Corporate Research Paper example PDF

Preview

Summary

Corporate Research Paper example...

Description

Prepared for: Douglas Kennedy Business & Its Environments (ECON 3340) Section O02 JR Shaw School of Business Northern Alberta Institute of Technology April 09, 2018

LOBLAW COMPANIES LIMITED INTEGRATED STRATEGIES IN BRECKON V. LOBLAW COURT CASE

Table of Contents INTRODUCTION......................................................................................................................................2 BACKGROUND........................................................................................................................................2 NON-MARKET ENVIRONMENT...............................................................................................................3 ISSUES.......................................................................................................................................................3 INTERESTS..................................................................................................................................................4 INSTITUTIONS..............................................................................................................................................5 INFORMATION.............................................................................................................................................6 INTEGRATED STRATEGY..........................................................................................................................7 CONCLUSION & RECOMMENDATIONS....................................................................................................9 REFERENCES.........................................................................................................................................11

1

Introduction Loblaw Companies Limited is Canada’s food and pharmacy leader, the nation’s largest retailer, and the majority unitholder of Choice Properties Real Estate Investment Trust. (George Weston Ltd., n.d.). Loblaw provides Canadians with grocery, pharmacy, health and beauty, apparel, general merchandise, banking, and wireless mobile products and services (George Weston Ltd., n.d.). There are more than 2,300 corporate, franchised and Associateowned locations, Loblaw, its franchisees, and Associate-owners employ approximately 192,000 full- and part-time employees, making it one of Canada’s largest private sector employers (George Weston Ltd., n.d.).

Background Initially known as Loblaw Grocerterias Co. Ltd., Loblaw opened its first “groceterias” – self-serve and cash and carry store over a century ago in Toronto back in 1919. Within 10 years, they had expanded their business chain owning more than 70 stores in Ontario alone (Loblaw Companies Ltd., n.d.). Loblaw continued its expansion and opened its first US store in New York, forming an American headquarters in Buffalo in 1924 (Loblaw Companies Ltd., n.d.). By the 1950’s W. Garfield Weston president of George Weston Ltd. gained controlling interest of Loblaw Groceterias Co. Ltd. after he acquired 100,000 shares from the company co-founder. In 1956, Loblaw Companies Ltd. became incorporated and acquired Loblaw Groceterias Co. Ltd. in Ontario, Loblaw Inc. in the United States and took the major stake in a large American grocery store chain called National Tea; and goes on to become one of Canada’s largest private sector employers (Loblaw Companies Ltd., n.d.). Today, Loblaw Company Ltd., has a vast number of corporate and independently-operated stores across Canada such as Loblaw, Shoppers

2

Drug Mart, Joe Fresh, Real Canadian Superstore, No Frills, T&T, Wholesale Club; just to name a few.

Non-Market Environment For a firm to be successful, it is imperative that it must be able to operate effectively and efficiently manage its market environment. However, according to Baron (2013), that is not sufficient as the success of the firm also depends on its non-market environment. It is therefore management’s responsibility to formulate and implement non-market as well market strategies. Due to the scope of this paper, I will focus on the lawsuit between Irene Breckon v. Loblaw. The following sections of the paper would explore the issue, interests, institutions and information in relation to the court cases between Irene Breckon v. Loblaw.

Issues Baron (2013), states that “issues are the basic unit of analysis and the focus of nonmarket action.” In December, 2017 Loblaw Companies Ltd. issued a press release admitting to its participation in an anti-competitive, industry-wide, bread price-fixing scheme from late 2001 to March 2015 (Loblaw Companies Limited, 2017). The participants regularly increased prices of bread on a coordinated basis (Loblaw Companies Limited, 2017). Loblaw received immunity from criminal charges and penalties because of its admission to the competition watchdog – The Competition Bureau Canada. (Sagan, 2017). However, this exposed Loblaw Companies Ltd. to several class action litigations across Canada. On December 21, 2017, two days after Loblaw’s press release, the president of the Anti-Poverty Coalition in Ontario, Irene Breckon, filed a statement of claim to the Superior Court of Justice Ontario seeking 1 billion dollars in damages on behalf of all Canadians who were victims of the alleged price fixing scandal (Sotos LLP, 3

2017). According to the Competition Bureau, Loblaw’s actions goes against the Competition Act, as the Act prohibits agreements that “prevent or unduly lessen competition or to unreasonably enhance the price of a product” (Competition Bureau Canada, n.d.). Additionally, the actions led to an increase in the price of bread which means that customers of Loblaw were over paying for a necessity for 14 years. This caused customers to be angry as the news destroyed trust between Loblaw and its customers. Even though Loblaw offered gift cards, Breckon asserted that the cards doesn’t compensate for the money she and other people had lost overtime; “…$25, that’s nothing! Compared to what they’ve overcharged me for 14 years” (Bajaj, 2017). Therefore, Breckon believes that the lawsuit in addition to those gift cards would able to compensate consumers for their losses.

Interests “Interests are individuals and groups with preferences for or a stake in a particular issue” (Baron, 2013). The main individuals that has interests in this class action lawsuit are Irene Breckon, Loblaw Companies Ltd and the customers of Loblaw Companies Ltd. who were victims of the bread price-fixing scheme.

