1. Please give a sum-up of the instance / job statement • Threat of new entry in industry. company thinks they may necessitate to take some action to either prevent this or remain competitory
2. What environmental constituents are relevant for Loblaw’s external analysis? Why? • Industry: Grocery Retail• Technological- new engineerings ( RFID. ECCNet )o Process direction. integrating of shop direction • Demographic – population size isn’t great. population distribution. urban country vs rural. low income V high income countries • Socio-cultural – clients in Canada are repetition clients ( animals of wont ) O Loblaw has a really strong private label. which increases client trueness – private trade names have a stronger growing rate than regular trade names • Political-legal – there is no existent political or legal ordinances that affect the supermarkets • Economic – need to watch for the possible alterations and tendencies in economic system that may impact purchasing wonts. such as recession. etc. • Global – merely because Wal-Mart is a planetary company
3. What is your appraisal of general environment?• See inquiry 24. What is your appraisal of industry environment ( Porter’s 5 forces ) ? • Threat of New Entrants – Low/ModerateIs associated with bing entry barriers ( see below ) & A ; with impregnation of food market retail industry ( many participants. low net income border. low growing rate ) Barriers to Entry ( here I give you illustrations of barriers utilizing Loblaw and Wal-Mart ; we mentioned most of them in category ) : o Economies of graduated table: Loblaw has it in sourcing and distribution. but Wal-Mart will hold it. excessively if decides to entry Canada o Capital demands: capital is needed to purchase physical infinite. and set up shop operations. but non a barrier for a big participant such as WM o Product Differentiation: ( Loblaw’s command label merchandises present important entry barriers ; solidifying it across nutrient. non-food. services ) o Switch overing costs: non a important barrier. even though Loblaw’s trueness plan incl. services may be a factor retaining its current clients if WM enters Canada o Access to distribution: creates a impermanent disadvantage for a big participant like Wal-Mart. but can be important barrier to any smaller/inexperienced new entrant ( Loblaw’s ownership of existent estate assets = & gt ; have taken good locations = & gt ; can move as a barrier for WM ) .
Cost disadvantages independent to scale: short-lasting for Wal-Mart because of its anterior history in retail and high economic effectivity. but may be important for other new entrants o Expected revenge: can be important as the market is saturated. and there are few strong officeholders ( for case. Wal-Mart can anticipate terrible revenge from Loblaw ) O Just FYI – Entry discouraging monetary value: ( This 1 is non from Chaprter2. but instead from Porter’s ( 1980 ) article – see mention below ) Entry discouraging monetary value is non a barrier for Wal-Mart. Wagess of come ining food market market in Canada are lower than in the USA as Canada is a extremely competitory market ; nutrient monetary values are lower = & gt ; borders are smaller ; Loblaw is a hard rival as it is successful in footings of both costs and distinction ) • Power of Buyers – Moderate/High
Even though persons have limited power. we may anticipate that some groups of purchasers are more active/organized. There are many picks ( food market shops and assortment of merchandises ) . and if the monetary value goes excessively high on merchandises purchasers go to another shop ( low shift costs ) . • Power of Suppliers – Moderate
National merchandise providers have power. but there is a figure of providers available ; for a new entrant it will take clip to construct relationships. The larger providers are able to order monetary values and where to place their merchandise in the shop. but the smaller providers are at the clemency of the purchasers. • Competitive Rivalry – High
There are several closely balanced competitors/grocery ironss ; the industry is turning. but the border is low ; fixed costs are high ; comparatively low shift costs ; comparatively high issue barriers = & gt ; all together indicates high competition. • Menace of Substitutes – Moderate
Busy lives = more restaurant/takeout replacements ; farmer’s markets/local farms ; besides competition from other shop formats ( convenience. forte. price reduction ) Is the industry attractive? Based on appraisal of Porter’s 5 forces. and taking into history the general environment. we can reason that the industry in general is non attractive. However. for a big and good established company such as Wal-Mart it can still be reasonably attractive. For Wal-Mart. there is an chance to complement their existing ( non-grocery ) merchandises and/or aim a low-income section of the market ( while many supermarkets target medium-income section ) .
