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Key Topics
Requirement
Lidl Super Stores-Strategic International Business Management
Solution
Introduction
The current paper is focused on understanding the international market expansion strategy of Lidl. Three countries have been analyzed for the company and the suitable one has been suggested. The analysis of the countries was done using PESTLE Analysis (see Appendix). Canada is selected as the country for investment. Lidl is a discount supermarket from Germany which has more than 10,000 stores in Europe (Geppert et al, 2015). The company was established in 1930 by Dieter Schwarz. A brief analysis of strengths, weaknesses, opportunities, and threats has been conducted. In the end, various modes of entries into the international markets are assessed and a suitable one is suggested.
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Rationale behind Selection of Chosen Market
Based on the brief PESTLE Analysis, it has been decided that the Canada is the right country for the company. The detail PESTLE Analysis of the Canada tries to understand the benefits that can be gained by the company. In end a summary has been given based on the analysis.
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Political Factor: The political situation of the country is stable. The country is currently headed by a democratic government and there are less likely that any major change is going to take place in coming few years in the political situation of the country (Lightbody, 2006). The stability in the policies designed by the government can also be witnessed. Most of the policies have been developed not to disengage the interest of the businesses within the country.
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Economic Factor
The inflation level of the country has been in control to some extent and provides enough disposable income to the customer that they can invest on various products. However, due to the recent economic changes at the global level has made people more cautious and therefore in such cases products with lower budget can be preferred (Burnett & Newman, 2014). The reason can be the orientation of the people to save some money for the difficult times. -
Social Aspect: The society of Canada is open to the people and companies coming from abroad. Within Canada, the sense of belongingness among the people is strong and they actively take part in various civil and community related activities. Moreover, one can witness most of the Canadian people volunteering for various activities that are oriented towards the whole society (Novak, 2013). There exists strong family relationship among them. The social safety net within the country provides equal opportunity for the well-being of all everyone living within the country. Such social aspect added with the economic consideration can be the right place for Lidl as more shopping activities can be witnessed.
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Technological Aspect: Technological advancements can be witnessed within every aspect of life of Canada, whether it is everyday lives of the individuals, mining activities, use of mobile technology, or the use of technologies in Agriculture (Infiniti & Manual, 2013). If the data is to be taken into consideration, in the year 2011, 2,69,60,000 people were using the internet which is about 80 percent of the total population. Such wide reach within a country is a feat rarely achieved around the world. Companies such as Lidl will get great opportunity in directly connecting with its customers.
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Legal Aspect: There are no major hurdles as per the legal procedures are concerned. The ease of doing business ranking of 13 shows the minimal roadblock in terms of rules and regulations. The only thing is that the companies have to follow the usual employment policies, operating policies, environmental, and other such policies to operate seamlessly (Griffin and Pustay, 2012).
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Environmental Aspect: The most part of the country is non-agricultural and only few percentage of land is used within the country for agriculture. The limited production is enough due to the limited population size. Unlike United States, Canada is dimly populated. The government is concerned about the environment and it is mandatory for the companies operating in the country that they follow such rules.
Summary
Overall it can be said that the external factors of Canada is appreciable enough to allow Lidl to operate in this country. There seem no major political or legal hurdles that can act as a road block in starting the business. Moreover, the current economic conditions in US and around the world are likely to orient Canadian population towards the discount stores like Lidl.
Opportunities and Threats
This section is concerned with understanding the various aspects that contribute to the opportunities and threats to Lidl. The Porter’s five forces have been considered for the analysis.
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Bargaining Power of Supplier: The bargaining power of supplier is strong as there other store chains who are willing to give good price (Fernie & Sparks, 2014). Therefore, it is important for Lidl that it builds good relationship with the suppliers to ensure that it maintains the promise of discounts to the customers.
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Bargaining Power of Buyers: The number of buyers within the firm is huge and the company is likely to have less influence on the purchase decisions of the customers even in the longer run. However, it cannot be said for sure that the longer run will be challenging for the company if right strategy is taken into consideration (Celuch et al, 2015). The presence of numerous stores within the country provides customers enough opportunities to switch from one company to another to make the purchase. The reason is that there is less to zero switching costs associated with that and the customers can choose from the wide options. The purchase within this industry is relatively small and all the consumers are either from households or individuals who engage in purchasing products for their own use. Therefore, there are less opportunity for companies such as Lidl who can struck any mega deals.
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Threat of New Entrants: The threat of new entrants within the industry is high as the cost of entry, which is the major driver, is very low (Lusch et al, 2015). Anyone who have minimum amount necessary for opening the retail stores can open at any nook and corner of the city and engage in selling the same product that are sold by Lidl and other such companies. Moreover, the impact of brand development is limited in this sector. The customers easily switch among the stores. Building a brand when being a new entrant is likely to be challenging but can be handled easily with good amount of investment in the promotional activities and persisting in the market for few years.
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Threat of Substitute Products: The threat of substitute products within this industry is at moderate level. There are various other companies with various offers on the table that keep attracting the customers to them. The right shopping environment and discounts can attract more customers (Swoboda et al, 2015). Lidl being a discount store, has the capability to attract the customers to its stores.
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Competitive Rivalry: The competitive rivalry in Canada is strong amid store chains such as Jim Pattison Group, Overwaitea Food Group, Loblaw Companies, and others. The Canadian market has companies of different shapes and sizes that can compete against Lidl very strongly. The nature of retail firms with the market is aggressive. The company can experience strong challenge in operating in the initial few months. Moreover, the company has to continuously keep eyes on its competitors to know their moves and keep influencing the population with the various promotional strategies. One of the important aspects is that as there exists few good companies in the Canada market already, therefore, it is expected to take more time for the Lidl to gain the faith of the customers.
