Value Chain Analysis of Loblaw Companies - Case Study Example

Running Head: LOBLAW COMPANIES Loblaw Companies Name Course Lecturer Date Introduction Loblaw Companies Limited is the largest food retailer across Canada. The company was started in the year 1919 where the concept of retail was defined as “self serve”. Metzger, P. (2008) maintains that, this traditional store provided high level of personal service but it largely comprised of various labor intensive operations. In 1928, the company had established sixty nine stores throughout Ontario where it unveiled its new state of art of warehouse and head office at Bathurust and Fleet streets at a cost of $1.5 milion. According to Metzger (2008), the company has more than 1000 franchise and corporate supermarkets which operates in 22 market segments and regional banners. The company has 14 million customers and is involved in maintaining a private label program which comprises of baby products, financial services, clothing, mobile phones and other general merchandise. The company is among the largest private sector employers with 136, 000 part time and full time employers. Loblaw companies are headquartered in Brampton Ontario and it is a subsidiary of George Weston Limited. According to Greenwood and Steve (1999), Loblaw Companies are largely known for innovation, value as well as quality of its food offering. It offers Canada’s strongest control label program which includes Joe fresh Style ® and Unique President Choice ® brands (Greenwood and Steve, 1999). In addition the companies participate in Canadian National Food Drive that operates in the following banners; Club Entrepot, Loblaw Superstores, Extra Foods, Valumart and Your Independent Grocers. With a daily increase of retail assets, the company Loblaw Companies Limited was incorporated in 1956 and at this same year the company announced a major impact on Western Canada with thirty two supermarkets slated for construction. In 1959, Loblaw companies entered the trading stamp wars with its personal Lucky Green Stamps. Current situation For it to remain as key leader in the retail sectors, the company has a well defined organizational structure which is classified according to the function of each department. Nattel et al. (2003) maintains that, areas of specialization within the company are; health and safety, governance, pension, environment and auditing. The company has a well structured social responsibility demonstrated in the following areas; environment where it ensure they implement policies which safeguard the environment, employee where the company define it success is through ensuring that employees relationships are coordinated positively and finally, community where the company is engaged in charity work especially in Canadian Cancer Society and Canadian Breast Foundation (Nattel et al 2003). Loblaw strives in maintaining good relationship with their customers through keeping them informed by mailing annual reports to them. Currently, Loblaw Companies is in touch with diverse lifestyles meeting the daily needs of all Canadian customers. Although the company largely concentrates of distribution of food, Loblaw is not limited to one market to one market segments as it is involved in providing its consumers with everyday household needs (Sekhri, 2001). Loblaw Companies holds approximately 20% of the food market through its various convectional food outlets. Loblaw companies currently have significant presence in all Canadian provinces except from Quebec where its market share is estimated to be less than 1%. With focus on the provinces, the company is the market leader in Ontario with 33%, in Saskatchewan and Manitoba 46%, Safeway 31%, Oshawa group 11% and Overwaitea 31%. In 1997, the companies had an outstanding performance were sales were up by 12% as compared to the year 1996 with an operating income of $430 million and net earnings of $215 million setting new highs. In 2011, the current position of the company has greatly improved in performance where it has an operating income of $600 million and net earnings of $400 million setting a high mark as compared to its competitors. This therefore has enabled, the company have a stronger ability to largely convert its liability as compared to five years ago (Kraus, 1999). Loblaw Companies has largely generated positive free cash in the past two years. This is due to the large investment in growth as well as its re-arrangement of distribution systems. This therefore gives an indication that the company free cash flow is in good state. As of January 2011, the company gross profit margin was at 7.5%. The company ability to convert debts interests in the past five years dropped from10.2 to 6.65 times currently which is not so good for the company. However, this is still manageable and the company is not viewed to be in a danger level. The graph below clearly defines the companies situation. . According to Brieger (2003), Loblaw companies return on investment shows that every sale approximately 17% profit is generated by each dollar of equity which has evidently been increasing yearly. In a highly competitive world, the company can be considered to be performing well. This is especially when the current business trends are put into consideration where the world has grown to a global village and more companies engaging in international trade through e-commerce. Finally, the average number of days for the company to be paid on accounts receivable has increased over last three years from 7.3 to 9.6 (Brieger, 2003). Value Chain Analysis of Loblaw Companies The value chain analysis basically describes all activities that do take place in a business and goes on to relate them to analysis of the business competitive strength (Nattel et al 2003). Michael Porter concluded that the activities of a business can be grouped into two. These are; primary activities that are majorly concerned with delivering and creating a product and support activities that include those activities that are indirectly involved in production and essentially increase the efficiency and effectiveness of a business. Of importance, is that value chain analysis is one of many ways of identifying excellent activities that may be undertaken by a business and which are outsourced (Wong, 2009). When keenly identified, such activities can increase organizational performance translating to an ultimate increase in the overall profits as well as success