerging companies to enable them employ a counter strategy and eventually emerge as the low cost leaders.

LOBLAW COMPANIES LTD Positioning Map

70,000 60,000 40,000 Clients 20,000 8 10 Operating expense Canada Safeway Limited Sobeys Inc METRO INC 12 14 16 18

Industry Value Chain Analysis In a value chain series of activities, a particular company/institution performs in order to offer something valuable to its customers. According to Michael Porter, (1985), value chain comprises of primary (outbound logistics, inbound logistics, operations, sales and services and marketing) activities and support activities (infrastructure, human resource, quality and procurement). Using this analysis, a company is able to identify its capabilities and utilize them to gain a strategic competitive advantage over its rivals. In the analysis, Loblaw Companies Ltd relies on suppliers of food products, power, and support services. It also deals with competitor companies both domestic and international while its target market is individuals, families and business people. The competitors target the market also, implying that Loblaw Companies Ltd needs to position itself as the most preferred option among the rivals through a critical analysis of its value chain. Companys Resources and Competitive Position (Internal Analysis) Internal analysis of a company helps in identifying weaknesses and the strengths of the company in its endeavor to satisfy the needs of its target customers. It may entail the

LOBLAW COMPANIES LTD organizations culture, strategy, resources (human, physical and financial), as well as its

limitations in relation to the customer needs. This analysis helps identify core competencies and capabilities and is an important ingredient in the crafting of the corporate strategy for an organization. Loblaw Mission To be Canadas best food, health and home retailer by exceeding customer expectations through innovative products at great prices. (Loblaw Companies Limited, 2011, par 1) Values Our Values clarify what is important in our organization, and guide our behaviour and decision making. (Loblaw Companies Limited, 2011, par 2). Financial analysis The companys current ratio has continually increased for the last three years, at 0.909 which was on 2009 to 1.118 as on 2011. This is an indication of how the franchise has managed to pay its standing liabilities. SWOT Analysis A SWOT analysis results in the identification of a companys core competencies and also in the recognition of prospects that the company is apparently unable to take benefits due to lack of appropriate resources. (Rumelt, 1991). A SWOT analysis for Loblaw Companies Limited (Loblaw) resulted in the following: Strengths Weaknesses

LOBLAW COMPANIES LTD

8 Serving only s narrow Market

Portfolio of store Formats Offering Canadians with a variety of successful products and services.

Known for the innovation, value of our food offered, and quality.

Strongest control label program Providing the PC point based loyalty program.

Committed to accountability and social responsibility

Provide customers with President's Choice Financial services

Superstores that give convenience and clients value, under one loof

Hard Discount stores that offer customers exceptional value

fresh products and supplies that our customers need

Innovation Strong brand program Innovation and cost efficiency in devising alternatives for insurance, banking, mobile phone services,

LOBLAW COMPANIES LTD insurance plans and credit services Opportunities New markets especially in Africa E-business to ensure wider customer coverage Threats Other establishment brands like Macdonalds

Strategy Execution Process The hospitality industry in this case study presents an environment characterized by cut throat competition and the only key to survival is to establish a competitive strategy that will stir any one company ahead of the pack. The companies in this market need to diversify their products to ensure a wider appeal to the existing markets since it has emerged that most companies in this operating environment offer similar products. The Loblaw Companies Ltd can reduce the instances of direct competition through venturing into new markets as well as introducing first class tickets to its collection of products and services. The industry, however does not present any opportunity for potential new entrants as the barriers to entry are much on provision of quality food. The strategies to be employed in this industry should therefore be aimed at promoting brand loyalty to ensure market retention, repeat purchase and good word of mouth. This calls for use of quality improvement tools like quality functional deployment (QFD) to include the clients views in service design in order to offer value for money. Issues to be Addressed

LOBLAW COMPANIES LTD 10 Shifting lifestyle of people- The company should introduce a variety of products and services to suite the new trends such as the organic foods to appeal its customer, who otherwise would have been lost. Cost of operation- The company should harmonize its salaries to fit in a uniform remuneration policy as the cost of labor increase. Sustaining market share and competition - Loblaw Companies Limited should consider the prices of its competitors before making any upward adjustment. However, quality and value should not be compromised.

LOBLAW COMPANIES LTD 11 References Ansoff, I. (1957) Strategies for Diversification, Harvard Business Review. September October (p. 113 124). Glueck, W. (1988) Strategic Management and Business Policy, London: McGraw-Hill Porter, M E. (1998), Competitive Advantage: Creating and Sustaining Superior Performance, New York: The Free Press Loblaw Companies Limited (2011). Mission and Values. Retrieved December 10, 2012 http://www.loblaw.ca/English/About-Us/mission-and-values/default.aspx Rumelt, P. (1991), Richard, P (ed, 1994) Fundamental Issues in Strategy: A Research Agenda, Harvard Business School Press. TSX Inc. (2012). Toronto Stock Exchange. Retrieved December 10, 2012 from http://tmx.quotemedia.com/company.php?qm_symbol=LBLCF:US