Management Issues in Loblaw Companies Limited

Loblaw co. ltd is one of the largest food retailer headquartered in Canada. The company was founded in 1919 and currently, it has carved a niche from its presence and operation in over 22 regions under corporate and franchise supermarkets. Loblaw is a constituent company of George Weston Limited- which has a control of 60% of its stock. Both of these companies have been operating in a very competitive grocery market over the years due to stiff competition from other giant companies from North America such as Wal-Mart that have been persistently posing a threat as they expand their operations into the Canadian market. To deal with imminent competition, Loblaw has rolled out a number of healthy anti-competitive strategies in the past. In 2012, for example, the company digitized the operations of its stores- a project which was finalized in 2014.

Loblaw Companies Limited contributes a lot to the Canadian economy. Apart from being one of the highest taxpaying companies in the country, it has also employed over 200 000 employees from Canada. Moreover, it had extended its roles as an ethical organization by undertaking Corporate social responsibilities in the communities where it stores are located. The company’s mission is geared towards meeting and exceeding the needs of the customers in a number of ways ranging from convenient stores and grocery locations to provision of full-service pharmacies and free banking (Moffatt, 2018). This paper is intending to provide a brief analysis of Loblaw company in terms of strengths, opportunities and threats, discuss management issues and provide recommendations in regard to the price-fixing scheme that the company has been accused of being part of.

                                    Analysis of Loblaw Organization’s Environment        

            In term of strength, Loblaw can be said to be the leading Canadian based grocer. It has over 1000 franchised and 500 corporate stores including over 20 banners operating in distinct market regions. By 2010, the company had an estimated sales revenue of $31.0 billion from a market share of just 29.9 %. The market share for Loblaw has however been increasing over the years despite its joint control with George Weston Limited. The company’s assets balance sheet value is slightly above $ 35.11 Canadian dollars. The market share for Loblaw in Canada currently is still large despite massive entrance into the market by other competing firms.

 Since the market size of the grocery business in Canada has been increasing drastically over the years, Loblaw has been presented with a number of opportunities to exploit.  Despite threats from its main competitor- Sobeys and Safeway, Loblaw still has the chance of increasing its market share further by improving the quality of its products and promotion of better customer service relations. If the company does not take precautionary measures, the other competitors such as Walmart, Real Canadian Superstore and Metro can take over its market share slowly over time.

In summary, the following the Strengths, Weaknesses, Opportunities and Threats for Loblaw are:

Strengths

The company prides itself on a strong brand name

It has a big market share where sales are constantly growing

The extra competitive advantage from the president’s choice Bank and loyalty program

Possession of the benefits of large-scale operation

Ability to serve a wide geographical market scope.

Adoption of corporate social responsibility projects which brings it closer to the community

Weaknesses

Weak distribution channel system which leads to breakage of the supplier-buyer relationship caused by delay in delivery of products

The company does not deal with perishable goods an idea which has been taken advantage by the competitors.

It has very few banners slightly more than 20

The customers find it difficult to navigate through their superstore website as there are many confusing details.

The management lacks ethics and has been conflicted with a criminal offence of ‘‘price-fixing scheme’’

The customers suffer from high prices due to increased sales and promotion costs

Opportunities

The management can be reshuffled and a new team brought in to bring in new ideas

The company can commit itself to strategies of innovation, diversification and growth

Make use of its discount incentive to advance cheaper deals for products

Educating the customers on the general merchandise discount pricing incentive

It can enter into a contract with trade unions so as to remove the 20% payment of administrative costs

Financing projects that can grow the business and bring in additional cash flows

Threats

Reduction in the level of reputation due to ‘‘price-fixing scheme’’ scandal

Stiff competition from local and international companies

The market seems to favour foreign investors such as Walmart

Major problems with the worker’s unions (RCI | English, 2018).

Management Issues at Loblaw Co. Ltd

                  The main issue that can be said to be dragging back the good reputation of Loblaw company is poor management practices. The fact that the management of Loblaw first denied involvement in the price-fixing scheme and later on admitting it, is a show of an unethical behaviour on the side of the management (CBC, 2018). Despite the fact that the matter has not yet been proven, the repercussions associated with the mentioning and involvement of it’s in regard to the scandal can be hazardous.

            The genesis of management issues arises when Loblaw admits having being part of a price fixing scheme with other grocery companies. After the company had admitted to have taken part in it, the managers later deny it so as to avoid legal action being taken against them. Ideally, the management should have taken the issue with the utmost care it deserves. The fact that they acknowledged that they had made a mistake, they should have devised ways of preventing it from happening again rather than playing about denial of being involved. To make things worse, the CEO of Loblaw co – Galen G. Weston’s alleges that the price fixing scheme was an overall industry practice (Moffatt, 2018). This shows us that, the company was following up anything that was happening in the industry without taking considerations whether it is lawful or not. A period of 14 years is such long that the company’s management should have sought ways of coming out of the scheme.

Application of Management Principles and Practices to Loblaw co.’s Case

               From a principles of management perspective, a number of management issues from Loblaw’s case can be seen to have been violated. First of all, the company’s management admits to having facilitated a practice that is not only illegal in Canada but also a sort of wrong behavior. In managing such a big company, the management should not have thought of getting involved with that scheme as it would jeopardize its operations in the course of undertaking business (Subba Rao and Pande, 2010). Risks associated with failure to comply with the regulatory laws should have come first in the minds of the managers. This case can therefore be looked at in a number of ways.