5. Evaluate Loblaw’s rivals ( rival analysis ) . • Sobeys• Metro ( Quebec )• A & A ; P. largely in Ontario ( rule in Toronto )• Canada Safeway• Vegan markets. farmer’s markets. little on-line food market service every bit good ( indirect rivals ) Please note that the followers is merely my sentiment ( non discussed in category ) – you can hold with it or disregard it: All Loblaw’s direct rivals pursue merchandise distinction schemes. They emphasize private trade names. focal point on peculiar sections of the market ( geographic / monetary value / client groups ) . In footings of future aims. Loblaw’s rivals are willing to accommodate to the demands and alterations happening in the market. they monitor each others actions. and seek to retain or better their competitory place.
These companies are good established in the market. they have good relationships with their providers and clients. stable distribution channels. and ability to prolong unfavourable displacements in market conditions ( these are their strengths ) . At the same clip rivals hold perceptibly smaller portions of the market. some of them are concentrated in peculiar parts of the state. and lack national presence/distribution ( these are their failings ) .
Loblaw holds an advantage over its direct rivals in footings of market portion. multi-format attack. and an operational flexibleness provided by Loblaw’s ownership of their shops. Loblaw is maintaining up with the alterations in its competitory environment ; it is financially healthy and therefore is able to maintain seting attempts in increasing the market portion ( per shop ) . and being flexible in supplying a broad assortment of products/services to multiple sections of food market retail industry ( this is the sum-up of Loblaw’s competitory capablenesss ) .
6. Based on external environmental analysis. make you anticipate Wal-Mart to present its Supercenters in Canada? Why or why non?
• Yes:o Same general socio-cultural environment as the US. where Wal-Mart supercenters were really successful + geographical propinquity O Wal-Mart has great engineering. which helps command costs o Wal-Mart expands sharply. including international enlargement O Growth outlooks / force per unit area to turn from the stock market / stockholders • NO:
O Industry is non attractive: low borders and the market is saturated ( many rivals. many shop formats ) . some entry barriers o Wal-Mart’s abroad efforts are non really profitable ( merely 2 for 10 ) O Wal-Mart has a negative image here We had different sentiments on whether Wal-Mart will come in Canada. and bulk of pupils voted for “YES” option.
7. Should Loblaw be afraid of Wal-Mart? What should Loblaw make to fix for the entry of Wal-Mart? • Loblaw should pay attending to WM ( strong rival ) . and be prepared for its entry to Canada. • Loblaw should better their engineering in order to increase operational efficiency / acquire more cost advantages. • Should continue distinguishing. For case. present “supercenter” shop format. spread out their President Choice trade name and utilize its exclusivity to crush out bigger trade names. Loblaw can emphasize the higher quality of its merchandises. Loblaw may see aiming center to high income clients in order to avoid the direct competition in the lower to medium income section. • Expand trueness plan making higher shift costs • Maintain strong fiscal place – that will assist their revenge capacity
Another personal note – non discussed in category: In fact Loblaw has already established some strong entry barriers ( see Q. 4 above ) . In add-on in footings of public presentation Loblaw’s place is equal or sometimes even favourable comparing to Wal-Mart ( for case. gross revenues per sq. foot and gross revenues per employees are better for Loblaw ) .
All together – Loblaw should beef up entry barriers / do Canadian market less attractive ; and seek to neutralize Wal-Mart’s competitory advantages ( for case. present monetary value decreases for broad assortment of merchandises ; increase the shop size ; expand non-food class ; increase cost-efficiencies ) engineering
Porter. M. 1980. “The structural analysis of industries” . Chapter 1 in Competitive Scheme: Techniques for analysing industries and rivals. New york: The Free Press. pp 3-33. IMPROVE COST EFFICIENCY ( usage of engineering. cost decrease )