Lidl's International Market Expansion: A Comparative Analysis

This report provides a comprehensive analysis of Lidl's potential for international expansion, focusing on a comparative study of the markets in Norway and Mexico. The analysis begins with a PESTLE analysis of both countries, evaluating political, economic, social, technological, legal, and environmental factors to identify the most attractive market for Lidl. Based on the PESTLE analysis, Norway is selected as the preferred market due to its favorable political stability, economic environment, and social factors. The report further explores the competitive environment in Norway using Porter's Five Forces model, assessing the bargaining power of suppliers and buyers, the threat of new entrants and substitutes, and existing competition. The VRIO framework is then applied to evaluate Lidl's resources and capabilities. Finally, various modes of entry are critically evaluated, with a recommendation for the most suitable mode of entry for Lidl in the Norwegian market.

Running head: ANALYSIS OF LIDL IN INTERNATIONAL MARKET
ANALYSIS OF LIDL IN INTERNATIONAL MARKET
Name of the Student
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1ANALYSIS OF LIDL IN INTERNATIONAL MARKET
Table of Contents
Task 1: Comparative PESTLE of the Market of Norway and Mexico......................................3
Task 2: Rationale for Selection of the Market Place for Lidl....................................................5
Task 3: Five Force Analysis Competitive Environment of Norway..........................................7
Task 4: VRIO Framework, Evaluation of Resources and Capabilities of Lidl........................10
Task 5: Critical Evaluation of Various Modes of Entry..........................................................11
Chosen Mode of Entry.........................................................................................................12
Appendix..................................................................................................................................13
References for Appendix......................................................................................................20
References................................................................................................................................21

2ANALYSIS OF LIDL IN INTERNATIONAL MARKET
Task 1: Comparative PESTLE of the Market of Norway and Mexico
The market in which the company has to enter can be decided by applying the
PESTLE analysis in both the countries. The comparison of the markets of both the countries,
Mexico and Norway can be compared and contrasted by using the PESTLE framework. The
PESTLE framework of both countries is presented in Appendix 1 and is interpreted below:
 Political Factors: The political factors in Norway are comparatively more
stable than that of Mexico. The country of Norway has better trust and belief
in the government that is there. The government also has less intervention in
the establishment and the execution of the business. The government of
Norway also shows less favoritism than the government of Mexico (Schwab,
2019). The government of Mexico is known for being corrupt and having
policies that are not transparent. The Mexican government has a great impact
on the working of the business and has a lot of corruption and bribery that
happens in the establishment and working of the country. Norway, on the
other hand, has a more stable government that helps the businesses in the
country grow more. For Lidl Norway is a better country to expand into
considering the political scenario.
 Economic Factors: The population of the country, Norway, is 5.3 million
while the GDP is $380.00 billion in the year 2019. The growth that the
country has seen is 1.8% in the GDP of the country (Heritage.org 2020). The
rate of inflation in Norway is 1.9%. The country has many natural resources
and also has an extensive social safety that makes the economy of the country
more stable. Mexico, on the other hand, has a GDP of $2.5 trillion and the
growth rate of the country is around 2.0% of the GDP. The rate of inflation of

3ANALYSIS OF LIDL IN INTERNATIONAL MARKET
the country is approximately 6.0% and the FDI inflow of the country is $29.70
billion (Heritage.org 2020). The economy of Mexico is better than that of
Norway and is growing at a much better and faster rate.
 Social Factors: The country of Norway has a modernized lifestyle in the
majority while many people still prefer the nomadic style of life (Zabko,
Fangen and Endresen 2019). There is a lot of variation in the style of living in
the country. The outdoor activities are one of the most central themes of the
lifestyle of the people in the country. Mexico, on the other hand, is a country
that has the majority of the people living in urban areas speaking Spanish (de
Blanco and Mirtallo 2016). The social structure that Norway follows is more
adaptable and suitable for more people to live there than there is in Mexico.
 Technological Factors: There is a lot of advancement that is happening in
Norway and the technology has integrated itself with the lifestyle of the
country (Nguyen and Petersen 2017). The data collected from the information
society development suggests that every individual of the country has access
to the internet. The business and the organizations of the country, Norway, use
technology and the internet for their daily activities and marketing (Black and
Muddiman 2016). Mexico as a country has also utilized the technological
advancement for the business and also has access to the internet for every
person (Cantu-Ortiz, et. al. 2017). Both countries are developed in terms of
technology and have utilized the technology to its utmost usage.
 Legal Factors: Norway has a transparent and efficient framework of
regulations. The transparent framework is important as it facilitates better
innovation, invention and many entrepreneurial activities (Kulish, et.al 2018).
The country has one of the most stable governments and economies and is