Role of the Management in Creation Compliance with Business Ethics

                  Business ethics in management requires that the actions undertaken by the management on behalf of the organisation are aimed at establishing good relationships with all parties. Mangers in any organisation have to follow laws of the market and those of the country regardless of the prevailing circumstances. In an ethical dilemma situation, the management is the sole body that can decide whether to comply or go against ethical concerns when a difficult situation calls for a decision (Broadhurst, 2000). For the case of Loblaw, we can say that an ethical dilemma situation presented itself thereby calling upon the management to choose. It is unfortunate however to realize that the top leadership of the company were fully aware of the involvement of the company in an unethical practice and allowed it to happen.

 It is undoubtedly true that ethics play a very important role in compliance with a company. It is the role of the management to identify and come up with ethical areas that need to be observed by the organization when it is dealing with the customers and other external players (I-sight.com, 2018). Moreover, good management practices require managers to exercise caution in their affairs since the failure or success of the organisation depends on their actions. For there to be a compliance culture, the management has to overlook short-term benefits that may accrue due to undertaking an unethical practice. Loblaw’s and George Weston’s move to fix an unfair price is against ethical considerations of management. The Management in both organisations deserves to face criminal charges because they abused the roles they had been mandated by the shareholders.

               The manager is a champion of risk and compliance according to principles and practice of management in the organization. Although compliance has been accustomed to different opinions by people, a compliance-focused management team is the architect of an ethically compliant organization. Ethics and compliance, therefore, goes hand in hand. For the case of Loblaw, we find the management has failed in their role as compliance and ethics creators. Instead, we see them as the influence of ethical violations in the creation of an uncompliant environment within the organization. The fact they shield the blame for the scandal to employees who have exited the company shows that they have no control over what is taking place within the company.

Quality Control in Management

 Good management practices require managers to have quality control over the organisations they run. Quality control within the organisation has an influence on the relationship between the Company and the external Players. For example, in case an ethical issue arises, the management should relate it very quickly to the various elements of the environment which can affect the reputation of the company. We, therefore, find the steps taken by the management of Loblaw inappropriate and against management practices.

Product quality should be the most important competitive strategy that should be chosen by a company. Managers, therefore, have to work towards ensuring that the organization’s products meet the needs of the customers without having to adjust the prices. The leadership of Loblaw might have avoided the quality control function by trying to meet their financial goals by entering into a scheme of setting unfair prices of bread.

Recommendations for Loblaw co.’s

                Considering that a corporate scandal touching on the management of Loblaw, has already occurred, a number of corrective actions need to be undertaken in a move to bring the situation to normalcy. The first action would be to dismiss all the related parties in management who played a role in the negotiations and dealings of the unethical practice of price-fixing scheme. Doing this is the first step of restoring the confidence of customers because it is a sign that the organization is actually changed. However, if this is not done, the customers will still believe that such a similar practice might happen again in future.

 Secondly, I propose that the company should come up with a formal written code of ethical guidelines that will serve as a controlling measure on practices undertaken by both the management and junior employees. Many multinational organizations that have succeeded in adherence to the generally accepted ethical business behaviour have developed specific ethical codes of ethics to be observed (Weber and Wasieleski, 2012). Areas that should be covered by the ethical codes should touch on the relationship between the company and outside players and also on the payments connection of the customers when it comes to transactions.

 From the recommendations I have made above, I find the idea of the creation of an ethical code of guidelines appropriate. I believe that when employees at every level are motivated to adhere to the codes, the company will succeed in the areas of ethics and compliance. A strong approach should, therefore, be sought by Loblaw Ltd to ensure ethical and compliance issues are integrated from the top management to the lower level employees in the organization. Moreover, training of employees on the importance of ethics and compliance initiatives at work can also bring better results.

             In conjunction with the creation of an ethical code of guidelines, an independent compliance office should also be set by the company. The role of the office should be to ensure that all regulatory laws are followed by the company (Weber and Wasieleski, 2012). This means that law professionals will be hired to fill up the office. The independent office should be headed by a chief compliance officer who will be the person responsible for making any legal dealings on behalf of the company. In case there would be a breach of any laws, the compliance officer should be held personally responsible for it. This recommendation can work well because only a specific person will be referred to whenever compliance issues are being sought.

Conclusion

 To sum up, it is evident that the field of management is usually characterized by a number of challenges that can often lead to criminal prosecution of the managers. As discussed above, the case for Loblaw presents a situation of poor management undertaken by the company’s top leaders. Learning about management has really changed my perception of how management is carried out. Through this case study, I have come to understand the various dynamics that is witnessed in the of management.

References

Broadhurst, A. (2000). Corporations and the Ethics of Social Responsibility: An Emerging Regime of Expansion and Compliance. Business Ethics: A European Review, 9(2), pp.86-98.

CBC. (2018). Loblaw management shakeup puts Galen Weston in charge | CBC News. [online] Available at: http://www.cbc.ca/news/business/loblaw-management-shakeup-puts-galen-weston-in-charge-1.2709817 [Accessed 28 Mar. 2018].

I-sight.com. (2018). Integrating Ethics and Compliance Into an Entire Organization | i-Sight. [online] Available at: https://i-sight.com/resources/integrating-ethics-and-compliance-into-an-entire-organization/ [Accessed 28 Mar. 2018].

Moffatt, L. (2018). An In-Depth Analysis Of Loblaw Companies Ltd. seekingalpha.com.

RCI | English. (2018). Loblaw’s labour problems in Ontario. [online] Available at: http://www.rcinet.ca/en/2015/07/02/loblaws-labour-problems-in-ontario/ [Accessed 28 Mar. 2018].

Subba Rao, P. and Pande, H. (2010). Principles and practice of management. Mumbai [India]: Himalaya Pub. House.

Weber, J. and Wasieleski, D. (2012). Corporate Ethics and Compliance Programs: A Report, Analysis and Critique. Journal of Business Ethics, 112(4), pp.609-626.

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