Strategic Management: Analysis and Options for Lidl
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This article provides an overview of strategic management for Lidl, a grocery company in Germany. It covers the external and internal analysis, strategic options, and competitive strategies. The focus is on Lidl's expansion plans and its presence in the global market.
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Strategic Management
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EXECUTIVE SUMMARY The main concern of Strategic management is to set out objective, carry out planning and execute functioning to meet out the strategic intent by avoiding the chances of deviation. It helps in the effective functioning of firm for which both internal and external factor needs to be evaluated. This provide the strategic direction to the company by making the sustainable choice for the long term growth and development.
Table of Contents INTRODUCTION...........................................................................................................................4 MAIN BODY...................................................................................................................................4 External analysis..........................................................................................................................4 Internal analysis...........................................................................................................................7 Strategic option............................................................................................................................9 Strategic direction......................................................................................................................11 CONCLUSION............................................................................................................................12 REFERNCES...................................................................................................................................1
INTRODUCTION Strategic management is the essential part of an organisation that include comprehensive and detailed plan which is prepared to achieve particular goals and objective of an organisation effectively. It involve the stream of various actions and activities that are designed to cope up with the changes that exist in external environment and access the opportunity successfully. This promote the systematic functioning of overall organisation where value is delivered to the internal and external stakeholder by carrying out the significant functioning effectively(Frynas and Mellahi, 2015). For the better understanding of report Lidl which is the grocery company of Germany has been selected. The company stared its operation in 1930 by Josef Schwarz which deliver the household products and became one of the evolving retailer of Europe. It currently operate in approximately twenty eight countries for which around three lac employees are hired. Due to the emerging size of company it earn new income of worth 1,541,000,000 euro by setting its image as quality product that can be avail by customer at reasonable prices. Based on SWOT analysis the key strength of company is the financial strength and economies of scale advantage due to which it is planning to expand its operation in the potential market that is India which is the part of Asian market. Similarly, the weakness of company is discounted prices of the product that basically restrict profitability margin. In context to key opportunity Lidl company need to focus to prepare the global presence and overcome thethreat of competitive pressure with the objective veto establish suitable position. This report cover topics like demonstration of external as well as internal analysis essential to prepare the strategic decision. Along with that plan and implement the specific strategy that is significant for an organisation in terms to carry out the functioning effectively. Further, in order to expand the operation effectively Lidl amongst the various strategies like merger and alliance needs to selects the significant process to attain the strategic decision position effectively. MAIN BODY External analysis External analysis encompasses the role of dynamic environment that is necessary to be evaluated by an organisation with the objective to identify the existence of potential opportunity
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and weakness.This leads to the systematic business operation due to which the manager of Lidl company before expanding process perform the PESTEL analysis that is explained below: Political factor:It include the government policies and political condition that needs to be systematically identified by company before extended or establishing the business entity. Ldli mainly function in Germany and other developed countries by branching out the operations due to which it gained huge recognition in all over European Union. Currently, it is planning to stretch its operation in India where the political condition are less likely stable in context to the whole Europe. So internal department can overcome the threat by enhancing the political situation and build strategy accordingly(Gamble, Peteraf and Thompson, 2014). Thus, presence in emerging economies is the opportunity for company in terms to gain the potential buyer which are keen to get desirable product and at nominal prices. This can even laid the possibility to prepare global dominance. Economic factor:It include the disposable income and gross domestic product of an economy that help the firm to determine desirable strategy by which they can determine the external economic condition and articulate strategy accordingly. In emerging economy like India the purchasing power of consumer is low in comparison to the Germany. So Ldli company needs to penetrate the whole market by retaining the existing strategy which is selling quality product to the mass market. This is the opportunity that can flourish the market operation by just focusing on the prevailing strategy adopted in its