MOS 4410A Strategy 006
Raymond Leduc
Loblaw Companies Limited
By: Nikhil (Justin) Bansal, Zunnan (Leo) Liang, and Xue (Snow) Hua
Table of Contents
Scope ................................................................................................................................... 1
Industry ............................................................................................................................... 2
Competition......................................................................................................................... 6
Company ............................................................................................................................. 9
SWOT ............................................................................................................................... 15
Competitive Advantage .................................................................................................... 16
Value Chain ...................................................................................................................... 17
Recommendations ............................................................................................................. 18
Exhibits ............................................................................................................................. 20
Bibliography ..................................................................................................................... 25
Scope
This report will focus on Loblaw Companies Limited and its strategy pertaining to
the Loblaws conventional stores.
Loblaw operates under approximately 22 market
segment banners but this report will focus on Loblaws Supermarkets in the Great Food
division as well as Loblaw’s in-store brands. These in-store brands are at many of
Loblaw’s stores regardless of the banner. Also, the report will only discuss the retail
segment and not the financial services segment of Loblaw Companies Limited. We will
not be discussing the discount strategy which includes the hard discount division such as
No Frills.
Vision: Loblaw’s vision is to be Canada’s best food, health and home retailer by exceeding
customer expectations through innovative products at great prices.1
Mission: Domestic food, health, and home retailer providing quality and affordable
products.
Objectives for 20132:

Exceeding customer expectations and achieving improved customer feedback
scores with the right assortment, improved customer in-store experience and
competitive prices;

Offering customized assortment, compelling displays and delivering competitive
value across banners through ongoing development and implementation of strategic
category reviews;

1
2
Capitalizing on its established control brands across food and general merchandise;
Loblaw 2012 Annual Report
Loblaw 2012 Annual Report
1

Managing costs across the business with a focus on improved shrink, inventory
turns, labour and administrative expenses to drive efficient operations and provide
customers greater value;

Investing to improve standards and in-store experience through renovations and
strategically investing in new square footage;

Capital expenditures to be approximately $1 billion, unchanged from 2012, with
net new retail square footage growth of approximately 1%; and

Maintain profit levels similar to those of 20123
Industry
Porter’s Five Forces

Rivalry
Rivalry among existing companies in Canada is high. The existence of several domestic
competitors including Loblaw, Sobeys and Metro, make up over half of the market share.
International companies including Wal-Mart, Costco and Target also play a major role in
this market. With many sizeable players in the Canadian grocery retail industry, each
company faces strong competition.

Threat of New Entrants
The threat of new entrants is low due to the number of resources needed to establish
oneself as a retailer. Starting a retailer requires a large amount of capital and existing
retailers have an established brand reputation.

Bargaining Power of Buyers
Individually, the buyers have little bargaining power with grocery retailers due to two
3
http://www.ctvnews.ca/business/loblaw-lowers-profit-projection-for-2013-1.1541419
2
reasons. Firstly, most people do their grocery shopping at the most convenient location to
them. They cannot bargain with the store but are obligated to pay for the price set by the
store. Little incentive is shown for a bargain given that the price set by store is not too far
off with the industry average. Second, each store provides a loyalty program to maintain
their customer base. This creates a switching cost for customers who consider changing
their grocery shopping location. Ultimately, staying with the same store becomes the most
rationale option for most buyers.

Bargaining Power of Suppliers
The bargaining power of suppliers is low because the food retailer industry is
dominated by a few major players. These dominant players usually dictate the terms of the
relationship with their supplier and can afford to switch suppliers fairly easily.

