The Lob-law Case for Business Policy and Strategies - Report Example

1. a) The grocery industry in Canada is relatively high and the competition is very high as well. This industry is less fragmented compared to the US and it is characterised by companies that are strong on a national level. Canada has a well-developed discount grocery sector and the customers’ bargaining powers are very high since there are so many substitutes and competitors to choose from and these include, restaurants, take away stores and fast food shops. The grocery industry in Canada has reached a mature stage and the new entrants may find it a bit difficult to penetrate the industry. Basically, all the products mainly related to food items are offered hence it is difficult for the new entrants to diversify their offerings and successfully compete in this tight industry. b) Rivalry is generally intense and renowned competitors like Wal-Mart, Metro, Cost-co, Co-op, Safeway and Sobeys among others are main players in the grocery industry in Canada. There are also small players and these contribute to the competition in the industry. Among the major players in the industry, it can be noted that these use different strategies such as differentiation so as to attract as well as retain their customers. These rivals have many stores in different parts of Canada which makes it a bit challenging for the other interested players to penetrate the highly competitive industry. c) The scope of rivalry includes differentiation of the products offered. In addition to grocery of food items, the rival competitors also offer general merchandise to the customers. There is variety which offers the customers the opportunity to enjoy their shopping from one place. Differentiation is another strategy used by the rival competitors so as to attract more customers. For instance, the strategy of one-stop shopping destination worked effectively for Wal-Mart because of economies of scale and scope, which allowed the discounter to maintain low prices and broad assortment. d) As far as product innovation is concerned, Loblow uses the private brands strategy. This gives it a competitive edge since other rival competitors cannot imitate such kind of products offered. The chain store is influenced by the needs of the customers in its product innovation. Other rivals like Wal-Mart use customization and segmentation strategy. In this strategy, characteristics of the ethnic and demographic community around each store are used to determine product assortment. Basically, Canada is a multicultural country hence the need to be sensitive to the needs of people from different backgrounds. 2. The Canadian supermarket industry is changing in that it is taking the fast food approach where food items are given priority. The industry primarily focuses on fresh strategy that is meant to give the customers fresh food products. The tastes of the customers are constantly changing as noted above. This makes it imperative for the supermarkets in business to adjust their operations so as to meet the requirement of the individual customers who are always the kings in business. Competition in the industry is shaped by these consumer changes and preferences as the competitors seek to satisfy the customer needs and interests in the market. 3. The success factors of supermarket operators like Loblow include the following: It is widely seen as a low-cost, one-stop shopping destination. It is positioned as a grocer with a large assortment and high-quality fresh food. It also has the highest ratio of store brand items. 4. Basically, SWOT stands for strengths (S), weaknesses (W) while on the other hand the external environmental factors are regarded as either opportunities (O) or threats (T). The major strength is that private labels seemed to give Loblaw a distinctive edge over its competitors. It offers the discount segment and offered the customers what it believed they wanted. One weakness that can be noted was poor distribution strategies it used. The major opportunity is that it can grow from strength to strength given that it already has loyal customers and it offers high quality products. The major threat is competition from rival competitors like Wal-Mart. The other problem that was encountered by the organisation before 2006 is that its distribution was not very good since there were some delays in delivering the goods which affected sales. The pricing strategy was not stable compared to Wal-Mart which offered discounts but Lonlow relied on promotions of particular products. In comparison, it can be noted that in 2007 it had changed its strategy and it primarily focused on lowering the costs in its operations and it managed to gain a competitive advantage. It also sought to improve its distribution of the products to avoid delays. 5. The company’s strategy against Wal-Mart during John Lederer era was to : Improve delivery through maximisation of its own fleet. It wanted to use uniform pricing strategy. It resorted to use new information to determine the amount of demand for products. Resolved to purchase general merchandise at significantly lower prices. Decided to follow strategy used by Wal-Mart to use standardised stores. Resorted to reduce labour costs. 6. In October 2006, Loblaw signed a four-year contract with union leaders, which allowed it to convert 44 of its conventional Loblaws and Zehrs stores to either lower cost The Real Canadian Superstores or into remodelled, more competitive food stores. It took measures that were meant to lower labour costs as well. It planned to eliminate up to 1,000 administrative jobs, about 20 per cent of its administrative work force as a way of lowering labour costs. It also embarked on a strategy to offer prices that were driven by sales promotions as a way of giving incentives to the customers. It also improved on the distribution system where John Lederer consolidated the company’s distribution centers from 32 facilities to 26 in a bid to improve efficiency. 7 The problems encountered by the company emanated from its distribution system. The reorganisation of the supply system had been improperly done and it encountered several problems. Since Loblaw had begun consolidation of its distribution centres, it lost millions of dollars because of the delays in delivering goods to stores. The delay in delivery of the goods for the big flyer promotion meant that the customers would switch to the other stores. As a result of the delay in delivery of the goods, Loblow was forced to reduce promotions which resulted in fewer customers being attracted to the stores. The merchandise that arrived late to the store would miss their opportunity. 8. To a greater extent, it was successful since it also ventured into other merchandise business. For instance, Loblaw’s $26 billion in annual sales was generated by non food items in 2004. The company’s financial statements showed that there was an increase in sales in 2006 compared to 2002. For example, in 2002, the sales were $22,953 and in 2006 they were $28,640. Other statistics such as cash flow show that there has been a steady increase from 2002 up to 2006. This can be shown that there was an increase of $5 687. This show a 19.85 % increase which shows that the organisation is fairing quite well. All other figures related to revenue generated show a steady increase. 9. It can be noted that Loblaw utilizes the differentiation strategy since they have a broad target of being cost leaders and they also offer various product lines to different segments. In order for them to improve on their competitiveness, they should maintain their strategy and keep on improving it so as to avoid extra expenses, time and effort. Indeed, it should maintain its uniqueness of satisfying the customer needs through the differentiation strategy that can be hardly imitated by the other rival competitors. 10. Loblow can exploit its local knowledge of the Canadian supermarket industry to its advantage against Wal-Mart in that they already know the needs and wants of their customers. Essentially, the main goal of business is to satisfy the needs of the customers profitably and there is every need for any organisation that is serious about making profits to know what is wanted by the customers. As noted, Canada is a multicultural country hence the need to know the customers’ expectation and needs. Against this background, Loblow can capitalize on this advantage against Wal-Mart. It should also be noted that each society has got its own cultural values and they ought to be protected. Every person has got a culture and all the people across the globe do have values that are shaped by their culture. For Loblow, it is their own advantage to know the culture of the local people as this will help create mutual understanding. The values of the people shape their way of behaviour hence they ought to be safeguarded. An organisation that does not know these cultural values of the local people may be shunned by if it does not implement good practices. Read More