home country. On contrary, there are different economic condition such as recession that act as a threat and directly hamper the profitability and productivity of firm (Ansoff and et. al., 2018). So to cope with this situation Lidl company promote the offerings via high discounts as it retain the people from switching cheaper alternatives. Social factor:The lifestyle, culture, belief and status are the part of social factor which needs to be researched by an organisation so that it can drive out effective value. So the company in Asian market need to spread the awareness in terms of supreme quality and derive out the value for different classes of society (Lidl PESTEL Analysis & Environment Analysis, 2018). Delivering the label and certified product engages the interest of customer which is an advantage situation that help to cater the opportunity of meeting the requirement of customer. Further, the social factors comprises of taste and preferences of customer that constantly changes which can
act as a threat of Ldli company. It can only be compensated by regularly anticipating the changing requirement and simultaneously matches the current need and requirement of audience. Technology factor:It represent the innovative or technical way that assist the firm to maintain its pace and enhance the market share of company. For the distribution of product in India the company can use the innovative technique like use of online play to demonstrate its various category through online catalogue. This engages the attention of customer which is an opportunity and used to maintain the electronic customer relationship management. Further, adoption of latest technology enhance the cost and expenditure of company which leads to the immense burden. Thus, it can only set off the threat if Lidl firm find using technology significantly enough to attain its purpose and overpower competitive pressure. Environmentalfactor:Environmentfactorrepresentthesurroundingorexternal environment that need to beeffectively understand by the company before incorporating any operations. This progressively help the Lidl organisation to ensure that all activities are carried out suitably by lowering down the chances of carbon footprint and eliminating use of plastics in order to gain the attention from society. Adequate Corporate Social Responsibility not only help the firm to exploit the global market but also maintainthe trust of internal as well as external stakeholders. Legal factor:This include the legislation or government law which is one of the most prominent factors that is mandatory for an organisation to adopt and follow effectively. While extending the operations in India there are certain legal laws like fixed working hours and child labour act that need to be understand by the the internal manager of Lidl organisation and carry out effectively. Therefore, this promote the global presence of brand effectively. Porter's five force analysis It is a framework that comprises of different competitive forces which are studies and analysed with the perspective to shape the functioning of industry and determine necessary strengths or weakness by formulating effective corporate strategy. In terms of Lidl company these forces help to define the competitive pressure that can direct affect the industry and provide direction by which it can handle diverse forces effectively. Explanation of different forces are listed below: Bargaining power of suppliers:Supplier are basically responsible to offer the necessary raw material to company that they can finally deliver by transforming it into necessary product.
In terms of Lidl company which is one of the largest company of Europe in terms of revenue and market share experiencemoderate to lowsupplier forces. Due to the wide operation supplier are more prone to deliver the quality product at reasonable prices so that they can maintain suitable relationship with company. Even the company need to deal with supplier of Asian market by maintaining effective relationship with them and get the products on time. Bargaining power of buyer:As retail industry cater the needs of diverse customer within stipulated period of time so there are different large and small retail company that are into similar type of business. This has increase the options or alternatives for customers of different regions like India as well as Europe which laid to high bargaining power of customer(Ginter, Duncan and Swayne, 2018). The Lidl company deals with this situation by analysing the strategies of tough competitor and bring modification accordingly. Additionally, it is known well in European countries for its discounted prices so that company need to inculcate same within Asian market. Threat of new entrants:Due to the possibilityof immense probability there are numerous new entrant that exist with the perspective to grow and expand its operation. As Lidl company stretches its business in large geographical market and has gained renowned image so the pressure from new entrant is low. The company can further sustain competitive position by taking the benefit of economies of scale and diversify the business operation effectively. Threatofsubstitution:Therearedifferenttypeofretailingcompanythatbuild competitive strategy and offer different product within the same platform(Noe and et. al., 2017). This determine the substitution pressure for the Lidl company is high which generate the threat to sustain the existing customer base of company. In order to deal with this situation it need to constantly realise the customer about its enrich product and service that are better from other rivalry available in market. Industry Rivalry:The rivalry for household and retail products is high because there are ample opportunities that can lower down the profitably of firm. Herein, Lidl company which has the large size are diversifying its operation in the Asian market that is India which so the challenge for company in terms to build the image and competitive with existing rivalry. The company can only deal with this situation if it generate brand image through extensive promotion techniques.
