The External, Internal and Implementation of Strategy

This document discusses the external, internal, and implementation of strategy. It covers topics such as PESTLE analysis and the five forces model.

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THE EXTERNAL, INTERNAL AND IMPLEMENTATION OF STRATEGY
6/22/2019
Student name

THE EXTERNAL, INTERNAL AND IMPLEMENTATION OF STRATEGY 1
Contents
Introduction......................................................................................................................................2
PESTLE...........................................................................................................................................3
Five force.........................................................................................................................................5
VRIO................................................................................................................................................6
Mode of entry..................................................................................................................................8
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
Appendix........................................................................................................................................15
Pestle of Mexico........................................................................................................................15
PESTLE of Norway...................................................................................................................15

THE EXTERNAL, INTERNAL AND IMPLEMENTATION OF STRATEGY 2
Introduction
International business is expanding the business beyond domestic boundaries, which is a critical
decision-making process as various elements are involved, which are affecting the strategy of the
company. The report’s purpose is to analyse the internal business constraints and assessing the
opportunity to expand in international business. An organizational case will be considered for
better understanding in the report that is of Lidl, which is a German global discount supermarket
chain. The key discussion in the report will include business external factors and strategies of the
company to enter into a new market. The two alternatives option for the company to enter into an
international market is Mexico and Norway. The comparative analysis of both the nations would
be conducted in the report further while using some of the strategic tools like PESTLE, Porter's
five-force model, VRIO model (Adam & Kotler, 2014).
The company is a grocery store expanded in 30 nations by now. The company claims to provide
fresh vegetable and fruits to the customers that are high in quality with lower prices to be offered
to the customer. Moreover, the company is providing hassle free shopping and due to non-
complex process, it is allowing customers to have high quality products in lower delivery prices,
and the extra ordinary experience of customers while shopping. Thus, the report will discuss the
most feasible nation in which the Lidl must expand or go international that is Mexico or Norway
(lid, 2019).

THE EXTERNAL, INTERNAL AND IMPLEMENTATION OF STRATEGY 3
PESTLE
Pestle analysis is one of the external environmental analysis is a tool that includes five major
factors that will affect the business opportunity and threat for the company conducting business
in the nation. The five factors are discussed and their score of the impact will be presented in
Appendix 1. From the analysis and scoring value, it can be said that Norway is more attractive to
target by Lidl. This can be said through the impact of the environmental factors over the
company, which are as follows
1. Political factors
The political factors are the key factors of the nation that would affect majorly on the company
as the government plays a key role in letting an organization enter into the market. One of the
constraints of political factor includes political stability, which is average of Norway but higher
than that of Mexico, which depict that this factor is a threat for the company but lower threat as
compared to the threat while investing in Mexico (theglobaleconomy, 2019). In addition to this
constraint the corruption control is another constraint that is quite strong for Norway, which
reflects that the corruption level would be low while investing and conducting business in the
nation, which is a good opportunity for Lidl to invest in Norway (theglobaleconomy, 2019).
2. Economic factors
According to the world economic forum agenda 2017, Norway is considered one of the most
inclusive economies of the world. This reflects that the economic factor of the nation is strong.
Moreover, the GDP or purchasing power of customers in the country is high and increasing,
which provide an opportunity for the company to expand the business. In addition, the corporate
tax of Norway is decreasing for years and its reaches down to 22% in 2017; on the contrary, the
corporate tax of Mexico is constant at 30%. This reflects that the company has better profit
gaining opportunity while investing in Norway (theglobaleconomy, 2019).
3. Social factors
Social and cultural factors of Norway include the educational level in the nation, which is quite
low and it depicts that the people are not too educated; this can be a threat for the company.

