Loblaw Companies Limited must develop a corporate strategy in response to Wal-Mart's upcoming expansion in the Canadian market through new Sam's Club locations and possible Supercenters. Loblaw's current success as Canada's leading grocery retailer can be attributed to the popularity of its private label brands, its streamlined operations, and large-scale purchasing efficiencies. Wal-Mart poses a significant threat to this model through its extreme price competitiveness achieved through the use of advanced supply-chain management technology and effective relationships with suppliers. Based on the company's past record of immediate success in new markets, Wal-Mart's decision to open more Sam's Club stores in Canada requires an immediate response from Loblaw's. Several possible strategies should be investigated and evaluated with the objective of maintaining market share, short-term profitability, quality standards, and long term growth. In response to Wal-Mart's expansion, Loblaw's has the option to: a)
Maintain its future course with its multiple store brands and private labels b)
Launch a new loyalty program and rebrand retail outlets under the Loblaw's name (some would be designated as Loblaw's + Superstores) c)
Place emphasis on expanding the Real Canadian Superstore outlet chain to compete with Walmart Superstores Analysis indicates that the creation of one common Loblaw's brand would be most beneficial in realizing the company's goals in both the short and long term. A new loyalty program would further solidify Canadians' support of the Loblaw's brand and attract new customers at the same time. This strategy will encourage higher spending per customer visit while maintaining the company's current position as a price leader and retailer of quality brands. While addressing the threat of Wal-Mart's expansion, this strategy is deliberate in creating a separate niche for Loblaw's in the market which is built upon the company's existing core competencies.
In order to build on their existing success, Loblaw's must address the changing landscape of the Canadian grocery market; most notably, the arrival of another major player in Wal-Mart. Currently, Loblaw's is the leader in the Canadian grocery market with market share in excess of its four closest competitors combined. The company has relied on the same strategic approach for quite a long time. This approach focuses on driving down costs through size and operational efficiencies as well as differentiating its products and stores. However, the arrival of Wal-Mart means that this time-tested strategy will no longer be relevant. While Wal-Mart's exact plans for expansion are still unclear, it has been speculated that the company could have as many as 10-20 Sam's Club stores in Canada by the year's end. This will prove to be a direct threat to Loblaw's' existing market strengths. For one, Wal-Mart has long established itself as a cost leader. While supermarkets such as Loblaw's use size and scale to achieve cost leadership, Wal-Mart is the largest retailer in the world, has an extremely efficient supply chain and is using technology to cut costs further. The impact of this new market threats to Loblaw's' operations will be profound. Wal-Mart has quickly dominated most markets outside of the United States within a few years of entry. While analysts suggest that the Canadian grocery market may have more depth, the threat is still imminent. One of the biggest challenges to Loblaw's will undoubtedly be the need to depart from a strategy that has proved successful for such a long period of time. Loblaw's must reevaluate their core competencies, identify opportunities and threats to their business and devise a strategic plan to address the impending threat of Wal-Mart's entry into the market. Such a strategic plan will affect many parts of the business including, but not limited to marketing, finance and operations.
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