Strategic Direction for Lidl's Growth in Thailand

This report discusses the strategic direction for Lidl's growth in Thailand, including the impact of external and internal factors on the organization. It explores the challenges faced by Lidl and provides strategies for establishing a successful business in Thailand.

Strategic direction for
Lidl's growth in
Thailand

EXECUTIVE SUMMARY
Strategic management is an important part of the organisation for expanding it's market
share an profit. Before entering into foreign markets, it is essential for companies to conduct
internal as well as external analysis. In this report, there is discussion on impact of external and
internal factors on Lidl organisation.

Table of Contents
EXECUTIVE SUMMARY ............................................................................................................2
INTRODUCTION ..........................................................................................................................4
Background of the company ......................................................................................................4
key challenges faced by the company ........................................................................................4
External environmental analysis ................................................................................................5
PESTEL analysis ........................................................................................................................5
Porters Five Forces Model .........................................................................................................7
Internal environmental analysis ...............................................................................................10
VRIO analysis ..........................................................................................................................10
Identification of competitive strategies ....................................................................................11
Porter's Generic strategies ........................................................................................................11
Methods of expansion ..............................................................................................................12
CONCLUSION .............................................................................................................................13
REFERENCES .............................................................................................................................14

INTRODUCTION
Strategic management is defined as the planning, analysis, monitoring and assessing
necessary requirements of meeting organisational goals and objectives. The various change in
business environment needs to assess strategies for the organisation for achieving success. The
strategic management is helpful in analysing stock of present situation and develop strategies for
analysing the implemented strategies. The present report is based on Lidl organisation. This is a
German global discount supermarket chain that is located in Neckarsulm, Germany. This is
operating in around 10,000 stores across United states and Europe. This company is deciding to
expand it's market share and start business in Thailand. For doing successful business, it is
important for this company to evaluate the internal as well as external factors that affects
business.
Background of the company
Lidl is a German global discount supermarket chain that is based in Neckarsulm,
Germany. IT is operates approximately 10,000 stores across United States and Europe. This
company belongs to Dieter Shwarz who is the owner of store chains Handelshof and
hypermarket Kaufland. This is competitors of various other supermarket chains like Aldi. This
company was started by Josef Schwarz in the year 1930. he decided to offer attractive discounts
to people in food wholesaler ((Ansoff, 2018)). Lidl is the fifth largest retailer of the world and it
earns approximately $82.4 billion. The distribution centres of this company are situated in
Mebane, North Carolina, and Spotsylvania, Virginia. This company is having zero waste
approach of displaying products in delivery cartons. This supermarket focuses on marketing and
public relations and providing employee benefit.
key challenges faced by the company
There are various challenges that this company has to face while entering into other
countries. In context of this case, Lidl wants to expand it's market in Thailand. It has to face
various challenges while establishing good position in this Asian market. Some of these are
listed below -
Unfamiliar cultures – The most important thing that affects functioning and operations
of a company in other country is culture difference. Lidl must ensure that it is adopting right way

in interacting with other social setting. Overcoming cultural challenge is key for Lidl to establish
successful business in Thailand.
Organisational communication- Communication Is a way by which a company can
represent itself and every country has its way of communicating to the people. The main
challenge faced by Lidl is to know how to communicate with the people of Thailand. The mode
by which team members communicate have a big impact on success of business into
international markets. Effective communication is required to carry out the activities and
manage employees in Thailand that can lead to easy market expansion.
Tariffs and Export fees - Every country has some export fees that is charged to transfer
of goods to other country. Lidl have also pay some tariff fees in order to bring goods in Thailand.
An organisation have to know about these charges so that they can include it into financial
planning.
Mastering marketing - This is another important aspect which is helpful for companies
in maximising profits at initial stages. This company has to make strong and effective marketing
strategies for meeting desired needs of customers of Thailand region.
External environmental analysis
PESTEL analysis
This is defined as an analysis which is helpful to evaluate market and know how the
company has to behave in order to do successful business. PESTLE is also good for conducting
effective market research about the company. This analysis will be providing a detailed
information about Lidl organisation. External analysis is very important to be done for
companies to understand implications of such plans on decision making of company. This tool is
helpful as it develops understanding of overall impact of macro environment on functions of the
company in Thailand. The external analysis of Lidl are mentioned below -