Summary
Based on this analysis it can be stated, that there is more likely that the company will face tough times in the initial days of its business in the country. However, with little persistence and with the right marketing effort, things can be favorable for Lidl. Moreover, it can be stated that the ability to provide appreciable discounts on its products, the company has enough opportunity to cater to the Canadian population and attract them to the stores.
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Strengths and Weaknesses: This section is concerned with understanding the strengths and weaknesses of Lidl on various parameters. There are various internal aspects within the country that help the companies sustain in the market. Mentioned below are those aspects of Lidl while understanding which is strength and which one is weakness.
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Resources: The company has good amount of human resource and they are comfortably working with the company. The human resources within the company are the major asset of Lidl as the entire store activities and effective functioning depend on them (Skippari et al, 2014). The company has ensured that it hire and nurture the right talent within the company which is one of the strengths of the company.
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Core Competencies: The ability of the company to provide appreciable level discounts can be considered as the major core competency. The company has been able to procure at the right price from the suppliers and sell them at the right price within the stores (Krzy?anowska & Tkaczyk, 2015). The prices can be witnessed to be generally lower in price than the competitors and that is the reason why customers in European Union prefer to flock towards Lidl. This can also be counted in the strengths of the company.
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Organizational Technology: The company uses state of the art technology. All the billings are done through integrated billing system. Moreover, the company engages in automated inventory management technology. Through this technology, the suppliers are integrated with the store inventory and they are allowed to manage the stocks. The constant updates of the stock levels at the stores to the suppliers ensure that the stores do not fall short of products.
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Capabilities: The company has knowledgeable individuals at the shore and they are able enough to utilize the information from the market to convert those into useful information (Stensson et al, 2015). Moreover, due to the experience of more than half a century, the company has gained enough understanding about the market which acts as the strongest point.
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Functional Areas: The functional areas of the company are working properly and there minor challenges that do not require major concern from the company head (G). Though all the functional areas are working effectively, one of the concerns is the lack of coordination which sometimes bring challenge with the management of more than 10,000 stores.
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Organizational Culture: The organizational culture of the appreciable and one has enough autonomy to take decisions within the company as far as it does not impact the reputation of the company. The type of organizational culture of Lidl can be guessed from its ability to stand the tide of time for more than eighty years and crossed more than 10,000 stores and still growing. The individuals within the organization are encouraged to share ideas and information that can help the company grow further. It looks like large family spread across the countries.
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Value Chain Activities: The value chain of the company is able to provide the right value to the customers with effective integration of suppliers, buyers, and other functional areas such as marketing, human resources, and others. All these areas collectively work towards providing more than what customers want from Lidl.
Summary
Based on the analysis of these factors, it can be stated that the company has enough strength to move ahead in the competitive market of Canada and gain some appreciable position.
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Evaluating Various Modes of Entry: This section is concerned with analyzing the various modes of entry into the Canadian market and the suitable one has been suggested for Lidl in the end. As it is super store chain, therefore, the entire consideration will be in this respect.
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Direct Exporting: Through this approach the company will be directly engaging itself with the customers, suppliers and other form of stakeholders to conduct the business. This method requires the company to have appreciable knowledge of the market and people prior to engaging in any sort of communication as it might disrupt the relationship before it begins (Parker and Van Praag, 2012). Lidl has no prior experience of Canada so this method would not be suggestible as one mistake due to limited market information may impact the strategic decisions of the company. Moreover, the exporting activity cannot be suitable option for a super store business. Space and people are required in this.
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Indirect Exporting: The indirect exporting requires placing an intermediary exporter in the middle to export the goods from one country to another. However, as Lidl is a super store and it does not engage in production and instead it caters to the end consumers, therefore the company has to be in front of the customers instead of using indirect exporters.
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Licensing: Licensing refers to the process when the companies engage in licensing the intellectual properties such as technology, the way of working, name of the brand, and others to the external party to use and operate their own business (Speckbacher et al, 2015). It is not sure how the brand of the company will be used on the unknown land; therefore, this method cannot be stated as a suitable strategy for Lidl.
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Franchising: Franchising can be stated as the extension of Licensing. In this the company, along with the brand names, also provides the strategy to brand the company name, concepts, expertise, and almost all the aspects that are imperative for the successful operation of the business in the international market (Kacker et al, 2016). This method can be accepted by Lidl. The reason is that the company can give franchise to someone who is aware of the Canadian market and is willing to take the brand ahead.
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Wholly Owned Subsidiaries: The company can acquire any existing store chain within the Canadian market. However, it is less likely that the decision for such an extensive investment will pay off in the longer. On the contrary, if this mode is accepted, then the company will have opportunity to own local expertise in the form of acquired market which can be used to gain influence in the market.
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Joint Venture: Joint Venture with another company can be a viable opportunity but there is less likely that the company will be able to find someone with the willingness to venture with it. However, one thing can be stated that any store willing to increase its strength by being in a venture will prefer this offer. This move by Lidl might discourage the ability to build individual brand in the market.
Recommended Mode of Entry
Based on the analysis of the various modes of entry for Lidl, it can be stated that the Franchise can be the best option for Lidl. The reason behind this is that the company does not even have to invest major capital into the country and with limited sharing of expertise, brand knowledge and selection of right spirited individual, can get the job done of bringing the brand in front of the customers. When the brand gets developed enough, then the company can engage in other forms of merger, acquisition or other forms of strategies.
Conclusion
In the end, it can be stated that Lidl has some opportunity in the Canadian market and based on the strengths and opportunities available with the company and in the market respectively, the company can move ahead with the decision of entering into the market. However, initially franchising has been suggested due to less risk involved in this format regarding cost and human resource.
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