4ANALYSIS OF LIDL IN INTERNATIONAL MARKET
more suitable for any company to enter the market. Mexico can be compared
by considering the factors that there are many regulations in the country and
that affect the working of the company in the country. There are rigid laws
that have to be followed by companies in the country (Botello and Dávila
2016.). The rigid laws make it a little less appealing for the companies to
establish themselves in the country.
 Environmental Factors: The policies in the country of Norway regarding the
environment have made it compulsory for the business to follow the laws
regarding the protection of the environment (Grave 2017). The government
takes initiatives to reduce the damage that is done to the environment and is
urging people and businesses to move towards a renewable source of energy
that reduces the impact of waste on the environment. The Mexican
government also has come up with many laws that are there to protect the
damage on the environment. The General Law of Ecological Balance and
Environmental Protection is the act that the country has implemented for
protecting and reducing the damage that is caused by the practicing of a non-
eco-friendly way of operations (Navarrete-Báez and Purcell 2019).
Task 2: Rationale for Selection of the Market Place for Lidl
As per the pestle analysis conducted for both the countries, it is evident that the Lidl
business expansion would be more profitable in Norway, considering the favorable political,
social, economic, and technological environment (Fitjar and Rodríguez‐Pose 2020). It has
been identified that Norway has better public trust and comparatively lesser governmental
regulations as compared to Mexico. The governmental laws and policies are transparent in
Norway as compared to Mexico, which has complicated legal procedures for foreign market
entry. Henceforth, Norway has better prospects and opportunities to conduct its business

5ANALYSIS OF LIDL IN INTERNATIONAL MARKET
operations. The political systems of Norway are favourable for Lidl. Norway has political
stability with low rate of corruption and bureaucracy. On the other hand, the Mexican
government has low political stability. Norway has a rich endowment of natural resources
with high level of economic stability (Karstensen, Engelsen and Saha 2020). This ensures
smooth flow of business operations in the country. As per the GDP of Norway, the country
has a growth rate of 1.8% with 73.0 score in economic freedom. Although the GDP rate of
Mexico and the growth rate are higher than Norway, it scores less in economic freedom,
which is not favourable for the business organization. As the economic freedom in Norway is
higher than Mexico, this situation makes it favourable for business expansion in Norway.
Considering the social lifestyle of the people, it can be seen that Norwegian people are more
inclined towards outdoor activities, they have modernized lifestyle (Ravneberg and
Söderström 2017). Majority of the people lives in urban areas. This makes it favourable for
Lidl to expand its business operations in the Norway. Further, Norway is technologically
advanced country, which provides greater scope for the business organization to further
develop its products and innovate them. The Norwegian people are also technologically
advanced, majority of the population living in the country, using internet for daily activities.
However, both the countries are equally advanced in technology. Moreover, the laws and
regulations of Norway are clearly defined and highly efficient. This facilitates invention and
innovation. Norway has high monitory stability, which is also favourable for business
organizations. The country is least corruption with its well-established laws and regulations
regarding its anti-corruption policies (Cooke 2016). On the other hand, acquiring license in
Mexico is challenging for the company due to its rigid governmental policies and procedures.
Both the countries Have policies concerning environmental taxes and value added benefits.
Norway has rigid laws and regulations to mitigate environmental damages caused by the
business organization. Therefore, the business organization needs to adhere to the business