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Internal analysis VRIO framework refers to the internal resources and capabilities that needs to be constantly access by company as it represent clear perspective that identify whether it is providing competitive advantage or not. Also it offers the opportunity to company where it can make optimum use of resources and build suitable position. FactorsValuableRarityImitableOrganizedResult Global presence YesNoYesNoCompetitive parity Skilled staffYesYesYesYesTemporary Competitive advantage ProductsYesYesNoYesCompetitive advantage Financial resources YesNoNoNoCompetitive parity Valuable:This involve the use of favourable resource that significantly adds value in the functioning of company and neutralise the presence of external competition. The resources that adds value to the company includes the wide presence of Lidl company in the European union which has particularly enhances the sales of company. Along with that products are the valuable resources of respected company because the internal personnel and management immensely
focuses to maintain the quality of its offering(Hill, Jones and Schilling, 2014). Employee are the key factor of an organisation that function to attain the objective by successfully transforming the rawmaterialintothefinisheditems.Sothemanagerprovidetheefficienttrainingand development session in order to enrich their existing capabilities and gain the long term success effectively. Thus, due to the wide presence the company leverage the advantage of financial resources which are valuable and help to carry out systemic operations to exploit the opportunity. Rarity:Resources which are valuable can only offer the competitive advantage to Lidl company if they are rare. As it is the signifiant way that can assist firm to gain the satisfaction and derive out best possible valuein order to overpower the competition pressure(VRIO framework, 2018). So amongst the different resources Lidl gets the privilege of rare resources in terms of skilled worker as well as quality product. This enhances the probability of firm to gain the success by satisfying the interest of the customer. Along with that as the company in near future will build plant and retail store in India so it needs to constantly enhance the capabilities of their employees and update its knowledge regarding the different variants of company. This helps to maintain the quality of diverse offerings and retain the interest of diverse customer. Imitable:Imitation refer to the process of duplicating the resources of company so that customer can easily substitute or switch to the competitor's product(Rothaermel, 2017). If the brand are easy to imitate then it leads to the temporary competitive advantage like there are several large retailer that can after the expansion of company in India and widespread their operationaswell.Alongwiththatbyorganisingtraininganddevelopmenttheexisting knowledge and skill can be constantly updated. So this does not help the firm to gain long term success. Whereas, there are certain aspect such as quality offering of the company can not be imitated by the other rivalry this leads the the core advantage to the company because they can use the innovative technique in order to bring out various variants as well as choices of customer. Financial resources are again the strength of company that needs to be utilised to diversify the operation, conduct market research as well as while extending theproduct range. This significant is the desirable position that strengthen the existing Organised:It reflect the management processes, culture as well as prices that help to capitalise the functioning of firm(Hitt and Duane Ireland, 2017). It is vital for the firm that need to use their resources effectively so that they can again the advantage of long term sustainable development. This is the successfully situation where the overall success and objective are meet
without any threat from the existence of competitive pressure. Further, company with the help of its quality productcan establish its operations in both home and host country and seek the sustainable interest of the customer. Strategic option Porter's generic strategycovers different competitive strategy that can assist firm to gain the profitability and maintain the systematic functioning. So while dealing with the external market firm need to establish the effective strategy that can enhance its performance and help them to carry out immense functioning. Basically there are two approaches that include low cost where the objective is to stretch its operation in each and every corner of the geographical area. Further, differentiation strategy is used to set the unique image and target the segmented group like premium customers. Thus, both are advantageous if adopted effectively and the explanation of strategy in context to Lidl company are explained below: Cost leadership:Under this generic strategy the company gain the competitive edge by low cost method and has the scope to target the broad including both national and international market. This is the preferable way to fight against the competitive pressure usually the large companies uses this strategy in order to diversify its brand in different market by pursuing the sue of economies of scale(Meyer, Neck and Meeks, 2017). Such strategy can be effectively used by Lidl company as it expand the arena of company in terms of dealing which leads to the portfolio investment. The main significance of this method is that it can exploit various opportunity by using advance technology and mitigate the chances of risk due to the existence of external factors. Hence, as the per unit cost of the product is low by due to the large market demand enhances the long term profitability and productivity of firm. Differentiation:This strategy is based on the dimension of unique attribute that enhances the value of product amongst the customers and helps to set the prominent position. As per Cost leadership, differentiation strategy is too used to target the broad market. This assist the company to gain ample of opportunities so it position the product as prestigious brand and due to the advance attribute the customer remain ready to pay the premium pricing. Such strategy can be adopted by Lidl company where with the help of promotional technique such as digital media the company can be positioned as the renowned brand that offer the quality product to the customer. If the customer find the quality is unbeatable then surely middle as well as high income group people can lead to profit maximisation due to the high margin(Stead and Stead, 2014). So here