Threat of Substitutes
There is a low threat of substitutes as people need to shop for their basic necessities
such as food and water. These supermarkets provide a majority of the products that most
households will require. People do have the option of going to restaurants but this creates
two issues. Firstly, eating at restaurants daily is expensive and not sustainable for the
family. Secondly, more and more consumers are becoming health conscious so fast-food
options do not fit well with their healthy lifestyle.
Porter’s Five Forces demonstrate that the characteristics of this industry are attractive,
especially due to a low threat of new entrants, little bargaining power of both buyers and
sellers, and a low threat of substitutes.
3
Driving Forces
Demographic: The grocery demand is increasing due to increasing immigration in
Canada. According to Statistics Canada, immigration accounts for approximately 60.0%
of Canada’s population growth in 2011.4 Also, because of the multicultural customers, it
causes the grocery industry to carry a broader line of products. Moreover, the industry puts
an emphasis on promotional expenditures to increase customers’ awareness and thus,
purchase more volume.
Socio-cultural: In recent years people have shown an interest for healthier food options
and the demand for organic food is increasing rapidly. Some grocery retailers have
established a private label or store brand which can save them supplier costs and help build
brand reputation.
Economic: With increased economic stability, the income level for people is rising. This
factor will lead more people to eat out rather than at home so there are less opportunities
for grocery shopping. However, greater income could lead people to purchase more
expensive products with higher quality.
Global: Some global grocery retailers such as Wal-Mart and Costco hold a large share of
the market and their low prices influence consumers’ choices.
Key Success Factors

Convenience location
Demographics indicate that it is preferable for a grocery store to choose a location near
a dense population. For example, superstores are usually located in a shopping plaza
4
http://www12.statcan.gc.ca/census-recensement/2011/as-sa/98-310-x/98-310-x2011003_1-eng.cfm
4
with ample parking space creating convenience and attraction for consumers.

Localizing products for consumers
Retailers need to create and launch products specifically for their consumers. This can
involve making changes to the store layout to appeal to certain consumer segments.
Furthermore, retailers need to be sensitive to different cultures by customizing their
production or food preparation practices to mirror those of their consumers’ backgrounds.

Efficient supply chains
Retailers need to move inventory rapidly especially when dealing with food.
Innovative equipment can be purchased to improve efficiencies along the supply chain.

Same Store Sales
Expansion with new stores is good but successful companies have a proportion of sales
growth from existing stores (open for a year or more). This is significant because new
stores can cause the company to incur losses which in turn, hurt future sales growth.