6ANALYSIS OF LIDL IN INTERNATIONAL MARKET
laws and regulations (Valtakoski, et. al 2019). Considering the above-mentioned factors, it is
evident that Norway is best suited for business expansion. Even though the GDP of Mexico is
higher and it is a growing country, it does not have economic freedom. Low rate of political
corruption in the Norway along with other factors such as favourable economic and social
situation makes the country suitable for business expansion. The technologically advanced
situation in the country makes it favourable for the business organization (Mariussen, Nguyen
and Løvland 2018). These facilities in the country can positively influence the business
organization and enable it to grow and expand its operations. As identified in the scoring
system, Norway scores higher in the overall score, which indicates that the country is
favourable for business expansion. The government of Norway also supports foreign direct
investment and provides strong protection to the business organizations operating in the
country. The judicial effectiveness of the country and low corruption perception index
indicates that Norway is favourable for the expansion. Most importantly, the tax rate in
Norway is low as compared to Mexico. The corporate tax rate of the country has also been
decreased to 23 %, which ensures favourable business environment. Norway is a modern
country with a strong and stable economy. Business opportunities in the country are high as
compared to Mexico (Dheer 2016). The country is one of the leading countries in maritime,
technology, telecommunications, environment, and energy. Further, foreign companies also
have unrestricted access to the markets through its EEA agreement. The Norwegian culture is
highly impacted by Denmark, the citizens of the country strive to individualize and refine
them, hence makes it favourable for business expansion.
Task 3: Five Force Analysis Competitive Environment of Norway
The five force model is developed by Porter and it is used to analyse the factors that
affect the industry and the profitability of a business in that industry. The five forces of

7ANALYSIS OF LIDL IN INTERNATIONAL MARKET
proposed are the Bargaining Power of Supplier, Bargaining Power of Buyers, Threat of New
Entrants, Existing Competition and Threat of Substitute.
 Bargaining Power of Suppliers: The power that the suppliers have on in the
industry is low as there are many suppliers that are present in the market. The
cost of switching from one supplier to the other is also low and thus the power
of suppliers is weak. The company, Lidl, though must conduct proper market
research and have knowledge about the market to gain more power over the
suppliers (Colla 2003). The less the company has dependency on the suppliers
the more the power the company has.
 Bargaining Power of Buyers: The power that the buyer has in the market is
high because of the presence of many other alternatives that the consumers
can choose from. The consumers prefer the products to be of a high quality,
though being at a cheaper price (Hardake 2018). The availability of cheaper
alternatives in the market makes it easier for the consumers to switch and thus
the power that they have is more than the company. The company can reduce
the bargaining power of the consumers by gaining more consumers and
providing better quality of products and services.
 Threat of New Entrants: The threat of new entrants is high as the new
entrants bring an array of new innovations in their product and services. The
newer innovations threatens the profit and the sustainability of the companies
that are existing in the company (Tomasevic and Spasojevic 2018). The
difficulty arises in maintain the economies of scale and are difficult to
maintain and attain and the stable economy and the flexible rules for entering
the market make it easier for new companies to enter into the market. The cost
advantage that is there makes it easier and more efficient to manufacture

8ANALYSIS OF LIDL IN INTERNATIONAL MARKET
cheaper in the country. The capital requirement though is huge and the new
entrants have to incur a huge cost to enter the market. Thus, it can be said that
the threat of new entrants is huge for Lidl.
 Threat of Substitutes: The threat of substitutes is high as there are many
cheaper alternatives that are available to the consumers (Klimek and Hansen
2017). The increasing of substitutes also increases the competition in the
market place. The consumers have more scope to choose from an alternative
that brings them much more value and helps them meet their needs and
requirements (Lenard 2017). The cost of switching of a consumer is low thus,
they can easily choose from many options that are available to them. The more
the substitutes that a company has the less the loyalty of the consumers is.
However, the company, Lidl, offers the consumers with innovative and
specialised services at a cheaper price to gain a competitive advantage over
the other companies that are present there in the market place.
 Existing Competition in the Market: The threat of existing companies in the
market is high for Lidl. There are many players that are there who offer a
variety of products and services at a much cheaper cost, which becomes a
major risk for the company. The action of a firm in the competitive
environment affects the actions of other firms in the industry. The grocery
industry of the country, Norway, has increases by 4.2% since the past years
(Grønland 2019). The growth rate of the grocery retail chains is predicted to
grow more in the coming years. The retail supermarkets and hypermarkets
have been known to dominate the market with more than 84% share
(Gulanowski, Papadopoulos and Plante 2018). Thus, it can be concluded that
there is a higher level of competition in the industry. The leading market

