Case Study Description of Loblaw in Canada's Stagnant Grocery Market
In September 2016, Loblaw Companies Limited (Loblaw), Canada's largest grocery retailer, was facing disappointing financial results, with net income in the previous quarter down 14.6 per cent from 2015. The chairman of Loblaw, needed to evaluate how to move forward in an increasingly competitive industry. With Sobeys Inc. at a close second to Loblaw's market share and with food inflation significantly affecting the prices of produce, the chairman needed to consider how to approach the grocery retail industry using a method that would appease both his frequently price-sensitive consumers and his bottom line. Kelly Whitehead is affiliated with York University.
Swot Analysis of "Loblaw in Canada's Stagnant Grocery Market" written by Ruhama Quadir, Kelly Whitehead includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Loblaw Grocery facing as an external strategic factors. Some of the topics covered in Loblaw in Canada's Stagnant Grocery Market case study are - Strategic Management Strategies, and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Loblaw in Canada's Stagnant Grocery Market casestudy better are - – there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings,
technology disruption, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Loblaw in Canada's Stagnant Grocery Market
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Loblaw in Canada's Stagnant Grocery Market case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Loblaw Grocery, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Loblaw Grocery operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Loblaw in Canada's Stagnant Grocery Market can be done for the following purposes –
1. Strategic planning using facts provided in Loblaw in Canada's Stagnant Grocery Market case study
2. Improving business portfolio management of Loblaw Grocery
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Loblaw Grocery
Strengths Loblaw in Canada's Stagnant Grocery Market | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Loblaw Grocery in Loblaw in Canada's Stagnant Grocery Market Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Loblaw Grocery in the sector have low bargaining power. Loblaw in Canada's Stagnant Grocery Market has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Loblaw Grocery to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Loblaw Grocery is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Ruhama Quadir, Kelly Whitehead can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Successful track record of launching new products
– Loblaw Grocery has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Loblaw Grocery has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Effective Research and Development (R&D)
– Loblaw Grocery has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Loblaw in Canada's Stagnant Grocery Market - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Loblaw Grocery has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
High brand equity
– Loblaw Grocery has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Loblaw Grocery to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Loblaw Grocery in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management
– Loblaw Grocery is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Leadership & Managing People industry
– Loblaw in Canada's Stagnant Grocery Market firm has clearly differentiated products in the market place. This has enabled Loblaw Grocery to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Loblaw Grocery to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Loblaw Grocery are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Highly skilled collaborators
– Loblaw Grocery has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Loblaw in Canada's Stagnant Grocery Market HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Loblaw Grocery is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Loblaw Grocery is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Loblaw in Canada's Stagnant Grocery Market Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Loblaw in Canada's Stagnant Grocery Market | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Loblaw in Canada's Stagnant Grocery Market are -
Aligning sales with marketing
– It come across in the case study Loblaw in Canada's Stagnant Grocery Market that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Loblaw in Canada's Stagnant Grocery Market can leverage the sales team experience to cultivate customer relationships as Loblaw Grocery is planning to shift buying processes online.
Skills based hiring
– The stress on hiring functional specialists at Loblaw Grocery has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Low market penetration in new markets
– Outside its home market of Loblaw Grocery, firm in the HBR case study Loblaw in Canada's Stagnant Grocery Market needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Loblaw in Canada's Stagnant Grocery Market HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Loblaw Grocery has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Loblaw Grocery has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Lack of clear differentiation of Loblaw Grocery products
– To increase the profitability and margins on the products, Loblaw Grocery needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Loblaw in Canada's Stagnant Grocery Market, it seems that the employees of Loblaw Grocery don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Workers concerns about automation
– As automation is fast increasing in the segment, Loblaw Grocery needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Increasing silos among functional specialists
– The organizational structure of Loblaw Grocery is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Loblaw Grocery needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Loblaw Grocery to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Loblaw in Canada's Stagnant Grocery Market, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Loblaw in Canada's Stagnant Grocery Market, in the dynamic environment Loblaw Grocery has struggled to respond to the nimble upstart competition. Loblaw Grocery has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Loblaw in Canada's Stagnant Grocery Market | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Loblaw in Canada's Stagnant Grocery Market are -
Using analytics as competitive advantage
– Loblaw Grocery has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Loblaw in Canada's Stagnant Grocery Market - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Loblaw Grocery to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Loblaw Grocery in the consumer business. Now Loblaw Grocery can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Loblaw Grocery can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Leadership & Managing People segment.
Creating value in data economy
– The success of analytics program of Loblaw Grocery has opened avenues for new revenue streams for the organization in the industry. This can help Loblaw Grocery to build a more holistic ecosystem as suggested in the Loblaw in Canada's Stagnant Grocery Market case study. Loblaw Grocery can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Loblaw Grocery can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Loblaw in Canada's Stagnant Grocery Market, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Loblaw Grocery to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Leveraging digital technologies
– Loblaw Grocery can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Loblaw Grocery can use these opportunities to build new business models that can help the communities that Loblaw Grocery operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Loblaw Grocery to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Loblaw Grocery to hire the very best people irrespective of their geographical location.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Loblaw Grocery can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Loblaw Grocery is facing challenges because of the dominance of functional experts in the organization. Loblaw in Canada's Stagnant Grocery Market case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Manufacturing automation
– Loblaw Grocery can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Low interest rates
– Even though inflation is raising its head in most developed economies, Loblaw Grocery can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Threats Loblaw in Canada's Stagnant Grocery Market External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Loblaw in Canada's Stagnant Grocery Market are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Loblaw Grocery.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Loblaw Grocery in the Leadership & Managing People sector and impact the bottomline of the organization.
Environmental challenges
– Loblaw Grocery needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Loblaw Grocery can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Shortening product life cycle
– it is one of the major threat that Loblaw Grocery is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Loblaw Grocery high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing wage structure of Loblaw Grocery
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Loblaw Grocery.
Technology acceleration in Forth Industrial Revolution
– Loblaw Grocery has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Loblaw Grocery needs to keep up with the evolution of technology in the Leadership & Managing People sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Loblaw Grocery will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Loblaw Grocery in the Leadership & Managing People industry. The Leadership & Managing People industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Loblaw Grocery business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Loblaw Grocery can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Loblaw in Canada's Stagnant Grocery Market .
Weighted SWOT Analysis of Loblaw in Canada's Stagnant Grocery Market Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Loblaw in Canada's Stagnant Grocery Market needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Loblaw in Canada's Stagnant Grocery Market is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Loblaw in Canada's Stagnant Grocery Market is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Loblaw in Canada's Stagnant Grocery Market is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Loblaw Grocery needs to make to build a sustainable competitive advantage.