 Political:- The political factors are an important factor which is analysed by each and
every country before starting business in that country. The rules and regulations adopted
by different countries affects business operations of the company. This is important for
Lidl to analyse the political factors that affect supermarket retail sector in Thailand. As
Lidl is planning to enter Asian market, there they have to face lot of complexities. Huge
part of this company is present in the European market and political instability present
there is going to effect supply chain activities of Lidl.
 Economic:- This is essential for companies to expand and establish business in different
countries that have growing economies. Recession is the biggest problem that is faced by
companies while operating in countries which have this kind of problem. Due to
recession situation, companies have problem in sales and their profits. There is drop in
growth and sales of the company. This kind of situation is managed by adopting new

strategies. The management of price of product must be done properly. Companies must
enter countries having good opportunities for employment.
 Social:- Social factors affects business operations in an positive or negative manner. The
preferences and choices of people change with time. It is not easy for companies to
provide products to people which can achieve all needs and demands of people. Every
country has its own culture and people living their actually affect company's sales
(Baumgartner and Rauter, 2017). Lidl organisation has successfully analysed needs of
products provided in supermarket.
 Technological:-Lidl organisation is focussing on providing a different and unique
experience to their customers. (Morden, 2016). Cognitive intelligence and artificial
intelligence are two factors which Lidl organisation is planning to adopt in their
operations to provide better experience to their customers.
 Environmental factor:- Sustaining in the market for long term is very important for all
companies. This is tool which will help them in reducing their cost which will help Lidl
organisation in maintaining their overall profit margin and at same time offering of
products at reasonable prices.
 Legal: Legal regulations always can be a threat for companies as this is a factor which is
related to compliance of various legal regulations being imposed on companies. In case
of Lidl organisations also, company is affected by various laws which can be labour laws,
employee related laws and many others. There are many serious issues which are
furniture causing death of people. This is leading to a very negative image of company
and their reputation is deteriorating in the market. This affects the company's reputation
which can be threat for long run operations in market.
Porters Five Forces Model
Porters five forces is a technique used to analyse the competition in the market of an
organisation (Bryce, 2017) . The forces include threat of new entry, threat of substitute,
bargaining power of buyers and suppliers and rivalry. In context to Lidl, the manager uses
porters five method in order to understand competitive advantage with in the market which are as
follows:

Threat of New Entrants : Lidl is a supermarket retail chain so it is difficult for the
company to achieve economies of scale. To enter in this type of market, companies require high
investment and needs high R& D cost . The company focus on creation and innovation of new
products so that new entrants is not easily compete with them. In addition to this, Lidl invest in
marketing activities to retain customers for a longer period and stop customers to switch to other
brands.
Threat of substitutes: Lidl have few substitute for the products in the market. The
substitute that is available sell their products at high cost as compare to Lidl. Lidl offers good
quality of products at lower price so they can attract large number of customers and gain
competitive edge in the market (Frynas and Mellahi, 2015) . in addition to this, Lidl focuses on
producing those products which are unique for the customers and fulfil there needs so that they
cannot be easily shift to substitute products.
Bargaining power of suppliers: There are large number of suppliers in retail
supermarkets so they have little control on prices. Lidl borrow raw materials from suppliers at
low price and if suppliers charge high price they can easily shift to other suppliers who provided
raw materials at low cost. Suppliers bargaining power is low in this market as buyer have the
option to shift with other suppliers. Lidl maintain a good relationship with those suppliers who
give more benefit to the company that leads to low production cost and high profits.
Bargaining power of buyers: The bargaining power of buyers is low as there are few
firms that offer the same product. There are less substitute product in the market that makes
buyers to no control on the prices that is charge by Lidl. The company attract high number of
customers by offering differentiated product in the marketplace. The buyers in these industry is
price sensitive as they want quality products and are frequent buyers.

Rivalry among Existing Firms: The competitors of Lidl is very less in the market. The
growth of this industry in the market is positive that means Lidl have good market share and
good enough to compete with its competitors (Hanson, 2016) . The products that manufacture in
this industry is unique as it is difficult for competitors to reach to that level. The exit barriers is
high in this industry due to government rules and regulations. The company focuses in gaining
new customers rather then old ones and conduct market survey in order to meet demand and
supply.
From the above study it has been analysed that company have a good market share and
reputation in the market. To compete with its competitors such as Walmart, Waitrose the
company needs a strong strategy to establish successful business market in Thailand that leads to
increase in profits and gain competitive edge in the market.
Internal environmental analysis
VRIO analysis
VRIO framework is used by organisations for evaluating weakness and strength of the
company. This is defined as laid framework that is used for evaluating four major concepts that
includes value, rarity, inimitable and organization. The four main resources that Lidl has are
human resource, global presence, differentiation strategy and cost strategy.
Valuable: The four resources discussed above are most valuable to Lidl. The employees
and staff working in Lidl are most essential resource of this company. This is helpful in working
in an efficient way (Hitt and Duane Ireland, 2017) . The global presence offers opportunity to
Lidl that many customers already know about performance and loyalty of this company. Cost
strategy is also a strength of Lidl which is useful for occupying distinct position in Thailand
market. There is another strategy with Lidl which is differentiation strategy, according to
which they offers differentiated products to customers. This increases profits and sales of the
company. This organisation is providing a whole different experience to its customers by giving
them additional discounts and offers in Thailand's supermarket.

