Strategic Analysis and Market Entry for Lidl: Mexico and Norway

This report provides a strategic analysis of Lidl's potential international expansion, specifically focusing on market entry into Mexico and Norway. It begins with a comparative macro-environmental analysis using PESTEL factors to assess the political, economic, social, technological, environmental, and legal environments of both countries. The report then employs Porter's Five Forces model to evaluate the competitive landscape of the retail industry in Norway, assessing competitive rivalry, bargaining power of buyers and suppliers, and threats of substitution and new entry. Furthermore, the VRIO framework is applied to assess Lidl's internal resources and capabilities, particularly its strong global presence. Finally, the report discusses potential modes of market entry for Lidl, based on the findings of the preceding analyses. The report is a comprehensive overview of the factors influencing Lidl's strategic decisions in international business expansion.

Running head: STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
Strategic International Business Management
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction:...............................................................................................................................4
Comparative Macro environmental Analysis:...........................................................................4
Political:.................................................................................................................................4
Economic:..............................................................................................................................5
Social:.....................................................................................................................................5
Technological:........................................................................................................................6
Environmental:.......................................................................................................................6
Legal:......................................................................................................................................7
Five Forces Model:....................................................................................................................7
Competitive Rivalry:..............................................................................................................7
Bargaining Power of Buyers:.................................................................................................8
Bargaining Power of Suppliers:.............................................................................................8
Threat of Substitution:............................................................................................................9
Threat of New Entry:.............................................................................................................9
VRIO Framework:...................................................................................................................11
Strong Global Presence of the business entity:....................................................................11
Pricing Strategy:...................................................................................................................12
Modes of Market Entry:...........................................................................................................13
Conclusion:..............................................................................................................................14
References:...............................................................................................................................16
Appendix:.................................................................................................................................19

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3STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
Introduction:
The initiation of the global business processes is seen to be one of the top most
growth consideration for the business entities operating in the modern world of trade.
However, the sustainability of the business entities is expanding their business processes is
seen to be reliant on on the excellence of feasibility analysis of the organizations (Lozano
2015). In such situation, the significance of different feasibility analysis tools such as Porter’s
Five Forces analysis, PESTEL analysis or SWOT analysis is seen to be notably high (Sarsby
2016). The study is based on the evaluation of the market feasibility associated with the idea
of business expansion of a selected organization named as Lidl. The study assesses the macro
environmental factors that can affect the success of the organization in expanding their
business operations to Mexico and Norway. In addition to this, the study evaluates the
competitive nature of the market with the utilization of Porter’s Five Forces model. Other
than this, the study provides an important assessment on the resources and capabilities of the
business entity with the application of the VRIO framework. With a detailed understanding of
the outcomes of the above mentioned analysis, the study provides an important discussion on
the probable modes of market entry that the organization is expected to use for their business
expansion.
Comparative Macro environmental Analysis:
Political:
Mexico is observed to be affected with considerably high corrupted political situation
where the political leaders and the ones on power, are seen to have an increased tendency of
taking bribes for their personal benefits (López-Alonso and Vélez-Grajales 2017). On the
other hand, Norway is seen to have a stable political situation. Norway is regarded as

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Scandinavian unitary constitutional monarchy. The political leaders and the governmental
framework of the nation is seen to reflect a great level of transparency in their administrative
activities (Caselli and Tesei 2016). Most importantly, the government of the nation is
prioritizes the needs of their citizens more than anything else which increases their
acceptance level amongst the citizens. Hence, it is understandable that Norway is
comparatively more feasible country for the expansion of the business actions of Lidl.
Economic:
With a precise look at the economic condition of Mexico, it is visible that estimated
total GDP (PPP) of the nation is 2.628 trillion US dollars in 2019 (Tradingeconomics.com.
2020) whereas the estimated total GDP (PPP) of the Norway was 397 billion US dollars in
2018 (Tradingeconomics.com. 2020). On the contrary, the estimated total nominal GDP of
the Mexico is 1.274 trillion in 2019 (Ceicdata.com. 2020.) whereas the estimated total
nominal GDP of the Norway was 443 billion in 2018 (Ceicdata.com. 2020). Considering the
economic condition, Mexico appears to be a comparatively larger market for the selected
organization.
Social:
Considering the social factors, it is clear that Mexico is largely affected with severe
impact of the poverty and at the same time, the low employment rate of the country is seen to
put direct impact on the law and order of the nation which is evident with the increment in the
number of criminal cases taking place in the nation (Beittel 2015). On the other hand,
Norway is seen to have a stable law and order situation in the nation. The citizens of the
nation are seen to earn sufficient amount of money which contributes to their ability in living
peacefully and that is one of the prime factors that increases the quality of the life style of the
people of the nation. Hence, Norway is a suitable choice for the business entity for expanding
their business operations.