THE EXTERNAL, INTERNAL AND IMPLEMENTATION OF STRATEGY 4
Another factor considered for the analysis of the nation includes rural urban segmentation,
through which it was identified that the largest population is urban population. This can be an
opportunity for the company as the company is targeting the population to change the
supermarket and grocery-shopping scenario, for which urban population could be the most
relevant target customer segment (Calboli, 2015) (Trivedi, 2016).
4. Technological factors
Technological factors include infrastructure of the nation and the use of technology like the
internet. This is quite good of Norway, reflecting an opportunity for Lidl to invest in the nation
while adopting technological innovation and technological advancement for growth opportunity
(nationsencyclopedia, 2019).
5. Legal factors
One of the constraints of legal factor includes rules of law that is quite strong of Norway, which
reflects the violence and level of crime is low in the nation. This is beneficial for Lidl to invest in
the nation while reducing the risk of the business from crime. However, the legal system of the
nation is strong, which depicts that the company needs to abide by the law in order to conduct
business (theglobaleconomy, 2019).
6. Environmental factors
Environment plays a vital role while conducting business. One of the key features identified in
Norway is its environment and natural beauty of the nation, which has also attract tourists. For
instance, the nation is known for Viking history but there are various environmental issues faced
by the nation, which needs to be considered by the company to protect the environment (Mills,
2015). However, the company can invest in the nation keeping CSR activities and environmental
sustainability goal to be implemented while conducting business in Norway. For instance, Lidl
has adopted take your bag policy in order to keep the expenses lower and for the greener solution
to avoid plastic bags, which could be constitute while conducting business in Norway (Craig &
Douglas, 2015).

THE EXTERNAL, INTERNAL AND IMPLEMENTATION OF STRATEGY 5
Five force
Porter five-force model is a strategic tool helpful in understanding the industrial factors affecting
the business of Lidl. The five factors include
1. The threat of new entrant
The threat of new entrant is very high in the supermarkets or the grocery industry. The reason
being the entering barriers are not high as the investment is not too high and any person can enter
into the industry (Menon & Edison, 2015). Moreover, the imitation level in the industry is quite
high, which reflect that the Lidl is willing to create the new scenario to the industry that can be
imitated by another organization to be in the competition. Therefore, it is suggested to the
company to keep innovation and quality assurance to sustain in the market and gain competitive
advantage (Dobbs, 2014).
2. Threat of substitutes
The threats of substitutes are more of higher side, the key substitutes to the grocery market are
the ready-made food service. For instance, youth and people residing alone prefer to go for
ready-made food from fast food chains or restaurants instead of cooking after purchasing raw
vegetables. This can be a threat to the company and affect the sale of Lidl (Ang & Rusli, 2018).
3. Bargaining power of buyers
Since the competition is the industry is very close, it can be said that the bargaining power is
largely in the hands of the customer instead of Lidl. The switching cost for the customer is nil,
which reflects that retaining the customer could be very difficult in the company and this can be
a major challenge for the company. Moreover, the threat of the price war can be one of the
negative outcomes of this cause (Balmer & Abratt, 2016).
The company can reduce the bargaining power of the buyers by keeping the quality at the best
and lowest price in the industry. Moreover, the services and experience of the customers must be
extra ordinary to retain the customer and increase customer loyalty. Moreover, the customer
loyalty program could help the brand to reduce this threat (Kolk, 2016).
4. Bargaining power of Suppliers

THE EXTERNAL, INTERNAL AND IMPLEMENTATION OF STRATEGY 6
The bargaining powers of suppliers are medium that is neither too high nor too low. The reason
being the suppliers at a higher position as this may influence the prices offered by the company
or may affect the profit margin of the company, as the lower cost is the key strategy of Lidl.
However, the power of the suppliers can be reduced by increasing the relationship with suppliers
that are sharing relation with more than two three suppliers in order to gain the opportunity to go
for the lower prices supplier (Choi & Park, 2016).
5. Industry rivalry
The key competitors of Lidl are the local supermarkets in the country. Moreover, the key
competitors of the company can be the global companies like Amazon dealing in retailing and
grocery item, and offering good discounts over the kitchen appliances. Therefore, it can be said
the competition is quite high in the industry, which can increase as the similar brands like
Woolworth could gain the opportunity to enter into the market in Norway (Judith & Steven,
2002).
Lidl could decrease the rivalry through gaining competitive advantage through innovative
strategy, product differentiation strategy and cost leadership strategy in order to keep the
customer satisfied and retained. This will reflect in gaining competitive advantage and sustain in
the industry for the long run (Ogutu & Mathooko, 2015).
VRIO
VRIO analysis is the tool that will be helpful for analysing the internal resources of the company
and the way the resources of the company are found to be sustained competitive advantage for
the brand. The four criteria that the company’s resources would consist of are Valuable, Rare,
Imitable, and organization
1. Financial resources –
Financial resources are one of the major resources of Lidl that are relevant for the
company and will be helpful in expanding the company’s business in the international
market. It can be said that these are the highly valuable resources of the company and are
found to be rare for Lidl (Rialp & Rialp, 2007). It can be said because the strong financial
resources are not generally found in the grocery industry. The farmers and entrepreneurs

