Strategic Analysis of LIDL's International Market Expansion Plans

This report provides a strategic analysis of LIDL supermarket, focusing on its international expansion plans into Mexico and Norway. The analysis employs the PESTEL framework to evaluate the political, economic, social, technological, legal, and environmental factors of each country. The rationale for selecting these markets is explored, highlighting Mexico's growing economy and Norway's strong economic stability. A comparative analysis of the two markets is presented, considering factors such as political stability, economic growth, social demographics, technological advancements, and legal frameworks. The report concludes with a comparative strategic analysis, providing a detailed scoring system across various PESTEL criteria, aiding in informed decision-making for LIDL's international business strategy. The report also discusses the impact of technology on consumer behavior and business operations in both markets.

Strategic International Business Management 1
STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
BY
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Instructor
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Strategic International Business Management 2
LIDL SUPERMARKET
INTRODUCTION
Within the last few years, LIDL has grown tremendously. As early as 2010, the shares of the
market had grown by 17% in its retailing of groceries alone. Many research activities have
analyzed the company’s operation mechanisms and concluded that LIDL would still perform
good several years to come since it uses the traditional retailing technique. Apart from that,
the company employs a dynamic yet simple logistics and supply chain network. It is the belief
of LIDL that it could increase its success levels by reducing SKU numbers in its ranges of
logistic products compared to those of Walmart and Tesco. The lines of products that LIDL
has selected are those that are widely employed (Alder, 2016). Otherwise, LIDL is planning to
expand its operations in two major markets in the names of Mexico and Norway. Before
expansion into the named markets, LIDL is planning to undertake a thorough strategic
analysis to determine strengths and weaknesses of the two. By so doing, the company, through
this activity, shall compare and contrast Mexico and Norway as potential markets using a
number of analysis tools (Alvesson, 2012).
RATIONALE OF SELECTION OF MEXICO AND NORWAY AS
NEW TARGET MARKETS
In this case, the paper will recognize the use of Comparative PESTEL Analysis to help in
developing the intended strategic analysis and rationale of selection.
i) Mexico
Mexico as a country is located in the southern regions of North America. The country covers
around 1,972,450 sq. kilometer with a population of over 112,400,855. The Mexican language

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is Spanish. The capital of Mexico is Distrito Federal and the city is recognized for its
socialism, athleticism, and diverse cultural aspects (Bernard, 2011).
Political Factors: LIDL has established that the political subdivision of Mexico encourages
the understanding of the country’s system of politics. In the country, “federal authorities”
have the mandate to enforce law statutes with actions of such federal authorities influencing a
big figure across provincial boundaries. Apart from that, the country’s tax rates vary from one
province to another with local authorities affecting such patterns (Chatman and Eunyoung,
2013, pg. 11). Issues on poverty are caused singly by political and geographic factors. The
country has a political-economic system that creates a sense of poorness. Apart from that, the
government applies World Bank and The International Monetary Fund that accommodate
most business (Bruce, 2016).
Economic Factors: In Mexico, economic impacts differs from one industry to the other.
Otherwise, FDI (Foreign Direct Investing) in the country has increased with time from $ 14
billion in 2009 to $ over 21 billion in 2017. The World Bank recognizes the country as one of
the upper-middle-income states (Knapp, 2006). However, about 44% of the Mexican
population is poor and thus, a high rate of economic growth is required to leverage the country
from the situation. Contrarily, the country has grown with a mean rate of 4% within a period
of one year. The country is also U.S.’s third largest trading spouse and second-largest export
market. The table below shows the economic outlay of Mexico in 2017:
GDP (official rate of exchange) Approx. $ 3trillion
GDP Per Capita Approx. $ 18,590
Annual existent GDP growth Approx. 7%

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Rate of inflation Approx. 7.1%
Natural resources Natural gas, lumber, lead, Zn, Cu, Ag,
Petroleum
Goods (trade) Exports: Approx. $500 billion
Imports: Approx. $ 250 billion
Social Factors: According to the findings of LIDL, social subdivision helps in creating
understanding on the demographics of customers in the country through such segments as
rural-urban cleavage, distribution of income, richness centers, level of education, and health
care facilitation. Around 77% of Mexicans live in urban areas with many Mexicans
emigrating from countries that lack occupation chances. Cites that are close to the US like
Tijuana and the rest experience rise in population because of increased business opportunities
(Kroeber, Kluckhohn and Untereiner, 2015).
Technological Factors: LIDL has established that subdivision on technology is a way of
establishing useful information regarding the country’s telecom and engineering levels. On
the same, Mexico’s cooperation with the US on issues around the 2,000-mile boundary line
has helped the country in planning for transit, provide solutions to environmental concerns, as
well as create economic wellness (Louis, 2017). Technology has also changed the purchasing
form of consumers as well as their general lifestyles. The use of personal computers has
encouraged online purchasing of goods and services. Manufacturing of merchandise also
currently involve the use of new technologies thereby increasing product quality as well as
service efficiency (Learning Business, 2009).

