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Strategic International Business Management

   

Added on  2021-04-17

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Running head: STRATEGIC INTERNATIONAL BUSINESS MANAGEMENTStrategic International Business ManagementStudent’s name: Name of the university: Author’s note:
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1STRATEGIC INTERNATIONAL BUSINESS MANAGEMENTTable of ContentsIntroduction......................................................................................................................................2Background of the organisation Lidl...............................................................................................2Task 1...............................................................................................................................................2Task 2...............................................................................................................................................3Discussing the rationale for the selection of chosen market............................................................3Task 3...............................................................................................................................................7Applying the 5-Forces model to critically analyse the competitive intensity of the industrialenvironment of Lidl in Mexico........................................................................................................7Task 4.............................................................................................................................................11Critically evaluating the resources and capabilities of Lidl and the competitive implications ofthese for the company when entering Mexico through VRIO Framework...................................11Task 5.............................................................................................................................................15Critically evaluating the various modes of entry available to Lidl and recommend withjustification....................................................................................................................................15Conclusion.....................................................................................................................................18Reference List................................................................................................................................19Appendix........................................................................................................................................23
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2STRATEGIC INTERNATIONAL BUSINESS MANAGEMENTIntroduction Strategic business management is the implementation and formulation of the majorbusiness objectives and initiatives taken by the organisation’s top management based on theconsiderations of the capabilities and resources of the organisation. The top management of theorganisation does the external and internal environment analysis in order to take the businessdecision (Shaiken, 2015). The aim of the assignment is to show the strategic decision making forinternational expansion of Lidl. Lidl retail organisation is chosen to show the strategic businessmaking for the organisation. In this assignment, Mexico and Norway country are chosen to showwhich one would be a good choice for Lidl to enter. In order to show the strategic decision forLidl, VRIO, Five Forces model of Porter and PESTLE analysis have been done. Background of the organisation Lidl Lidl is a private organisation and it is a retailing industry with the discount supermarketchain. The first discount store was opened in the year 1973 and the founder of the organisationwas Dieter Schwarz. Headquarter of Lidl is at Neckarsulm, German. Lidl has more than 10,000stores in more than 30 countries (Lidl.de, 2018). Lidl has mainly stores in Europe and in theUnited States. At present, the CEO of the organisation is Jesper Hojer and Lidl mainly sellsdiscount products. Most importantly, Lidl is a competitor of German supermarket chain Aldi andLidl have supermarket chain in almost EU member countries except Estonia and Latvia.Task 1 (Refer to Appendix)
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3STRATEGIC INTERNATIONAL BUSINESS MANAGEMENTTask 2 Discussing the rationale for the selection of chosen market Mexico is the second largest economy among the Latin American countries and Mexicois a major oil exporter. In Mexico, the socio-economic gap is wide and rural areas are neglectedby the government behind huge cities. Mexico has been governing by the InstitutionalRevolutionary Party and the stability of the political system is ensured by the government. Thegovernment gives freedom to the media and one's section of media describes Mexico as Drug-Centre of Latin America. Lidl does not have a store in the Latin American country; therefore,Lidl can try their luck in Latin America from Mexico as political condition of Mexico will helpto enter the business in this country. As observed by (Butler, 2018), president Enrique Nietopromised the people to bring major changes in an economy with ground-breaking reformsincluding the loopholes in corporate tax and liberalising the economy. The Mexican economy has been dominated by the service sector and it contributesapproximately 62% to the total GDP. The GDP growth of Mexico has been recently hamperedby global financial crisis and recession. The GDP declined to negative rate 4.4% during the timeof 2009 and it managed to take acceleration after 2010 to rate of 5%. The reason behind thegrowth of GDP in Mexico was an increase in external demand as well as domestic demand.Current GDP of Mexico is $1.046 trillion and GDP growth is 2.3% in the first fiscal quarter in2018 (Bmiresearch.com, 2018). In Mexico, population below poverty line is almost 42% andlabour force is 53 million. Therefore, it shows that Mexico has good potential to make a retailmarket as the population is high, the labour force is good and the GDP is going high. UNICAD
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4STRATEGIC INTERNATIONAL BUSINESS MANAGEMENTreport in 2017 showed that Mexico is going to open to FDI as it is world's fifteenth largest FDIrecipient.20152016FDI Inward flow (Million U$)33,18026,700FDI stock 509,290473,520FDI inwards 12.711.1FDI stock (% of GDP)44.545.6Table 1: Foreign Direct Investment in Mexico(Source: Bmiresearch.com, 2018)Major FDI in Mexico is coming from United States, Belgium, Canada and Japan. Lidl isGerman-based Company and Germany gave 3% FDI in the year 2016 and Major investment iscoming from the manufacturing sector (61.2%) (Lustig, 2014). The government in Mexico isvery friendly towards the FDI and the labours are young and skilled.201320142015Total employment inretailing (‘000)5,470.3055,581.006,093.00Employmentinretailing (%)11.1%11.2%11.4%Table 2: Employment in retailing(Source: Bmiresearch.com, 2018)
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5STRATEGIC INTERNATIONAL BUSINESS MANAGEMENTFigure 1: Retail sales in Mexico(Source: Bmiresearch.com, 2018) Mexico has world's eighth largest population and the retail organisations will have agood customer base. Mexico has strong cultural and economic ties like NAFTA (1994). Mexicois viewed as a youthful country and the median age in this country is 27 years (Lewrick et al.,2015). Life expectancy rate in Mexico is 77 Years. Retail industry evolves women and children;therefore, Lidl can easily make business in Mexico. Mexico does not have a chance to shift to anaging population and future demands will increase.In the retail industry, Mexico has good competition in the different retail chain and theydo a competition of consumers' credit. Consumers are using many consumers' channel;assortment and a large variety of products are used. In Mexico retail industry, bigger marketpenetration is possible with diversification. In the year 2007, technological innovation has beentaken place in Mexico regarding establishing many scientific organisations, private companiesand educational institutions (Charlton & Spence, 2017). The younger generation in Mexico is
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