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Technological:
The high score of 0.767 in the Human Development Index of Mexico signifies
improvement in the rate of literacy and education (Hdr.undp.org. 2020). As a result, the
technological acceptance of the people of the nation is increasing in a notable manner and
that can be utilized by the business entity for sustainable management of their business
operations. In comparison of Mexico, Norway is seen to have a higher score in the Human
Development Index which signifies the increment in the education level and literacy rate of
the nation (Hdr.undp.org. 2020). The increment in the literacy rate of the nation reflects the
improvement in the capability of the general public of the nation in controlling the
technological gadgets and technological advancement which places the business entity in a
better position in conducting the technology based marketing and promotional activities in
sourcing skilful and experienced employees.
Environmental:
The base of the environmental legislation In Mexico is General Law of Ecological
Balance and Environmental Protection. The legislation is observed to play a major role in
limiting the emission of the toxic substances along with other pollutants from the commercial
and non- commercial business houses operating in the nation. On the other hand, the
formulation of the environmental legislation of the Norway is seen to be well designed for
reducing the wastages, water pollution, soil pollution, land pollution and air pollution in the
nation. The governmental agencies of both the countries are considerably strict in enforcing
the compliance of the profit and non- profit organizations with the environmental guidelines
and legislations of the country.

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Legal:
With a precise consideration towards the legislative structure of Mexico, it is visible
that the Mexican Federal Labour Law is seen to be well designed for management of the
employment relations in the mainstream organizations operating in the region (Gtlaw.com.
2020). The legislation plays a pretty significant role in managing the remuneration
characteristics, work time characteristics, rewards, performance evaluation along with the
workplace health and safety of the employees. On the other hand, the Working Environment
Act 2005, the Labour Disputes Act 2012, Equity and Anti- Discrimination Act, Annual
Holiday Act, Personal Data Act and Act Relating to the Industrial Injury Insurance are
recognize as the backbone of the employment relations managed by the business entities
operating in the Norway (Ilo.org. 2020). The legislations educate both employers and
employees regarding the suitable tactics for the management of the working environment,
employment dispute cases, anti- discrimination, employee privacy, probable holidays along
with the workplace safety and security of the employees. From the diversified composition of
the legislations, it is understandable that the selected organization have comparative better
feasibility in expanding their business actions to Norway than that of Mexico.
Five Forces Model:
Competitive Rivalry: High
With a detailed emphasis on the retail industry of Norway, it is understandable that
there are considerable number of retail organizations operating in an efficient manner in the
nation. The strong presence of the business entities such as the Rema 1000, Coop, Kiwi,
Bunnpris and Meny are observed to be pretty significant in stating the intensity of the
business competition in the nation (Rema.no 2020). In addition to this, the considerably high
number of outlets of the mentioned business entities is one of the important factors that

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increase the reach of the business entities to their customers. Apart from this, majority of the
mentioned organizations are observed to apply competitive pricing policy to gain the cost
leadership in the nation and that also contributes to the enhancement of the competition in
Norway retail market. Apart from this, the diversified product offerings of the business
entities are regarded as one of the important factors that increase the level of competition in
the nation. As a result, it is visible that the retail market of Norway is facing an absolute level
of competition which has the potential to affect the smooth management of the business
operations of the Lidl.
Bargaining Power of Buyers: High
Considering the condition of the retail market of the nation, it is understandable that
there are sufficient number of organizations to meet the demands of the customers. In
addition to this, the excellent capacity of the business entities in utilizing low pricing for their
products is a unique proposition for the customers and that certainly increases the number of
possibilities of the customers to purchase from (Lidl.com. 2020). Apart from this, the
substantial product offerings of the business entities increases the scope of the customers in
finding out their desired products which increases the ease of the customers. Other than this,
the Rema 1000, Coop Norge AS and Kiwi are observed to have strong reputation of
delivering top quality products to their customers and that certainly increases the scope for
their customers in obtaining efficient services from a handsome number of business entities.
Hence, it is obvious that the customers of the Norway retail market have a high level of
bargaining power which can affect the business doings of Lidl.
Bargaining Power of Suppliers: Low

