Loblaws Business Strategy

Business Level Strategic Analysis

External Environment

Porter's Five Forces (Appendix A)

The grocery industry is a commoditized industry, which makes it difficult for grocers to sustain through differentiation. Buyer power is high and thus, cost leadership and operational efficiencies are critical. There is fierce competition amongst various grocery stores, with the main players such as Loblaw and A&P holding multi-banner stores in various market segments. Traditional grocery stores also lose some of their market share to drug stores, convenience stores and other retailers who have entered the industry. Threat of substitutes from fast-food and take- away outlets is not as prevalent, since many grocery stores have started stocking ready-to-eat meals and have deli services available for consumers. Competitive pressures are increasing in the industry with the potential entry of Wal-Mart and new delivery methods such as the internet.

Key Success Factors of the grocery industry include the following:

* Low cost operations; leading to lower prices

* Convenient locations and large stores

* Wide product ranges; good quality

* Value added services; customer loyalty programs

* Cutting-Edge technology, both front-end and back-end

Looking at the above factors, there are many opportunities for Canadian grocers to improve on their services such as vertical integration as supplier/distributor, innovative technologies like RFID, and global expansion (See SWOT Analysis - Appendix B).

Internal Environment

As mentioned above, the grocery industry is heavily commoditized and competitive. The Canadian market leader, Loblaw, serves a broad target market and integrates a low cost strategy with product and process differentiation. Through their multi-banner approach, they leverage their core competencies across multiple businesses.

Resources and Capabilities

Loblaw's unique tangible resource is that they own 63% of their corporate stores real estate properties, a competitive advantage against other many grocers who lease their stores. Some of their intangible resources include their brand