Sales per Square Foot
Successful companies are efficient with their store space so that they are able to
generate as much sales volume as possible out of each square foot of store space.
An analysis of the industry today and in the future illustrates that Loblaw is in a sound
position. The industry has attractive characteristics and the driving forces largely support
Loblaw because its broad product offering includes affordable choices, healthier choices,
and ethnic offerings.
5
Competition
Wal-Mart
The global retail giant Wal-Mart entered into the Canadian market in 1994, causing
panic to all Canadian domestic retailers including Loblaw who was leading in market share
percentage. By definition, Wal-Mart is not the most direct competition of Loblaw. WalMart operates discount stores that offer a wide variety of goods with very competitive
prices while Loblaw offers higher quality goods with relatively less competiveness on
pricing. However, Wal-Mart’s competitive pricing has a strong ability to alter some
consumers’ behavior because many customers see Wal-Mart as a very tempting substitute.
As a result, it becomes very hard for Loblaw to maintain customer loyalty while fighting a
price war with Wal-Mart. As one of the largest competitors in the industry, Wal-Mart has
equipped itself with 153 discount stores and 227 supercenters totaling 380 stores in
Canada.5 Wal-Mart’s relentless effort to achieve dominance has been very aggressive.
Most of the 227 Wal-Mart supercenters run for 24 hours a day and seven days a week,
which gives them a competitive advantage in opening hours.6 This might not be the most
economic approach for Wal-Mart, but by doing so, Wal-Mart will be able to attain more
market share, a current focus of Wal-Mart. Furthermore, Wal-Mart has a greater advantage
because it can afford to lose the price war.
Wal-Mart has much stronger negotiation power with the suppliers making it
unrealistic for Loblaw to start cutting prices. It is never a good idea to compete on things
that your competitor has always been good at. Loblaw is lucky to have the customer group
5
6
http://corporate.walmart.com/our-story/locations/canada
http://clients1.ibisworld.com/reports/ca/industry/majorcompanies.aspx?entid=1040#MP7857
6
a bit distinguished from that of Wal-Mart. Customers who shop at Loblaw expect to enjoy
the shopping experience itself. Having stylish store decorations and strict goods
arrangement and display policy makes Loblaw the “fashion icon” in this general
merchandise industry. At the same time, having quality products contributes to Loblaw’s
sound reputation because one expects to be able to purchase products that have the best
quality available within the country.
Metro
Montreal-based Metro is the third largest domestic grocery chain in Canada.7 There
are 102 “Metro Plus” supermarkets throughout Quebec and Ontario with an average size
of 33,000 square feet, while there are 70 Loblaws stores with an average size of more than
100,000 square feet.8 Due to the significantly smaller size, Metro is able to enter smaller
local communities and gain control of grocery sales within that small region. This provides
them with an advantage for its geographic proximity. While being convenient on a
locational base, Metro stores runs 24 hours a day, seven days a week for all of their
branches, making them fully accessible anytime and anywhere. Loblaw’s stores differ from
Metro in that it has much bigger stores and offers a wider range of choices on various
products. Loblaw is better suited for customers who are looking to buy many products at
once while they can drop in one of the Metro Stores to buy a small amount of goods or at
a late time.
7
http://www.theglobeandmail.com/report-on-business/loblaw-warns-on-profit-for-2013-third-quarterearnings-drop/article15409879/
8
http://clients1.ibisworld.com/reports/ca/industry/majorcompanies.aspx?entid=1040#MP7857
7
Sobeys
Nova Scotia based Sobeys has the second largest grocery chain in Canada.9 In
recent years, Sobeys has acquired many different banners enlarging their business
coverage. After being unsuccessful in one of their store banners, Price Chopper, Sobeys
rebranded into Fresh Co., refreshing their market image.10 Sobeys has primarily been
focused on cutting costs and improving sales to deal with increasing price competition
within the industry.
Costco
There are 82 Costco Wholesale stores in Canada.11 Costco offers a very unique
membership fee program so that customers will shop repeatedly at their locations to obtain
a cheaper price.12 Customer loyalty at Costco is quite strong considering its relatively high
switching cost (having paid for the membership fees upfront). Loblaw sells smaller
quantities of goods compared to Costco, which attracts customers to make purchases more
frequently. Also, the lack of a “members only” policy makes Loblaw more accessible to