THE EXTERNAL, INTERNAL AND IMPLEMENTATION OF STRATEGY 7
are generally selling their grocery products in the local products. Moreover, this resource
is costly to imitate by the competitors that are the grocery owners are unable to make
their financial resources strong very fast. In addition to this, these resources are organized
in order to acquire the value and are used strategically to covert the resource into the
sustained competitive advantage for Lidl (Chatzoglou & Chatzoudes, 2018).
2. Local food products
Local food products are valuable to Lidl as they are able to reach out to the customer with
fresh products and good quality product while decreasing the logistics expenses.
However, this resource of the company is not rare as the competitors are from the local
area and they are also providing local food products. Similarly, this resource is easily
imitable, which reflects that this not considered a temporally competitive advantage, but
cannot be considered as an advantage for the long run (Chung & Fiore, 2017).
3. Patents
Patents are valuable resources that are helpful to the company to trade goods without
having interference from the competitors. This resource is responsible for higher revenue
to the company, and increase the business through revenue from licensing for providing
the licenses to other manufacturers of these patents. These are rare resources of the
company that cannot be imitated by the competitors. The reason being the patents are
gained so that any other competitor is not able to imitate the idea or the business, for
which they needed the licenses from the company. However it can be said that these
resources are not organized well by Lidl, which reflect that the company is not optimally
using the patents, that is their full potential is not been utilized. This is considered to be
the factor of sustained competitive advantage (Doole & Lowe, 2008).
4. Distribution network
From the VRIO analyses, it can be said that the distribution network of Lidl is considered
to be a valuable resource. The distribution network of Lidl makes sure that the revenue of
the company is increased and the lowest possible cost is been implied so as to increase
the profit margin for the company. Moreover, the distribution network of the company is
identified to be a rare resource for Lidl as it is not that easy for the competitors to possies,
which also reflect that it is non-imitable, if possible then it must be very costly which will
not affect the Lidl’s business to greater extent. Moreover, through VRIO analysis it has

THE EXTERNAL, INTERNAL AND IMPLEMENTATION OF STRATEGY 8
also been found that the organization has been using this resource to full potential in
order to convert this resource into a competitive advantage. Thus, it can be said that the
distribution network of Lidl is one of the sustained competitive advantage source (Du et
al., 2018).
Mode of entry
For entering into an international market, it is essential that the company strategies have a
specific entry mode to the company, as per the suitability and the legal requirements of the host
nation. Therefore for Lidl to enter into Norway market needs to strategies for entering the nation,
for which there are various alternatives like a franchisee, joint venture, licensing, merger and
acquisition, and various other modes. Every mode has its own advantages, and disadvantages and
the suitability of each mode are different. From analysing the external and internal environment
of Lidl in previous sections, it can be said that the licensing could be one of the appropriate
modes of entry to enter Norway grocery market (Finne, 2017).
The international licensing agreement is responsible for the international firms to manufacture
the products in the host nation and will be allowed to sell the products on the name of Lidl in the
host nation to use their brand name. A licensor is a company that is allowing another grocery
manufacturer in the host nation to trade the goods for which the company would be getting a
charge and share. This will expand the business of Lidl because the licensee will do the
management and the company will also earn the revenue from licensing (Evans, 2011). The
reasons for the suitability of licensing mode of entry for Lidl is
1. Local product information and extra revenue
The manufacturer would be from the host nation that reflects that the individual or the company
would be having ample amount of information related to the local producer and the technical
know-how, which would also help the company to keep the prices lower and higher quality
product (Harvey, 2009).
2. Quick expansion with less legal formalities