Anti-Poverty activist, Irene Breckon, the lead plaintiff in the civil claim is an interest as she is the one who initially filed the claim against Loblaw and the other companies. Irene is seeking compensation from Loblaw for the excessive amount of money that has been swindled from customers for the last 14 years. The compensation being claimed, should there be a favorable outcome, is a substantial amount of 1 billion dollars.

The second interest Loblaw Companies Ltd. is an interest because of the role it played in the issue. Loblaw Companies Ltd. and its shareholders will be greatly affected financially as

4

they stand to lose a significant amount if the outcome of the lawsuit is successful. In addition to the class action lawsuit filed by Irene Breckon, Loblaw Companies Ltd. is faced with several other class action litigations around Canada at least in 6 other jurisdictions (Breckon v. Loblaw, 2018, para. 28). This could result in Loblaw Companies Ltd losing an extremely colossal figure to be paid in damages to the plaintiffs. The amount set aside for these possible payouts and other compensations significantly affected Loblaw’s fourth quarter profits and subsequently its shareholders’ income (Ref) Finally, the last interest in this civil claim is the customers who were victims of the bread price-fixing issue. The customers lost a lot over the 14 years that Loblaw Companies Ltd. and the other companies over charged for bread. Breckon stated that she’s filed the civil on behalf of all Canadians who purchased bread beginning in January 2001 at the grocery chain's stores (Bajaj, 2017). Additionally, the law-firm in the Action, has “included the claims of “umbrellapurchasers” of packaged bread; these are the purchasers who did not purchase directly or indirectly from the defendants - Loblaw in this case – but indirectly from upstream nondefendants and who allegedly incurred higher prices than otherwise due to the market effects of the defendants’ price fixing” (Breckon v. Loblaw, 2018, para. 44).

Institutions Scott (2001) asserts that institutions as multifaceted, durable social structures, are composed of regulative, normative and cultural-cognitive elements that guide behavior and provides stability and meaning to life. “Institutions provide arenas in which interests seek to influence the outcomes on issues” (Baron, 2013, p.4). The institution involved in this case is the Ontario Superior Court of Justice. The Superior Court of Justice has jurisdictions over civil, criminal and family cases in Canada (Ontario Superior Court of Justice, n.d.). Another

5

institution that has influence in the outcome of the case is the Competition Bureau – a federal institution and an independent law enforcement agency that ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace (Competition Bureau, n.d.). The competition is the agency who initiated investigation on this issue back in 2017. Media outlets such as Loblaw official media website (http://media.loblaw.ca/English/media-centre/) was used to communicate information to the public.

Information “Information refers to what interests and institutional officeholders know about an issue…” (Baron, 2013, p.10). According to a press release issued by Loblaw on their corporate website, the Companies' disclosure at this time is limited to their knowledge of the Competition Bureau's investigation, in which they have been cooperating as an immunity applicant since March 2015 (Loblaw Companies Limited, 2017). This means that information relating to this case is not made public until the Competition Bureau has concluded findings from its investigation. This limited information causes media and other interests to speculate and form their opinions on the issue putting Loblaw into a more negative spotlight. The interests and institutional officeholders have knowledge about the allegations of the industry-wide bread pricefixing. However, because the other defendants such as Walmart and Sobeys has not admitted to the allegations, interests and institutional holders are only aware of Loblaw’s participation as they acknowledged their role in the scheme. They must anticipate information about the other possible defendants in the case. Until then, due to limited information given by the Competition Bureau and the privacy of details in this case, Loblaw would continue to be the only company that is greatly affected financially by large civil claims.

6

Integrated Strategy “In interacting with the public or with stakeholders, it is useful to begin with caution. The public trust in large firms is low, and criticisms of business are often viewed with a degree of credibility that is not accorded to the communication by firms” (Baron, 2013, p.557). Loblaw Companies Ltd. widened the trust gap by partaking in the industry-wide bread price-fixing scheme and thus it is imperative to implement an integrated strategy to address its non-market issue. A business strategy must be congruent with the capabilities of a firm and the characteristics of both its market and non-market environment (Baron, 2013, p.46). Baron (2013) also mentioned that a business strategy, just like its environment, has both market and non-market components and these components must be integrated. “Media strategies guide interactions with the media and communications with stakeholders and the public (Baron, 2013, p.63). George Weston, CEO of Loblaw, educated the media and the public about the issue in its non-market environment by issuing a press release. Loblaw used it corporate media website to issue the release and according to Baron (2013), this results in stories being more accurate and balanced. On the corporate media website, the CEO clearly listed the strategies that the company would take to address the issue once he learned about the company’s involvement in this anticompetition action. “To the extent that it can anticipate an issue, a firm is better positioned if it has laid the groundwork to deal effectively with the issue as it progresses through its life cycle” (Baron, 2013, p.65). George Weston notified the Competition Bureau back in 2015 upon discovering the issue and fully cooperated with the Bureau so that it may receive immunity and lessen the consequences to the firm. The company also stated that it discharged any employees that were responsible for the company’s role in the arrangement (Loblaw Companies Limited, 2017).