the general public.
Loblaw faces relatively small competition from Costco since Costco is a wholesale
retailer while Loblaw offers grocery shopping in a more ordinary sense.
9
http://thechronicleherald.ca/business/1163738-taylor-lots-of-changes-in-the-bag-for-sobeys-chain
http://clients1.ibisworld.com/reports/ca/industry/majorcompanies.aspx?entid=1040#MP7857
11
http://clients1.ibisworld.com/reports/ca/industry/majorcompanies.aspx?entid=1040#MP7857
12
http://www.costco.ca/join-costco.html
10
8
Company
Uniqueness perceived by the customer
Low-cost position
 Differentiation
Overall Cost Leadership
Differentiation Focus
Cost Focus
The chart above highlights that Loblaws is pursuing a broad differentiation strategy
to overcome the five forces and achieve competitive advantage. Loblaws differentiates
itself by developing a strong private label, also called store brand strategy. Its President’s
Choice (PC) brand is home to approximately 3,500 products including lawn and garden,
beauty and general merchandise products.13 Loblaw’s PC products appeal to customers
because they are high in quality and more affordable than national brands. This makes the
PC and no name private label brands the #1 and #2 consumer package brands in Canada.14
Promoting the quality of the product has allowed Loblaws to move these brands upmarket
and create steady demand for them. For example, the Decadent Chocolate Chip Cookie is
now the top selling cookie brand in Canada.15
Moreover, there are specialized product lines within the PC line of products in order
to target different consumer groups (Exhibit 1). Apart from the main President’s Choice
line of products, the brand features: environmentally responsible products, others that are
third party certified to meet Canada’s organic standards, those for health-conscious
individuals with less fat, less sodium, more fibre or Omega-3s plus, and pet specialty
13
http://www.presidentschoice.ca/en_CA/community/faqs.html
http://www.raymondjames.ca/en_ca/equity_capital_markets/equity_research/sample_research/docs/Lobla
w%20Companies%20Ltd.%20011612.pdf
15
http://www.marketnews.ca/LatestNewsHeadlines/OBITUARY:President%E2%80%99sChoiceCreatorDa
veNicholDiesat73.html
14
9
quality food.16 Loblaws positions itself as a one-stop shop where customers can satisfy all
of their needs.
Furthermore, customers can be assured that the affordable prices do not come with
substandard quality. Loblaws provides healthier alternatives recognizing that consumer
preferences have been changing. During 2013, Loblaws will be meeting its target of having
all President’s Choice products free of artificial colours and artificial flavours. 17 By
meeting this target Loblaws will effectively respond to the growing demand for natural
products.
The PC family also includes the premium Black Label collection. These 200
unique products offer “an epicurean adventure for people who are passionate about food
and seek the ultimate culinary inspiration and experiences, without paying specialty store
prices.”18 Therefore, customers can save time and money by purchasing this premium food
along with their regular grocery and avoid the trip to a gourmet food store.
Loblaw’s differentiation strategy also includes an offering of ethnic foods as well as the
creation of a unique store experience. Loblaw executives understand that competing on
price only is not a sustainable strategy. They began to identify new markets such as the
ethnic consumer, for Loblaw to target. Loblaw has had these ethnic food offerings at its
discount No Frills supermarkets over the past several years with a focus on fresh produce
such as karela and okra.19 In 2009, Loblaw bought Canada’s biggest Asian food retailer,
T&T Supermarket Inc., so that it could extend its offering to this growing customer
16
http://www.presidentschoice.ca/en_CA/familypage.html
http://www.canadiangrocer.com/top-stories/marketplace-calls-for-differentiation-loblaws-vicente-trius15707
18
http://www.newswire.ca/en/story/857809/loblaw-launches-the-president-s-choice-black-label-line-offine-food-products-sourced-the-world-over
19
http://www.theglobeandmail.com/globe-investor/loblaw-buys-asian-grocery-chain/article4389458/
17
10
segment.20 This strategy makes sense because consumers want localized products. Loblaw
is becoming sensitive to certain cultures and launching products specifically for the ethnic
consumer. This strategic move will help them tap into a growing market of South Asian
Canadians that spend up to 23 per cent more on groceries than others in Canada.21
Part of the broad product offering includes bringing in food from other areas of the
world. The Black Label collection aims to tell a story with each of its products in order to
add that to the unique store experience. A majority of products in this premium line are
