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Competition between Loblaw and Wal-Mart - Essay Example

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INTRODUCTION TO THE SCENARIO: Loblaw was considered to be the North America’s most innovative retail chains. It is one of the holding companies of the Weston family of Canada. This family has been a major actor or element in the global food industry. It has investments in this industry which are spanning across the world…
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Competition between Loblaw and Wal-Mart
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Competition between Loblaw and Wal-Mart

Download file to see previous pages... The Executive Chairman of the company is Galen Weston who at the time of the launching of these stores was just five month into the new position. He succeeded his father W. Galen Weston. The Executive Chairman is in a very demanding place at the moment. He not only has to flip the tables for the company but also has to save the family’s reputation. He supporting executives have let him down very badly with awfully wrong recommendations, now he has taken the reins of the organisational strategy in his own hands. He believes that he can turn the fortune of the company around because according to him the company has been through much more difficult times than this and it has always managed to crawl back up. And there is no reason to believe that the company would not do the same now when it faces a similar crisis situation (Besanko, Dranove, Shanley, and Schaefer, 2007). BARRIERS TO ENTRY: Barriers to entry are placed by an existing business of an industry in the industry to discourage other interested entrant from entering the industry (Ferguson and Ferguson, 1994). The existing business can discourage a new entrant in a number of ways, for instance its can fabricate certain situations in the industry which would require a new entrant to put up huge capital investment before entering the industry (Leamer, 2009). The existing business can also put up a show of its strong brand equity in the marketplace, which can also discourage a new entrant from entering (Barthwal, 2000). Michael E. Porter (2008), while analysing the competitive environment of an industry identified six entry barriers: 1. Economies of scale: This occurs when unit price of a product decreases when a certain level of production volume is reached by a business (Mankiw, 2009). When existing players in the industry gain this advantage they force the new entrant to either find a competitive production volume or bear the high unit cost. Other similar cost advantages which the existing player would have on his side include: proprietary information, favourable location, experience, excess to raw material, government subsidies and etc (Arnold, 2008). 2. Product Differentiation: Since existing businesses in an industry have an established brand equity and identity, this fact makes it important for new entrant to come up with a different product. In this regard the new entrant has to invest a lot of resources, which can be very discouraging for him (Wessels, 2000). 3. Capital Requirement: This is a requirement which comes up when new entrant wants to enter an industry. They have to commit huge amount of capital to acquire operational status (Johnson & Scholes 2001). 4. Switching Cost: This cost has to deal with customers, who have to bear this cost when they switch to a different provider of the same product. Certain industries have a very high switching cost which makes it important for the new entrant to offer customers some relief or incentives so that the customers find some motivation to switch (Borodzicz, 2005). 5. Access to Distribution Channels: In an industry the established players have a dominating position when it comes to influencing the members of distribution channels. Through long standing relationship agreements an established business erects a hurdle for a new entrant, who has to ...Download file to see next pagesRead More
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