Loblaw Companies Limited: Preparing for Wal-Mart Supercenters

The grocery industry has a relatively high market commonality; a lot of grocery stores are somewhat related in terms of technologies used, labor force and the products or services offered in the stores. Differentiation with other competitors is key for survival in this highly competitive industry.

In the United States, the food retail industry is absolutely massive. According to Statista, this industry brings in nearly 5.27 trillion dollars annually and 594.4 billion of that is from grocery store sales. In this market, the 20-ton gorilla in the room is Walmart, racking in nearly 20% of the entire market at around 118 billion dollars in 2013 according to the Harvard Business School case study. Following Walmart, Kroger and Costco own the biggest next largest slices bringing in 76 billion and 71 billion respectively. In this highly competitive market that has some of the smallest margins of any industry it can be tough to get ahead and even tougher to grow. However, Trader Joe’s has managed to pierce what was once a very small world

The market responded favorably to the merger between Loblaw Companies Ltd and Shoppers Drug Mart. News of the agreement sent Shoppers shares to increase by approximately 27% on TSE before falling back to 13%, and Loblaws shares were up almost 9% (Globe and Mail, 2013). On the 15th of July 2013 the announcement was made public, and both companies shares price closed at an alltime high of $50.13 per share for Loblaws and $60.12 per share for Shoppers. During the rest of the same month, Shoppers shares price kept on risen, while Loblaws shares price maintained its usual price below the $50 standpoint (Appendix B).

In 2009 and forward, Loblaw Companies were up against aggressive competitive markets while still dealing with the backlash from the 2008 world economic crisis. Same store sales were on the decline and Loblaw’s was in desperate need to change their store strategies. By 2011, Loblaw’s had come up with the idea to diversify and expand their operations with new upgrades to in store departments as well as expanding upon their leading brands, President’s Choice and No Name. This case study underlines the premise of national and global strategies, which is a key subject matter and general broad topic when studying International Business. The main concerns of this case study would be to identify if Loblaw’s new strategies gave them a leading edge in the ever-expanding market, as well as seeing if these new strategies will hold up to market standards in the near future.

Most firms in the supermarket industry operate as retail outlets, comprising of supermarkets and discount stores. Most of these supermarkets operate on very little profit margins, and mostly get their ideas from their customers for their product developments. Supermarkets generate revenue by being determined to meet the needs of their customers’ lifestyle. By so doing they end up creating value for their products and making profits at the same time. Through bulk purchases, they also achieve their economies of scale at cheaper prices and then end up selling at cheaper prices to their customers.

Grocery industry is a highly competitive market with thin profit margins. Super markets are dominant players in the grocery industry. They use grocery offerings to drive traffic to their higher profit margin retail items. With its operations efficiency, Walmart, the largest grocery retailer has been able to offer significant price drops. This also forces other grocery stores to drop prices which keeps the profit margin thin. Even with all the advantages of operational efficiency and economies of scale, Walmart’s share in grocery sales was down at 51% in 2011.

In a society that has seen such a drastic downturn in the economy, people are searching for the best possible bargains they can find. People across the United States are looking for ways to save money; thus, searching for stores that will provide them with everything they need at a lower cost. Companies all over the United States are fighting to stay competitive and are seeking ways to restructure their company and still provide for consumers the best possible prices. Companies such as Wal-Mart do not have to change their structure to fit the demands of consumers because it already offers its customers brand name items

In 1997 the top three mass-retail chains, Wal-Mart, Sears, and Kmart, controlled 80% of the discount retail market, up 10% over the previous five years. This appears to be a continuing trend, providing them greater pricing power over their suppliers like Newell Company. This

Despite the seemingly simply concept, the effect is profound. Fishman explains that Makin Bacon is “an example of how, when things go well with Wal-Mart, it’s good for everyone: vendors, factory workers, customers, even the customers of Wal-Mart’s competitors”. This is because of free-market competition. In order to compete with Wal-Mart’s everyday low prices, other providers like Target must lower their prices as well, and that is why Fishman argues that Wal-Mart’s commitment to low prices actually helps