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Looking at the substantial numbers of suppliers operating in the mentioned nation, it
is understandable that the organizations are subjected to a considerably low level of
bargaining power from their suppliers. The suppliers operating in the retail market of the
nation are seen to provide significant discounts to the business entities in case the business
entities purchase their products in bulk. In addition to this, the supplier organizations are
observed to have the ability to supply their products on time, accurate quantity and of
optimum quality. Along with that, the supplier organizations have the practice of following
the suppliers’ code of conduct which enables the business entities in sourcing ethically and in
an eco- friendly manner (Smith and Thanassoulis 2015). Hence, Lidl is expected to find a
high share of ease in managing their supply chain operation in the Norway market.
Threat of Substitution: High
Considering the excellent ability of the business entities such as Rema 1000, Coop,
Kiwi, Bunnpris and Meny in delivering top quality products to the customers, offering their
products at considerably low prices and offering diversified products to meet the
differentiated needs of the customers, the options left for the customers in purchasing their
products from a particular organization is seen to be notably high. As a result, the threat of
substitution for the business entity, Lidl is expected to be high as well.
Threat of New Entry: Moderate

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(Information: Sales volume of total retail trade in Norway from 2008 to 2018 (as index))
(Information Courtesy: Statista.com. 2020)
From the sales volume statistics of the retail trade in Norway, it is understandable that
the organizations that are operating in the industry are subjected to a stable business growth.
The stability in the sales volume numbers of the nation is strongly momentous in persuading
the new business organizations in entering the mentioned market (Statista.com. 2020). On the
other hand, the substantial requirement of the financial investment for the creation of the
compulsory infrastructure, allocation of the human resources for the management of their
business operations in Norway and the difficulty associated with the creation of an attractive
brand image in the nation, are the factors that demotivates the new business entities in
entering the retail market of the nation. As a result, Lidl is exposed a moderate level of threat
of new entries in the nation.

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VRIO Framework:
Strong Global Presence of the company:
Lidl is regarded as one of the top most German discount supermarket chain operating
in the world of retail business. The organization was established in 1930 and has
continuously strengthened their presence in the global market in an efficient manner. Having
said that, one of the capabilities that place the organization in perfect position for gaining the
competitive advantage is development of their strong presence in the retail world. The
business entity is currently operating in 28 different countries which includes developed
markets such as Austria, Belgium, Czech Republic, France, Latvia, Poland, Spain, United
Kingdom and United States. In these countries, the business entity is able to establish more
than 10800 number of outlets which is substantial for the ability of the business entity in
reaching out to their customers in different parts of the globe (Lidl.com. 2020).
As the strong presence of the business entity enables it to reach out to the customers
with their product offerings, the strong presence of the business entity is to be regarded as
valuable. In addition to this, the development of such diversified store presence requires
considerable amount of monetary investment from the part of the shareholders or owners of
the business entities. As a result, it is costly for the other organizations to imitate the same.
Having said that, the structure of the higher authority of the business entity is seen to be well
organized for utilizing such differentiated store presence for increasing the sales of their
products and for earning larger number of profit. The extensive investment from the part of
the shareholders of Lidl for the creating of such strong store presence across the globe is rare
amongst the modern mainstream business entities operating in the world.

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Pricing Strategy:
With a detailed consideration towards the pricing of the products of Lidl, it is
understandable that the organization is inclined towards the application of low pricing
strategy for their products and services. A detailed look at the policies of the business entity
is effective in understanding the urge of the senior management of the business entity in
targeting the customers of all income levels for the products and services (Lidl.com. 2020). In
the meantime the business entity is seen to be determined in creating a cost leadership in the
global retail market and the reflection of the determination is pretty prominent from the
utilization of the low pricing strategy from the part of the business entity. As the application
of the low pricing strategy for the products and services of the business entities is placing the
organization in a suitable position for attracting a greater number of customers, it requires to
be considered as valuable from the part of the organization.
However, there are several organizations operating in the global retail industry that
have applied the low pricing for their products such as Walmart and at the same time, such
business entities are also present in Norway as well. As a result, the mentioned competency
of the organization is not rare. Having said that, the business entities that are seen to utilize
the mentioned resources are observed to be well supported from the part of their shareholders
as it requires a great share of monetary investment. Hence, the achievement of the mentioned
competency is costly to imitate for the other organizations. From the sales statistics of the
business entity of 2018, it is understandable that the organization is able to utilize their low
pricing strategy for their benefits in an efficient manner and that is prominent with the
enhancement of the sales of the products of the business entity (Statista.com. 2020). The
achievement of the business entity in increasing their sales is a clear reflection of the well
organization and utilization of the mentioned resource.