Loblaw Case Summary
Class #2: EXTERNAL ENVIRONMENTAL ANALYSIS - LOBLAW
1. Please give a summary of the case / problem statement • Threat of new entry in industry, company thinks they may need to take some action to either prevent this or stay competitive
2. What environmental components are relevant for Loblaw’s external analysis? Why? • Industry: Grocery Retail • Technological- new technologies (RFID, ECCNet) o Process management, integration of store management • Demographic – population size isn’t great, population distribution, urban area vs rural, low income vs high income areas • Socio-cultural – customers in Canada are repeat customers(creatures of habit) o Loblaw has a very strong private label, which increases customer loyalty – private brands have a stronger growth rate than regular brands • Political-legal – there is no real political or legal regulations that affect the supermarkets • Economic – need to watch for the possible changes and trends in economy that may affect buying habits, such as recession, etc. • Global – just because Wal-Mart is a global company
3. What is your assessment of general environment? • See question 2 4. What is your assessment of industry environment (Porter’s 5 forces)? • Threat of New Entrants – Low/Moderate Is associated with existing entry barriers (see below) & with saturation of grocery retail industry (many players, low profit margin, low growth rate) Barriers to Entry (here I give you examples of barriers using Loblaw and Wal-Mart; we mentioned most of them in class): o Economies of scale: Loblaw has it in sourcing and distribution, but Wal-Mart will have it, too if decides to entry Canada o Capital requirements: capital is needed to buy physical space, and set up store operations, but not a barrier for a large player such
1. Please give a summary of the case / problem statement • Threat of new entry in industry, company thinks they may need to take some action to either prevent this or stay competitive
2. What environmental components are relevant for Loblaw’s external analysis? Why? • Industry: Grocery Retail • Technological- new technologies (RFID, ECCNet) o Process management, integration of store management • Demographic – population size isn’t great, population distribution, urban area vs rural, low income vs high income areas • Socio-cultural – customers in Canada are repeat customers(creatures of habit) o Loblaw has a very strong private label, which increases customer loyalty – private brands have a stronger growth rate than regular brands • Political-legal – there is no real political or legal regulations that affect the supermarkets • Economic – need to watch for the possible changes and trends in economy that may affect buying habits, such as recession, etc. • Global – just because Wal-Mart is a global company
3. What is your assessment of general environment? • See question 2 4. What is your assessment of industry environment (Porter’s 5 forces)? • Threat of New Entrants – Low/Moderate Is associated with existing entry barriers (see below) & with saturation of grocery retail industry (many players, low profit margin, low growth rate) Barriers to Entry (here I give you examples of barriers using Loblaw and Wal-Mart; we mentioned most of them in class): o Economies of scale: Loblaw has it in sourcing and distribution, but Wal-Mart will have it, too if decides to entry Canada o Capital requirements: capital is needed to buy physical space, and set up store operations, but not a barrier for a large player such
References: Porter, M. 1980. “The structural analysis of industries”, Chapter 1 in Competitive Strategy: Techniques for analyzing industries and competitors. NY: The Free Press, pp 3-33. , o IMPROVE COST EFFICIENCY (use of technology, cost reduction)