THE EXTERNAL, INTERNAL AND IMPLEMENTATION OF STRATEGY 9
The political issue is not identified in the case of licensing as the mode of entry as it is also
increasing the employment in the host nation. Moreover, the licensing requires less problem
related to the legal requirements and formalities that will help the company to easily enter a new
market without any major issues faced. Therefore, it will beneficial for Lidl to enter into Norway
market and expand business at rapid speed (Jaworski, 2018).
3. Exporting is not possible
Lidl is dealing with grocery products that are unable to export which reflect that the company
needs to conduct the manufacturing and marketing activities in the host nation, which makes
exporting mode impossible for the company. Thus, licensing found to be appropriate for Lidl
(Oh, 2015).
4. Pave the way for investment in future
However, this mode can be a little disadvantage for the company as the income from this mode is
less than that of another mode of entry as the control is majorly in the hands of the licensee. In
addition, the risk of losing the reputation and trademark by the incompetent licensee, as the
company is unable to trust every party in the host country, the risk of look=sing the brand image
is high. Another key con of the mode for Lidl includes foreign partner can be the potential
competitor of the company after understanding all the business activities in future and can
hamper the business of Lidl (Oke & Prajogo, 2016).
Even after some of the cons identified, the suitability of licensing mode is appropriate and the
recommended mode of entry for Lidl would be licensing

THE EXTERNAL, INTERNAL AND IMPLEMENTATION OF STRATEGY 10
Conclusion
Lidl is a German global discount supermarket chain. The company is a grocery store expanded in
30 nations by now. The company claims to provide fresh vegetable and fruits to the customers
that are high in quality with lower prices to be offered to the customer. One of the constraints of
political factor includes political stability, which is average of Norway but higher than that of
Mexico, which depict that this factor is a threat for the company but lower threat as compared to
the threat while investing in Mexico. According to the world economic forum agenda 2017,
Norway is considered one of the most inclusive economies of the world.
Technological factors include infrastructure of the nation and the use of technology like the
internet. This is quite good of Norway, reflecting an opportunity for Lidl to invest in the nation.
The threat of new entrant is very high in the supermarkets or the grocery industry. The reason
being the entering barriers are not high as the investment is not too high and any person can enter
into the industry. The threats of substitutes are more of higher side, the key substitutes to the
grocery market is the ready-made food service. The key competitors of Lidl are the local
supermarkets in the country. Moreover, the key competitors of the company can be the global
companies like Amazon dealing in retailing and grocery item, and offering good discounts over
the kitchen appliances. Financial resources, Local food products, Patents, and distribution
network are some resources that are found to be a competitive advantage for Lidl. Even after
some of the cons identified, the suitability of licensing mode is appropriate and the
recommended mode of entry for Lidl would be licensing. The reasons for the suitability of
licensing mode of entry for Lidl is Local product information and extra revenue, Quick
expansion with less legal formalities, Exporting is not possible, and Pave the way for investment
in future.

THE EXTERNAL, INTERNAL AND IMPLEMENTATION OF STRATEGY 11
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THE EXTERNAL, INTERNAL AND IMPLEMENTATION OF STRATEGY 15
Appendix
Pestle of Mexico
Macro economic factors Sub factors Attractiveness for Lidl (0-10)
Political factors Political stability – Highly
instable / week
(theglobaleconomy, 2019)
0
Control of corruption – week
(theglobaleconomy, 2019)
0
Economic factors GDP/ PPP – Increasing
(theglobaleconomy, 2019)
10
Corporate tax rate – 30%
(theglobaleconomy, 2019)
5
Social factors Literacy rate – above 94%
(theglobaleconomy, 2019)
10
Rural urban segmentation –
76% urban area
8
Technological factors Transportation and
infrastructure – Sharing US
border
9
Legal factors Rule of law – weak 0
Environmental Environmental problems –
high
4
Total score of attractiveness
for Lidl
46
PESTLE of Norway
Macro-economic factors Sub factors Attractiveness for Lidl (0-10)

THE EXTERNAL, INTERNAL AND IMPLEMENTATION OF STRATEGY 16
Political factors Political stability – neither so
strong nor so weak
(theglobaleconomy, 2019)
5
Control of corruption – Strong
(theglobaleconomy, 2019)
10
Economic factors GDP/ PPP – average
(64,965US dollar in 2017)
(theglobaleconomy, 2019)
8
Corporate tax rate – 22%
(theglobaleconomy, 2019)
10
Social factors Literacy rate – low wit
spending of around 7-8% of
GDP in education
(theglobaleconomy, 2019)
2
Rural urban segmentation –
81.5% urban area
9
Technological factors Transportation and
infrastructure – quiet good
(nationsencyclopedia, 2019)
6
Legal factors Rule of law – strong
(theglobaleconomy, 2019)
9
Environmental Environmental problems –
high industrial pollution
(azocleantech, 2019)
5
Total score 64