Rare: Global presence is not a rare concept. There are different competitors of Lidl such
as ASDA, Waitrose which are also operating in different countries. The strategy developed by
Lidl must be so strong that it could overcome other competitors. Differentiation strategy is
unique and it allows provides opportunity to attract more customers of Thailand. Cost strategy is
also used by Lidl by offering products at affordable prices. Human resource of Lidl is also
strength of this company as they provide effective training and development sessions to
employees.
Imitable: Global presence and human resource are present in Lidl and in it's
competitors. Differentiation strategy and cost strategy are not easy to copy. This includes a lot of
planning and strategies.
Organization: All resources have to be organized by the company to ensure smooth
functioning. Human resource, global presence and cost strategy resources which are present in
all companies, but Lidl should focus on its differentiation strategy. This is the characteristic
which has helped company in gaining a competitive advantage in market.
Identification of competitive strategies
Porter's Generic strategies
Generic model of porter: Lidl is a German brand dealing with supermarket chain. It is
involved in managing different type of operations which provide wide range of products to
customers. The generic model of Porter is used by companies to develop plans and strategies
which enables it to establish success in market. There are three major components in Porter
generic strategy model (Hitt, Ireland and Hoskisson, 2016). When Lidl will establish it's market
in Thailand, it has to focus on these three strategies and expand it's market share in Thailand.
These strategies are described below -
Cost Leadership: This is the strategy where the organisation has an objective for
achieving leadership position within market. This is done by creating effective competitive
advantage. Lidl is focusing on becoming a cost leader in terms of price of various products. As
per this strategy, Lidl is benefited as it gets to compete with other rival brands.
Differentiation:- This strategy means company is offering some new products for
attracting more customers. The concept of differentiation helps companies to have unique
identity. It provides opportunity to Lidl in providing new products to it's customers. According to

this strategy, business organisation seeks for something new innovation in their industry. This
creates value for customers. The new product depends upon differentiation feature. Lidl develops
differentiation in their process and product while attracting customers of Thailand. Lidl can
attract people of Thailand by providing discounts and offers on products which are mostly used
by people of Thailand. Some other features on which differentiation strategy is applied to
products are high customization, features of product and usage of dealer network.
Focus:- Lidl adopts two different types of focus strategy including differentiation focus
and cost focus. This company uses differentiation strategy and the management focus on narrow
segment of market. This company has chosen small market area of Thailand and will analyse
whether it is able to grab success or not. It is easier as after analysing success in small market,
Lidl gets to know how it has to work for meeting needs and demands of customers of Thailand .
On the other hand, cost focus is defined as situation in which organisation focuses on
price of the product. In this, companies offer their products at lower price than competitors. Lidl
wants to minimise cost of procurement of raw materials. There is also minimisation of price
associated with cost of products (Jenkins and Williamson, 2015) . This helps in maintaining
profits. Lidl can easily gain profit and sales if it offers products at lower rates in Thailand.
Methods of expansion
There are different methods of expansion which can be followed by Lidl to enter into
market of Thailand. Some of the methods are mentioned below -
Internal expansion – This is known as expansion of business using own money and
personnel. Growth in terms of internal aspect means that staff and resources are of the company
itself. As Lidl wants to expand it's business in Asian market and it is done by utilising available
capitalisation, recruiting and training employees and increasing funds.
Franchising - This is a method of distribution of services and products that are marketed
by different party other than the owner. According to this approach, organisation can operate in
another country by sitting in domestic organisation. The business owners sell name, logo and
business model to third party operators or franchisees. This is beneficial for Lidl to expand it's
business in Thailand using franchising.
Joint venture – This is a business arrangement in which two or more parties agree to pool
their resources. The main purpose of these is to accomplish a particular task. In market of

Thailand, Lidl has opportunity to collaborate with any of the local companies and capture it's
market (Meyer, Neck and Meeks, 2017) . In joint ventures, every participant is reasonable for
losses, profits, costs that are related to the venture.
CONCLUSION
From the above discussion, it is concluded that implementing effective and strong
strategy is key for business success. Any organisation is able to capture market share if it possess
an effective strategy for doing business. Before starting any business, companies conduct internal
as well as external analysis that is helpful for companies to do their business operations in an
effective manner. PESTLE model helps companies to understand different factors like political,
economical, social, technological, environmental and legal that affects business operations and
activities. VRIO model provides information about strength and weakness of the company in
doing business in different countries. In order to have effective strategies Porter's generic model
is used that explains different strategies which can be adopted by companies to do effective
businesses.

REFERENCES
Books and Journals
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Gruyter GmbH & Co KG.
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USA.
Hanson, D., and et. al., 2016. Strategic management: Competitiveness and globalisation.
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Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and strategic
management research. The Blackwell handbook of entrepreneurship.pp.45-63.
Hitt, M. A., Ireland, R. D. and Hoskisson, R. E., 2016. Strategic management: Concepts and
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Jenkins, W. and Williamson, D., 2015. Strategic management and business analysis. Routledge.
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Morden, T., 2016. Principles of strategic management. Routledge.