Strategic International Business Managements

Running head: STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
Strategic International Business Management
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STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
Executive summary
The German discount retail supermarket, Lidl, aims to expand its global operation and Mexico
and Norway are the two nations that have been considered for this business expansion. Mexico
and Norway are dynamically different in terms of business environment. PESTLE analysis have
been conducted and Mexico has been found to be more suitable for a successful business
expansion for Lidl. Porter’s five forces model has been applied to analyze the industry
competitiveness in the Mexican economy. VRIO framework has been used to analyze the
internal environment of Lidl and that suggested that with given resources and capabilities, Lidl
would be able to achieve competitive advantage in Mexico. Lastly, different foreign market entry
modes have been assessed and franchising is found to be more appropriate option for Lidl to
have a profitable and successful business in the Mexican market.

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Table of Contents
1.0 Introduction................................................................................................................................3
2.0 Rationale for selecting the appropriate market: Mexico............................................................4
3.0 Porter’s 5-Forces model for critical analysis of the competitive intensity of the industrial
environment of Lidl in the market of Mexico.................................................................................7
4.0 Internal environment analysis of Lidl using VRIO framework.................................................9
5.0 Critical assessment of different modes of entry available and recommendation on the most
relevant mode of entry to be adopted by Lidl................................................................................11
5.1 Recommendations................................................................................................................14
6.0 Conclusion...............................................................................................................................14
References......................................................................................................................................16
Appendix........................................................................................................................................20

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1.0 Introduction
Lidl is a global supermarket chain operating in the discount retail industry. It was
established in 1973 in Germany. In the next five decades, the company has expanded its business
across the continent of Europe and the USA. Currently Lidl has approximately 10,800 stores
across 32 nations in Europe and in the USA. Another low price discount retail store, Aldi, is the
major competitor of Lidl. The business objective of Lidl is to provide highest quality goods, like
the fresh produce, meat products, baked goods and other household consumer products at the
lowest possible price, to have the easy store layout and product assortments to provide the
customers with a smooth and comfortable shopping experience and to follow the values and
operations that enable it to maintain the lower prices even for the highest quality domestic and
international products and to enhance the value to the customers with their every purchase
relationship with Lidl (lidl.com 2020). Lidl opened its first store in the different continent of the
North America in 2017 and within 2019, Lidl successfully expanded to over 70 chain outlets in
nine states in the East Coast of the USA. The US operations of Lidl has been quite successful
and profitable.
Lidl wants further expansion in their global operations and therefore has been considering
two nations, Norway and Mexico for the business expansion. This report will provide an outline
of the macro-environmental factors of Norway and Mexico and their comparison will be made to
give an idea about the more appropriate economy to choose for business expansion. This will be
followed by a competitive intensity analysis of Lidl’s industrial environment in the selected
market, internal environment analysis of Lidl by applying the VRIO analytical framework,
critical assessment of different modes of foreign market entry for Lidl, and recommendations

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about the most appropriate mode of entry that would help the company to achieve success from
this strategic business expansion.
2.0 Rationale for selecting the appropriate market: Mexico
Mexico and Norway are two countries that are being considered by Lidl for its further
international business expansion. The economic conditions of these nations are highly diverse
with very different growth potential. While Norway is a developed economy, Mexico is a
developing economy. The level of GDP as well as GDP per capita is higher in Norway than in
Mexico, while the population in Mexico is much higher than in Norway. According to World
Bank (2020), Norway had 5.8% annual GDP growth rate in 2018, while Mexico had 2%.
However, the difference in economic conditions creates different market competitiveness as well
as different impacts on a new business. Hence, the macroeconomic variables of both the nations
have been analyzed and compared using the PESTLE analytical tool to understand the potential
market conditions that Lidl would face while opening and running a new business in a new
country.
PESTLE represents Political, Economic, Social, Technological, Legal and Environmental
factors (Sridhar et al. 2016). These are external environment for any business as these cannot be
controlled by the business management, and rather these factors have direct and indirect effect
on the business performance. The political factor analysis shows that the political condition in
Norway is more stable than that in Mexico, while Mexico has very high corruption level in the
society (Morris 2018). However, with major regulations and reforms in the business sector,
Mexico has emerged as an attractive destination for international businesses.

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The analysis of the political environment shows that Norway is a politically stable nation
than Mexico and Norway also has very minimum level of corruption compared to Mexico. At
present, the political scenario in Mexico is facing some turbulence regarding the illegal
immigration issue at the US-Mexico border and stringent detention of Mexican refuges or
immigrants in the US (Macías-Rojas 2018). This issue has been creating chaos and challenges
for the economy of Mexico by affecting the flow of international trade, especially to the USA,
which is its biggest trading partner, and FDI flow and skilled labor immigration. Moreover,
Norway has a strong position in the EU, while Mexico has been gaining position in the global
economy due to its increasing GDP growth rate.
The economic environment analysis shows that in 2018, Mexico’s GDP was 1223.36
billion USD (worldbank.org.Mex 2020), which is comparatively lower in Norway, 434.167
billion USD (worldbank.org.Nor 2020). However, due to larger population, Mexico has a lower
nominal GDP per capita (9,224 USD in 2017) than that in Norway (75,428 USD in 2017)
(Worldometers.info 2020). The inflation rate was higher in Mexico in 2018 at 4.90% while that
was lower in Norway at 2.76% (Data.oecd.org 2020). On the other hand, Mexico had an
unemployment rate of 3.9% in 2018 (Kitroeff 2018), while Norway had 4.7% (Gustafsson and
Pedersen 2018). Mexico is considered as a developing country with labor intensive industries.
There is ready, willing and affordable labor force in Mexico and that lowers the production cost.
Norway has comparatively higher labor cost as the cost of living is 136% higher than in Mexico
(Expatistan.com 2020). It implies that the production and business cost are much higher in
Norway, which would affect the profitability of a new business.
The size of the market is much larger in Mexico than in Norway. Mexico is world’s 15th
biggest nation and second biggest in the Latin America. As of 2018 December, population of