in organizational efficiency in service and product delivery. In the primary activities, the Loblaw Companies has engaged in these activities. The primary activities include the inbound logistics that is concerned with the receiving and storage of the external materials (Wong, 2009). In this, the Loblaw Companies being one of the largest retailers in Canada has intensified in the inbound logistics. Recently it has created larger facilities as well as minimizing the smaller distribution centers. This is said to come as a result of massive competition from Wal-Mart, a competitive giant (BEC, 2009). This has been a great beneficial to the Companies as it has aided in cutting time taken from the producers to the stores and therefore, reduced the cost incurred. This as well has been seen in its outbound logistics whereby finished goods are delivered to the consumers timely (Porter, 2001). In its operations activities, Loblaw Companies has intensified its manufacturing of goods. It has laid strategies that will ensure that the goods are manufactured at a faster rate that will of course that products are received by the consumer at the right time and place and in excellent conditions. The marketing and sales activity is one of the most active activities in the company. This is so as it determines whether the companies makes great profit margin in its services. In its recent annual report, Loblaw Companies maintains its concentration on mainly food retailing with the main objective of providing the customers with the excellent one-stop shopping for the households needs. It has created a significant program of more investment in the continued expansion of the already existing markets. Actually, sales, is the biggest story in the Loblaw Companies at the present. This has been as a result of enlargement and modernization of the new market (Peattie, 2011). Sales so far have been increasingly rapidly. Basically, the strategies that are being laid down on expansion of the markets are expected to raise the sales of the Loblaw Companies. The company has opened more suppliers at a rate that exceed the competitors. By so doing, the company is able to develop a competitive advantage which enables them to remain as market leaders within the retail industry. Loblaw companies have developed various strategies which have enabled them to be ahead even when the world is recovering from the recent financial crisis that badly affected the retail industry. In the supporting activities, Loblaw Companies has continually been active in ensuring that these activities not only are improved but also improve the image of the companies. These include procurement which involves how the company acquires its resources for the business, human resource management whereby the Loblaw Companies has increasingly been motivating and rewarding its employees to ensure that the they perform efficiently. These include tuitions that are offered to the employees at subsidized cost and are related to the positions that they are holding, online training and in house training is also offered. Essentially, the company is one of the top a hundred employers for 2012 as a result of its commitment to the employee’ affairs. Apart from the training, the company is set to see that the employees receive excellent working atmosphere. Various motivation token are readily available for the employees that include holidays, social events and they are able to interact with the managers more often. Activities involving technology development are essential in every international business. Loblaw Companies, has therefore, continued to increase its efforts in ensuring that the development are not only improved but also sustained (BEC, 2011). Management of information from the customers and the shareholders has been important in the company. Activities involving infrastructure have also been supported by the senior manages. This is to support the planning, control, and finance. In finance, the company has merged with major banks to facilitate it operations and also increase its services to the customers. Overall, the value chain of the company has helped the company to mainly focus on those activities that will increase its competitive advantage and also sustain it (BEC, 2011). References BEC Boothman, (2009). “A More Definite System” Journal of Macromarketing BEC Boothman, (2011). Mammoth market: the transformation of food retailing in Canada, 1946-1965, Journal of Historical Research in Marketing. Brieger, P. (2003). Coming soon to a supermarket near you: Firm caters to Canada's fastest  growing religion. National Post. Retrieved February 12, 2003: http://80-gateway.proquest.com.ezproxy.lib.ucalgary.ca:2048/openurl?ctx_ver=z39.882003&res_id=xri:pqd&rft_val_fmt=ori:fmt:kev:mtx:journal&genre=article&rft_id=xri:pqd:did=000000385929871&svc_dat=xri:pqil:fmt=text&req_dat=xri:pqil:pq_clntid=12303. Greenwood, R and Steve, S. (1999). Loblaw Companies Limited. Illinois: University of Illinois at Urbana-Champaign. Kraus, W. (1999). Loblaw Companies Limited: 1999 Composting Conference. Retrieved  February 20th 2012 from the World Wide Web: http://www.compost.org/Presentation.PDF Livingston, Gillian. (2002). Two Ontario Loblaw stores to have medical clinics. Standard.  Retrieved on 20th February from; http://80-gateway.proquest.com.ezproxy.lib.ucalgary.ca:2048/openurl?ctx_ver=z39.882003&res_id=xri:pqd&rft_val_fmt=ori:fmt:kev:mtx:journal&genre=article&rft_id=xri:pqd:did=00000026881068&svc_dat=xri:pqil:fmt=text&req_dat=xri:pqil:pq_clntid=12303 Metzger, P. (2008). Loblaw’s Tests S-less stores. Retrieved on 20th February from: http://torontoist.com/2008/04/loblaw_tests_sl/ Nattel, I et al. (2003). Loblaw Companies Limited. RBC Capital Markets (Canada).  Retrieved on 20th February 2012 from http://80 web6.infotrac.galegroup.com.ezproxy.lib.ucalgary.ca:2048/itw/infomark/795/189/39963017w6/purl=rc1_INV_0_DL7489869&dyn=3!xrn_4_0_DL7489869?sw_aep=ucalgary#Investment%20Opinion Peattie, K, (2011). Towards sustainability: achieving marketing transformation a retrospective comment, London: Westernburn Publishers Ltd. Porter, M. (2001). Strategy and the Internet. Harvard Business Review, 79(3), 62-78. Sekhri, R. (2001). Greenpeace chides Canada, grocers on food labeling. Retrieved on 20th February 2012 from: http://www.biotech-info.net/canadian_labeling.html Wong, K, (2009). Approved Marketing Plans for New products and services, New York: iUniverse Read More