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even if segmented group is small but can compensate all the expenditure of company in exchange of the supreme quality derived for the welfare of company. Cost focus:As per this generic strategy the firm concentrate to become market leader by serving the narrow area suitably. For this the company set the nominal prices of their product and services and effectively penetrate in the confined market effectively. Due to the low availability of the finance and pressure of existence in the international environment they restrict their operation and mitigate the chances of loss due to less risk factor. In terms of the Lidl company can use this strategy by which it can confined its operations to the particular market and leverage the advantage of high customer loyalty. Usually the company undergo the extensive market research where it constantly takes the feedback from customer and perform the daily regime significantly. Differentiation focus:This is again the focused strategy under which concentration is given to the narrow market and serve them with prestigious quality. At this stage the organisation generate low volume in terms of sales and revenue due to its restricted awareness(Morden, 2016). Along with that due to the low availability of the number of substitute Ldli company can set the premium pricing that need to be paid by customer in order to satisfy their require. Further, the customer gets the opportunity to experience quality product by serving the whole market favourably. Thus, strong operation and stable position significantly assist the company to gain the suitable profitability but they need to remain curious about the external market otherwise this can affect the position and loss the strong customer base. Therefore, amongst the different strategy it has been determined that the Lidl company can adopt the Cost leadership approach where it focuses to target the broad market which is not only confined to Germany but Asian market as well. This is the most significant way to generate the global presence by selling out quality household product effectively. Strategic direction Strategic direction simply determine the route of firm that need to be followed to gain the growth as well as development. This si the essential approach that simply include the whole planning procedure athat need to be followed by the company in order to attain the particular goal and objective effectively. It basically act as a guidance that educate the different group member and staff what activities needs to be carried out to reach out either short or long term target(Morschett, Schramm-Klein and Zentes, 2015). It significantly enhances the position of
firm by diversify its operation from its home country that is Germany to the totally new country which is Asian market. The company does not have experience of working in the emerging economies but it carry out its operations to explicitly enhance the profitability by generating the potential buyer. Amongst the different types of strategy Lidl company can effectively adopt the Diversification strategy as it help the company to understand the new market and behaviour of customer such as their buying pattern, consumption habit and so on.On the basis of research the company need to modify its product and bring certain alterations so that the costumer of Asian market specifically India can get the best possible value at desirable prices. Further, to carry out this process effectively the company can form the strategic alliance with the existing retail industry of India such as Future Group. This is the favourable way by which respective company can smoothly enter into the new geographical market and mitigate the chances of risk. As the profiastability and risk ration shared between the different partcise so rather than operating alone that can formulate the effective terms and condition based o0n which the functioning gets easier and smoother. Lidl company can indulge into the alliance for diversificationastherearevariousadvantageassociatedwithit.Like,itempowersthe knowledge and resources sharing that reduces the burden of sole operation in the company. Also the market condition of India is totally different from its current market so it empower the skill and way of doing the business operation. Along with that the company can enhance its capability and overcome the existing competitors pressure due to the collective effort of the parties. Forming significant alliance can instigate company to access the target market and engage them by widespread the awareness about its quality product that is much more better from other competitors(Vogel and Güttel, 2013). CONCLUSION From the above discussion it has been concluded that strategic management is every essential for the organizations where management of the company formulate strategy and make sure to implement in well manner. It is the ongoing process of planning, monitoring and controlling, so managers should perform that which helps them to maximise the overall operational efficiency as well as effectiveness. In order to expand their business operations in the new market, organization need to evaluate macro as well as micro environment in order to identify the key driven facto. It further beneficial for the managers to formulation their strategies accordingly because these factors affect the production as well as profitability of the company.
With the help of PEST or SWOT analysis, management identify the key driven factors which impact the growth of the company.
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REFERNCES Books and journals Ansoff, H. I. and et. al., 2018.Implanting strategic management. Springer. Frynas, J. G. and Mellahi, K., 2015.Global strategic management. Oxford University Press, USA. Gamble, J. E., Peteraf, M. A. and Thompson, A. A., 2014.Essentials of strategic management: The quest for competitive advantage. McGraw-Hill Education. Ginter, P. M., Duncan, W. J. and Swayne, L. E., 2018.The strategic management of health care organizations. John Wiley & Sons. Hill, C. W., Jones, G. R. and Schilling, M. A., 2014.Strategic management: theory: an integrated approach. Cengage Learning. Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and strategic management research.The Blackwell handbook of entrepreneurship.pp.45-63. Meyer, G. D., Neck, H. M. and Meeks, M. D., 2017. The entrepreneurship‐strategic management interface.Strategic entrepreneurship: Creating a new mindset.pp.17-44. Morden, T., 2016.Principles of strategic management. Routledge. Morschett, D., Schramm-Klein, H. and Zentes, J., 2015.Strategic international management (pp. 978-3658078836). Springer. Noe, R. A. and et. al., 2017. Human resource management: Gaining a competitive advantage. New York, NY: McGraw-Hill Education. Rothaermel, F. T., 2017.Strategic management. New York, NY: McGraw-Hill Education. Stead, J. G. and Stead, W. E., 2014.Sustainable strategic management. Routledge. Vogel, R. and Güttel, W. H., 2013. The dynamic capability view in strategic management: A bibliometric review. International Journal of Management Reviews. 15(4). pp.426-446. Online VRIOframework.2018.[Online].Available through:<https://strategicmanagementinsight.com/tools/vrio.html> LidlPESTELAnalysis&EnvironmentAnalysis.2018.[Online].Available through:<https://www.essay48.com/term-paper/13726-Lidl-Pestel-Analysis> 1