sourced from around the world. For instance, “Black Label Cherry Shiraz jelly comes from
a vineyard in Israel and No. 5 Umami paste was developed with British food writer Laura
Santtini.”22 These strategies help Loblaw work on improving its supply chain management
so that the right food can come in to stores and meet growing demand. Efficient supply
chains are the cornerstone of Loblaw’s strategy as none of the differentiation is possible
without the right processes and distribution network to develop high appealing products.
Vincente Trius reports that Loblaw’s supply chain is “consistently delivering above 98.5
per cent of availability across all of [its] stores” and inventories reduced consistently. 23
The store experience in Loblaws is created through an emphasis on fresh products,
local products, and customer service. Loblaw’s strong private label strategy demonstrates
the focus on new food experiences but the location of their products is also a key factor of
new experiences. For instance, the Loblaws store at Maple Leaf Gardens in downtown
Toronto (Exhibit 2) features unique elements: the Artisan oven, an 18-foot wall carrying
20
http://www.theglobeandmail.com/globe-investor/ethnic-consumer-the-goal-for-new-loblawpresident/article578346/
21
http://www.theglobeandmail.com/globe-investor/loblaw-buys-asian-grocery-chain/article4389458/
22
http://www.canadiangrocer.com/top-stories/loblaws-pc-black-label-11045
23
http://www.canadiangrocer.com/top-stories/marketplace-calls-for-differentiation-loblaws-vicente-trius15707
11
more than 400 varieties of cheese from around the world, an in-store sushi bar, as well as
chef-made meals.
24
Loblaw has transformed a memorable venue into a great grocery store
that meets demand with selection and quality.
The store has received positive reviews
with one resident saying “after all the hype I wanted to see what it was really like. I love
it. What they’ve done here is make it an experience to shop.” 25 The space also includes
monuments to the Gardens’ history recognizing that many customers have a connection to
those memories.26 This strategy targets people working downtown Toronto who may enjoy
the experience and be motivated to shop at their local Loblaws. Nonetheless, the store will
attract customers that live in the downtown area, cater to the growing condo market, as
well as attract students looking for a quick hot meal.27
Moreover, the recent acquisition of Shoppers Drug Mart by Loblaw for $12.4
billion serves to enhance this customer experience.28
Adding to the one-stop shop
experience the acquisition will provide greater selection and allow Loblaw’s store brands
to enter Shoppers stores. As location is a key performance indicator, the acquisition allows
Loblaw to tap into over 1000 stores in inner cities that host dense populations.29 Another
concern for retailers is the cost of real estate but this deal brings Loblaw’s famous private
label brands into small stores primely located in urban areas. Loblaw is less represented
in city cores but “the Shoppers Drug Mart stores in English Canada and its Pharmaprix
24
http://www.canadiangrocer.com/top-stories/loblaws-maple-leaf-gardens-store-to-open-nov-30-10313
http://www.thestar.com/business/2011/11/30/customers_lined_up_as_loblaw_opens_upscale_gardens_sto
re.html
26
http://www.huffingtonpost.ca/2011/11/30/loblaws-maple-leaf-gardens_n_1121081.html
27
http://www.theglobeandmail.com/globe-investor/loblaw-seeks-to-revive-claim-as-foodietemple/article4179867/
28
http://business.financialpost.com/2013/07/16/loblaw-walmart-target-cities/
29
http://business.financialpost.com/2013/07/16/loblaw-walmart-target-cities/
25
12
stores in Quebec have excellent penetration in Canada’s cities and other major urban
areas.”30
Financial Performance
Implications of Financial Summary for Loblaw Companies Limited (Exhibit 3)
The compound annual growth rate (CAGR) for 2010-2012 for revenue is 1.24%.
The CAGR for net earnings is (1.87%). These results demonstrate that sales have been
increasing but profit has declined and at a more rapid pace than the increase in sales. The
market grew more competitive due to double-digit growth by Walmart and Costco forcing
Loblaw to cut prices on many of its products.31 As a result, consumers purchased a higher
quantity of products, which increased revenue but the lower margin meant lower profits.
There had been some expenses incurred as a result of restructuring of head office
and administrative positions. Loblaw had also invested in customer proposition at $55
million in order to stay committed to its strategy to build better value for its customers.32
Net earnings were also impacted negatively by investments in Loblaw’s information
technology systems and supply chain.
Implications for Loblaw’s Consolidated Statement of Earnings (Exhibit 4)
Loblaw’s
Consolidated
Statement
of Compound Annual Growth Rate
Earnings, 2011-2012