9ANALYSIS OF LIDL IN INTERNATIONAL MARKET
player in the country is Norges Gruppen and there is a huge level of
competition in the industry.
Task 4: VRIO Framework, Evaluation of Resources and Capabilities of
Lidl
The VRIO framework can be used to analyse the internal capital and the resources
that a business organisation has. The framework can be used to identify the competitive
advantages and implications that the business has during the stages of expansion. The VRIO
analysis of Lidl aids in understanding the stages of the resources that can be used to improve
the competitive advantage of the company.
 Valuable: The financial resources that the business has is of high value and
will aid the business in expanding and operating in Norway. The food
products that are there are of high quality is much more cheaper. The services
and products that are offered is of high value for the company (Góis 2018).
The company has highly trained workforce and that also provides a great
value to the consumers. The patents also provide a competitive edge to the
company.
 Rarity: The financial resources and the strong financial position that a
business has is rare and this position is what helps in determining the rare
services that the company offers to the consumers (Johnsen, et. al 2016). Lidl
though as a company does not offer any rare or differentiated products and
thus the rarity of the company is not that huge. The compensation policies that
is offered by the company towards the employees is also rare.
 Imitable: The resources that the company has in terms of finance is not
imitable by the other companies and the substitutes that are there in the

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market, yet the products and services that are sold by the company is not rare,
thus, can be imitated by the other companies easily (Góis 2018). Through the
research and development, that a company does makes it easier for them to
copy the products that the Lidl sells. The strategies that Lidl applies can also
be easily copied and imitated by the other companies that are there in the
market place. However, the patents the company has makes it difficult to
imitate.
 Organisation: The financial resources that the company has is a competitive
advantage for them. The strategies if utilised in an efficient manner can also
become an advantage for the company and can aid them in investing in the
right places. The patents that Lidl has are not well organised and thus can
become a threat for them.
Task 5: Critical Evaluation of Various Modes of Entry
There are many ways that can be analysed for the expansion of the business in the
foreign market. All the market entry modes have many advantages and disadvantages. The
modes of entry are described below:
 Direct Exporting: The direct exporting is the selling of the products and
services directly in the market by using the resources of the company. This
method is considered to be of the best and easiest way to enter into a foreign
market. The exporting of the goods also avoids the expenses that the company
has to bear in the established target country. These are the selling of goods on
a contractual basis with the local companies (Fernandes, Gouveia and Pinho
2014). The level of risk involved is relatively low, however the company can
be affected negatively if there is low level of knowledge about the local

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market. From the above analysis it can be seen that direct export can be
something that is good for the company. The mode of entering the country by
Lidl on the basis of the competitors and substitues that are present in the
market should be direct exporting as it will help them in having a brand
identity for themselves as well as understand the local markets.
 Franchising and Licensing: The term licencing can be described as
transferring the rights to the other local firms for them to sell their products
and services. The strategy of licencing when used by the business can help
them have a larger market share (Munkejord 2015) . Franchising is also
helpful in gaining the tractions in the foreign market. There is huge risk
involved in this method as the licensee can become a competitor and disrupt
the business.
 Partnering: This involves forming a partnership with the business that are
local. It can be considered to be a necessity for a company when it enters a
foreign a market (Selimi and Zekiri 2017). This reduces the risk as it is shared
with the partner. The cost involved in this is though huge and there might also
be a problem in integration of companies.
Chosen Mode of Entry
The chosen mode for entry for Lidl in the Norwegian market is the direct mode of
selling considering all the advantages and the disadvantages. The company by using this
mode of entering can sell to the consumers directly by using the resources it owns, in terms of
finance, capital and labour (Selimi and Zekiri 2017). The strong financial position of the
company makes it much stronger for the company to use this method of entering into the
market and can also be used by them to have a sales program that is entirely their own. The
local agents can be used by Lidl to express the motives and interest of the company to the