7

Another strategy that was implemented by Loblaw Companies Ltd. is offering customers a $25 Loblaw card, that can be used to purchase items in Loblaw grocery stores across Canada (Loblaw Companies Limited, 2017). “Regulation is also used to accomplish fairness goals” (Baron, 2013, p.277). “Any conception of the social responsibility of business must include compliance with just laws” (Baron, 2013, p.563). Loblaw Companies Ltd. “have significantly enhanced their compliance programs with measures that are both industry-leading and go further than the Competition Bureau's own requirements” (Loblaw Companies Limited, 2017). Loblaw also stated in its press release that the Companies established a new independent compliance office, led by a Chief Compliance Officer, to oversee implementation of enterprise-wide policies required to ensure world-class competition law compliance (Loblaw Companies Limited, 2017). Additionally, all sales and marketing personnel at Weston Bakeries, all merchants and store managers at Loblaw and senior leaders at each of Loblaw have undergone intensive compliance re-training and certification, with ongoing updates and monitoring. Lastly, the CEO stated that “The Companies are the first in Canada to commit to, and begin implementation of, ISO 19600 for competition compliance program certification, which will provide independent, third-party validation against world-class standards” (Loblaw Companies Limited, 2017). Therefore, Loblaw Companies Ltd. market strategy is to reposition itself as a company that upholds compliance of the law as a priority of the firm thus increasing the firm’s corporate social responsibility and enhancing its competitive advantage in the market. Loblaw also strategically positioned itself in the space of public sentiment as an “industry leader” with regards to compliance.

8

Conclusion & Recommendations In conclusion, even though Loblaw has taken actions to admit its role in the industrywide price fixing scheme, it is still under intense criticism by Canadians and the media as they feel cheated. There has not been an outcome in the litigation between Breckon v. Loblaw but there are many other cases underway against Loblaw anti-competitive behavior. The step to compensate the customers through the issuance of a $25-dollar gift-card is highly disparaged as they are of the view that they have lost thousands over the years by purchasing bread through Loblaw grocery stores. Moreover, Loblaw should strengthen its position in the market and nonmarket not just as a leader in compliance but one whose priority is enhancing its overall corporate social responsibility. Loblaw initially, operated partially under Friedman’s view of corporate social responsibility that asserts that firms conduct business in accordance with owner’s desires, which is generally to make as much money as possible. However, they did not conform to the basic rules of society. Loblaw can adopt the Business Roundtable view of corporate social responsibility which affirms that business is to “serve the public interest as well as private profit” (Baron, 2013, p.566). The Business Roundtable “identified seven constituencies: customers, employees, financiers, suppliers, communities, society at large and shareholders. Responsibility to all these constituencies in total constitutes responsibility to society, making the corporation both an economically and socially viable entity” (Baron, 2013, p.566). Additionally, Loblaw Companies Ltd. should increase it corporate governance through increase social accountability. The company can implement compliance audits on a quarterly basis and publish public reports about its findings. These compliance audits would help to correct any deficiencies and keep public accountability as priority for Loblaw Companies Ltd.

9

By incorporating these recommendations, Loblaw can avoid non-market issues like Breckon v. Loblaw and the other class action suits against them.

10

References Bajaj, A. (2017, December 24). Irene Breckon files $1 billion class-action lawsuit against Loblaw Companies Ltd. Retrieved from https://www.canadian-media.com/law Baron, D. P. (2013). Business and its environment. Boston: Pearson. Competition Bureau Canada. (n.d.). Competition Bureau Canada - Home. Retrieved from http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/home David v. Loblaw; Breckon v. Loblaw, No. ONSC 1298 slip op. at Https://www.canlii.org/en/on/onsc/doc/2018/2018onsc1298/2018onsc1298.html?autocompleteStr=CV17-00005494-00CP&autocompletePos=1 (Ontario Superior Court of Justice March 01, 2018). George Weston Ltd. (n.d.). Loblaw Companies Limited. Retrieved from http://www.weston.ca/en/LoblawCompanies-Ltd.aspx Loblaw Companies Limited. (n.d.). History. Retrieved from http://www.loblaw.ca/en/about-us/history.html Loblaw Companies Limited. (2017, December 19). Press Release Details. Retrieved from http://media.loblaw.ca/English/media-centre/press-releases/default.aspx Ontario Superior Court of Justice. (n.d.). Home. Retrieved from http://www.ontariocourts.ca/scj/. Sagan, A. (2017, December 20). Loblaw gets immunity after alerting watchdog to decade-long bread pricefixing scheme. Retrieved from http://business.financialpost.com/news/retail-marketing/newsalert-loblawparent-company-alerted-competition-watchdog-to-bread-price-fixing-3 Scott, W. R. (2001). Institutions and Organizations. Retrieved from https://books.google.ca/books/about/Institutions_and_Organizations.html?id=kpDUHoaNhqYC Sotos LLP. (2017). Statement of Claim. Retrieved from https://www.sotosllp.com/wpcontent/uploads/2017/12/Statement-of-Claim.pdf

11...