I think Wal-mart front office felt that the company was losing its edge because competitors had closed the pricing gap between the stores to mere pennies. Wal-mart has always been known for having lower prices. But if the prices between Wal-mart and other stores was not that big of a difference who could say Wal-mart is a better bargain. Wal-marts management understood that something had to be done and that their product needed to meet consumer’s needs if the store wishes to be successful (Ferrell, Hirt, Ferrell, 2016). Wal-mart tried to emulate what other stores such as Target had been effective in doing and failed badly. So Wal-mart began to focus on the things that made the store great in the first place. Wal-mart focused on groceries

Based on our analysis of both the internal and external aspects of SuperValu, one of our recommendation for the SuperValu board of directors is to sell off the grocery retail business unit. SuperValu does not have the internal resources to continue competing in this highly competitive industry. The company is also not able to strategically place itself in the market compared to competitors because they are not a low cost leader, nor do they have a premium product. Walmart and Aldi will continue to take revenues from Cub and other SuperValu owned grocers in the future, while Whole Foods and other specialty stores will continue to offer better products that match external trends. In addition to the growing competition, SuperValu’s financial performance has been below or stagnant relative to their competitors and the industry overall. The company revealed that about half its revenues and one-third its earnings come from the distribution business, which continues to grow and currently services about 2,500 independent retailers from 19 distribution centers. During that same quarter, same-store sales at its supermarket locations dropped about 4.5 percent, with even Save-A-Lot outlets registering 4.1 percent decreases in same-store sales.

Walmart has always been considered a powerhouse in the retail business world. It is encouraging to read the story about how Walmart started as a small store in one location but now Walmart has grown to over 11,000 stores worldwide. There is no mistaking that Walmart has shown itself to be a business that has grown to the ranks of empire among retail. With net earnings of more than $482 billion and a staff of more than 2.2million associates worldwide (Walmart, 2016), Walmart has squashed its competitors and created a category all its own. These successes can be contributed to Walmart’s’ exemplary external and internal business environment and their ability to construct a masterful business and corporate level strategy.

Who would have thought that by opening up a single grocery store in the early 1900s, it would give the ability for someone to open up over 60 more in less than ten years. In today’s business market, it is nearly impossible to open up 60 grocery stores in Toronto in less than 10 years. The reason being is that the grocery retail industry is now becoming or has become an Oligopoly. When one is walking through the streets of Canada looking at places to shop for groceries, one may stumble across several options of grocery stores to choose from. Often people question whether to buy their groceries either at No frills, Fortinos, Real supermarket or Loblaws. For many, the question is simply answered by choosing the store nearest to the comfort of their home. Over time, customers become loyal to the store for many different reasons, it often has to do with the experience offered at a certain chain and loyalty programs. Many of these loyal customers will not buy from other supermarkets unless they are away from home where their preferable store is not convenient. Not every Canadian customer is aware that Loblaw Companies Limited, the single largest Canadian food retailer owns many of the different supermarkets out there. This paper will prove that the Loblaw Companies Limited has is constantly trying new things in order to maintain and improve success and will also be outlining the history, organizational structure, target market, store design and the retail strategy of the company.

Wal-Mart needs to identify and nurture the primary core competency that fueled their growth: fulfilling customer needs with a wide spectrum of products at everyday low prices This competency is the product of the aggregate of competencies across individual skill sets and organization boundaries: Wal-Mart is a leader in channel management, inventory control, distribution and customer service. This is a result of the company 's ability to coordinate a complex information management and distributing network and to efficiently manage supplier relations, through the use of new technologies and the seamless flow of information. Wal-Mart was a leader in Uniform Product Codes scanning. For the two years that it took K-Mart to implement their system, Wal-Mart had, at least temporarily, a competitive advantage that was both valuable and rare.

The concept of strategic groups in the grocery industry is one that is used to group companies within the same industry that are alike in business model of that have similar combinations of like strategies or goals. When it comes to competition in the grocery retail industry. The selling of grocery’s is an important industry that affects the health and wellness of its countless customers and many of its staff, and can also have a major impact on the farming community and manufactures that assist the suppliers. In any industry their sometimes are many different companies with many different strategies to sell its products and services. Some company’s may target customers wanting lower prices like Walmart, and some