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Lob Law Case Essay

1401 words - 6 pages

1) The Canadian grocery retail industry is a very competitive market with very low margins. Although is grew at an impressive 4% still the Canadians paid the lowest food prices in the world. This was made possible by a stiff competition within the industry, which forced the retailers to keep prices low to maintain their competitive edge. It is mentioned in the case that Canadian grocery market is the most advanced grocery market in the world. These factors make this market somewhat less attractive to enter especially for a new entrant.
Loblaw as a retailer was able to maintain a leadership position in this industry by a combination of various activities. It owned majority of real estate ...view middle of the document...

They also started to provide home as well as cars loans, which enhanced their brand image even further. These attributes became the differentiating factor for them in the marketplace. Their logistic network employed the latest computer network, which predicted demand and changing consumer needs. Based on these predictions the company was able to maintain stock and reduce its lead-time. They have developed an integrated network with their suppliers, which help them maintain a better and more efficient logistic network. They are able to maintain better quality with the help of this integration, which help in the information flow from the customer to the manufacturer.
Loblaw developed a business model that had a strategic fit as a low cost provider in the market place. They also developed their private labels, which gave them a bargaining power with the established brands. With the introduction of private labels such as the “President’s Choice (PC)“ they were able to maintain a good brand loyalty which helped them in gaining the share in profit pool of the industry. They were successful in creating an efficient management structure that had accountability as well as responsibility distributed evenly. This structure gave the company the needed support and also provided flexibility for the changing environment. They were able to penetrate the market better with the help of both company owned and independent stores. This gave them the reach, which made their national presence possible. Moreover 34 warehouses that were managed by the company serviced all these stores. This integration made the company a well-managed and highly receptive company in the market.
As a business strategy Loblaw do not fare well on all the forces defined by porter’s model of understanding strategy of a company. They exert power on the supplier where they are on the strong side of bargain. But this tactic fails when they deal with a powerful brand, which has a national presence. To counter this Loblaw markets its own brand, which has gained significant market share but is not able to compete in every market. They have little or no power in the case of customer; they are forced to reduce the price because of intense competition. There is a constant threat to entry as this industry is changing very rapidly leaving enough room for niche brands to establish their market. Moreover since this industry is influenced by the accessibility of the store to the customer therefore smaller local player also are a serious threat to the national companies such as Loblaw. As such the market is highly competitive since there are 18 companies, which have some national presence with varying market share. The profit pool is shrinking with every addition to the industry as the market is only growing at a modest rate as compared to the competition. There is a low threat of substitute because of economies of scales as well as the services that are provided by the supermarkets are difficult to match...

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