Revenue
1.13%
30
http://www.chaindrugreview.com/inside-this-issue/news/08-05-2013/loblawsdm-aims-to-enhancecustomer-experience
31
http://www.canadiangrocer.com/top-stories/competition-consumers-hurt-grocery-store-sales-last-year21729
32
http://www.loblaw.ca/English/Media-Centre/news-releases/news-release-details/2013/LoblawCompanies-Limited-Reports-2012-Fourth-Quarter-and-Fiscal-Year-Ended-December-29-2012Results1/default.aspx
13
Cost of Merchandise Inventories Sold
Selling,
General
and
1.22%
Administrative 4.20%
Expenses
Operating Income
(13.58%)
Net Earnings
(15.47%)
Selling, General, and Administrative expenses are growing close to four times
faster than sales meaning that there are activities being carried out inefficiently.
Furthermore, operating income and net earnings are both declining at a rapid rate of
13.58% and 15.47%, respectively. Stiff competition caused Loblaw to increase marketing
efforts to attract more consumers and maintain their competitive position in the market.
Moreover, the restructuring of head office and administrative positions resulted in a $61
million charge.33
Implications for Loblaw’s Consolidated Balance Sheets (Exhibit 5)
Loblaw’s Consolidated Balance Sheets, Compound Annual Growth Rate
2011-2012
Long term debt due within one year
672.41%
Long term debt due within one year poses a huge concern for Loblaw with a growth
rate of over 600% for the year. Cash must be saved in order for long term debt repayment
which can be achieved through saving more or taking on additional debt. It would be
33
Loblaw 2012 Annual Report
14
important for Loblaw to hold back on expansion projects and consider focusing on its same
store sales growth.
Implications for Loblaw’s Financial Highlights (Exhibit 6)
We observed a (0.2%) decline in same store sales for 2012 and saw a compound
annual growth rate of 0.79% for retail square footage. The launching of new stores had
little negative impact on the same store sales.
SWOT
Strengths
Loblaw Companies Ltd. is the largest Canadian-based grocery store with a
consistent brand image. It contains 576 corporate and 451 franchise stores under 22 banners
with wide geographic coverage.34 It is known for innovations which relentlessly improve
the value and quality of its products. For example, Loblaw recently announced their
commitment to only sell sustainable seafood.35 This will add value to Loblaw’s social
image demonstrating that Loblaw cares about more than just making profit. Furthermore,
their hard discount division supermarkets such as No Frills create affordable options to
meet customers’ needs.
Loblaw’s model of private brand positioning is also a significant strength. For
instance, Loblaw had $8.2 billion in private label sales in 2010, which represented 26.9%
of Loblaw’s sales and 67% of Canadian private label sales.36
34
Loblaw 2012 Annual Report
http://www.cbc.ca/news/canada/newfoundland-labrador/loblaws-commits-to-sustainable-seafood1.1874301
36
http://www.raymondjames.ca/en_ca/equity_capital_markets/equity_research/sample_research/docs/Lobla
w%20Companies%20Ltd.%20011612.pdf
35
15
Weaknesses
Loblaw has too many management layers and there is also a high cost of
restructuring. Loblaw is only serving a narrow market and has less locations than WalMart, a major competitor in this market.
Opportunities
There is opportunities for steady expansion through the opening of more stores or
geographically. Loblaw already operates under a broad differentiation strategy. It may be
able to add a broad geographic appeal by operating internationally.
Threats
Loblaw’s biggest competitor Wal-Mart offers “fresh” food with low prices. This
is a major concern as food prices continue to increase. Another threat is that if Loblaw
remains as a domestic superstore, there may be high competition from other potential
national grocers.
Competitive Advantage
Overall, Loblaw is facing stiff competition in this market but it is in a sound
position due to its reputable brand image. We believe that Loblaw’s brand image is a
strength that is sustainable and a competitive advantage. Loblaw, as the leading grocery
chain in Canada, provides high quality food options and caters to the needs of consumers.
The brand image is hard to copy as Loblaw has developed a strong loyal base. Moreover,
its brand is very durable. For example, the President’s Choice brand was founded over 30
16
years ago and has become “an institution.”37 The brand image matters to customers
because Loblaw has evidently shown concern for their needs. Loblaw executives have
worked to develop strong brand collections with variety and even healthier food choices.
Lastly, the brand image is exploitable. Loblaw can leverage the good reputation of high
quality products to further extend product lines or garner support for new brands.
Value Chain
After constructing the value chain for Loblaw (Exhibit 7), we were able to get a
better understanding of Loblaw’s efficiencies and inefficiencies.
Loblaw’s inbound
logistics involve relationships with its suppliers and its dominance allows it to dictate terms
and ultimately, have a reliable supply of goods. Next, the operations management at
Loblaw has greatly improved with huge investments toward management systems such as
Manhattan’s Supply Chain Process Platform.38 Loblaw’s outbound logistics are fairly
integrated with the rest of its value chain due to standardized processes and the
establishment of four regional planning centres.39 Marketing and sales has focused on
improving Loblaw’s loyalty program, PC Plus.40 Lastly, all these elements of Loblaw’s
value chain come together in producing excellent service for its customers at each of its
retail locations.
This is a great value chain that allows Loblaw to continually achieve a competitive
advantage in the grocery retail industry. Loblaw’s executives continue to innovate which
37
http://www.marketnews.ca/LatestNewsHeadlines/OBITUARY:President%E2%80%99sChoiceCreatorDave
NicholDiesat73.html
38
http://www.manh.com/resources/press-releases/2012/01/17/loblaw-wins-top-supply-chain-awardprogressive-grocer
39
http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Loblaw-Achieve-HighPerformance-Supply-Chain-Transformation.pdf
40
http://www.newswire.ca/en/story/1157859/media-advisory-and-photo-call-loblaw-launches-the-pcplustm-loyalty-program
17
improve infrastructure and make management systems more efficient. With a centralized
distribution centre, up-to-date IT systems, and unique in-store experiences, Loblaw’s
customers are always satisfied.
Recommendations
Although the company objectives are specific, achievable, relevant, and timed, we
found that Loblaw needs to make them more measurable. By making the objectives
measurable the company can know when they have met their targets.
It is essential for Loblaw to differentiate itself from Wal-Mart and it would be
beneficial if they keep going in this same direction. Meanwhile, price competition raises
the bar for Loblaw’s store experience requirement; as a result, the implementation of highstandards of store services and quality monitoring should be in place.
Loblaw should increase their local exposure and constantly monitor the
competitors’ sales and promotions in order to update its current strategy. It is necessary for
Loblaw to inform the public that it is the ultimate “one-stop” shopping terminal for grocery
so that customers will be willing to travel further and purchase more products at once. In
addition, choosing convenient locations for the construction of new stores can fight off
competition from smaller-sized local stores.
While cutting costs and increasing sales are essential to all retail businesses, it is
significantly important for Loblaw to not lose its brand image during the price war. Loblaw
ought to remain steady in their long-term strategy by being competitive in cost control
without damaging their product quality and store services. Nevertheless, reputation is what
keeps Loblaw ahead in the market.
18
Despite different target markets, Loblaw needs to monitor and control the price
spread between retail and wholesale because having too large of a spread would change
customers’ purchasing patterns. For instance, one might be encouraged to switch to
wholesale shopping given the considerably large price difference.
Loblaw should allocate sufficient time toward training and development so that its
human capital can be most effective. Roles should be refined and performance of
individual departments should be tracked against the company’s objectives. Financially,
Loblaw will have to hold back on big scale investments until they have sufficient cash
flow. A majority of their cash will be put towards the long term debt due within one year.
19
Exhibits
Exhibit 1 – PC Brand Collection
Source: http://www.presidentschoice.ca/content/pc/en_CA/familypage.html
Exhibit 2 - The Loblaws store at Maple Leaf Gardens in downtown Toronto
Source: http://www.newswire.ca/en/story/887001/loblaws-at-maple-leaf-gardens-opens-today
20
Exhibit 3 – Financial Summary for Loblaw Companies Limited, 2010-2012 (in millions,
except per share amounts)
Source: Loblaw 2012 Annual Report
Exhibit 4 Loblaw’s Consolidated Statements of Earnings, 2011-2012 (in millions, except
per share amounts)
Source: Loblaw 2012 Annual Report
21
Exhibit 5 Loblaw’s Consolidated Balance Sheets, 2011-2012 (in millions, except per
share amounts)
Source: Loblaw 2012 Annual Report
22
Exhibit 6 Loblaw’s Financial Highlights, 2010-2012 (in millions, except where otherwise
indicated)
Source: Loblaw 2012 Annual Report
23
Exhibit 7 – Value Chain for Loblaw
Inbound
Logistics
Operations
Management
Outbound
Logistics
24
Marketing
and Sales
Services
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