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Legal Factors: The legal outlay as well as corporate contractions of Mexican firms depend on
a number of legal factors. For instance, Mexico’s legal environment is structured in a manner
that it specifies the kind of business firms that can or cannot operate in particular areas. A
number of U.S. regulative bureaus affect business operations in the country. Such institutions
include EPA (Environmental Protection Agency), OSHA (Occupational Safety and Health
Administration), EEOC (Equal Employment Opportunity Commission), and SEC (Securities
and Exchange Commission). According to the fundamental law of 1917, the country must
have a federal democracy in which powers are separated into three main arms, the legislative
arm, the executive, as well as the judiciary. On the other hand, conformity costs estimates
vary and are likely to transcend to about $100 billion every yearly. Most of such costs are
broken down to consumers (Louis, 2017).
Environmental Factors: The business environment of Mexico encourages cooperation.
However, its physical outlay and environmental conditions includes a number of factors such
as environmental sustainability and encouragement of industrialization and urbanization
(Business Management, 2017a).
ii) Norway
Political Factors: The political system of Norway, like those of its Nordic neighbors is
traditional and in the form of a constitutional hereditary monarchy. The country’s parliament
is elected via a proportional system after every 4 years. On the other hand, the country is
politically stable, highly developed and modernized because of a very strong economy. Apart
from that, the company has a strong foreign investment growth for the past five years
(Business Management, 2017a).

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Economic Factors: The main economic activities in Norway is exploitation of natural
resources that includes hydroelectric power, petroleum, and fishing. The economy’s GDP has
also grown from $500 billion in 2014 to about $800 billion in 2017. On the contrary, the GDP
per capita is currently at an approximation of $80,000. Apart from that, Norway is one of the
richest countries worldwide in terms of GDP per capita. The country also has its public
finances boosted by revenue generated from the petroleum sector (Business Management,
2017b).
Social Factors: Norway is also considered as one of the world’s most beautiful countries. It
has several attractive sites such as the midnight sun and mountains as well as Fjords. The
country is also known for the natives’ vibrant cultural lifestyles. The cities are as well
cosmopolitan and therefore, full of stunning Scandinavian architecture. However, the country
is sensitive to global business cycles. On the contrary, the economy of the country has
experienced robust growth over a short period. The standard of living in the country is high
compared to other countries in Europe. Such is because the government adopts a strong,
integrated welfare system (Business Management, 2017b).
Technological factors: Like Mexico, technology has also done a lot in the enhancement of
business operation in Norway. As LIDL establishes, customers will go for online inventories
and stores instead of physical locations. Otherwise, clients could make online bookings of
products and request for delivery or use maps to locate best stores.
Legal Factors: Norway’s legal framework is traceable to the Land Registration Act (2005)
and the Division Act of 1995 all of which determine the registered cultural heritage of the
country. Apart from that, since Norway is part of the EEA (European Economic Area), it has
adopted the INSPIRE initiative. Such means that there are particular laws, some of them

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business laws that the country has to implement. Trade in the country is therefore, made easy
(Pettigrew, 2015, pg. 571).
Environmental Factors: The government of Norway is highly aware of international and
domestic environmental concerns. Some of the challenges that the government is trying to
fight include exposure to water and air pollution because of emissions from neighboring
nations. Otherwise, the country has assumed a major role in the context of international
environmental protection (McKenna, 2012).
COMPARATIVE STRATEGIC ANALYSIS OF SELECTED
MARKETS
A. Political Factors (Explanation of Criteria)
Mexico, according to LIDL, is composed of, “federal authorities” with the mandate of
enforcing law statutes and influencing a big figure across provincial boundaries. Mexico also
has tax rates that vary from one province to another with local authorities affecting such
patterns. The country is also faced with issues on poverty that are caused singly by political
and geographic factors. Norway on the other hand, has a traditional political system.
However, the country is politically stable, highly developed and modernized because of a very
strong economy. Figure 1 in the appendix gives an analyzed scoring system for political
factors affecting both countries.
B. Economic Factors (Explanation of Criteria)
As mentioned before, economic impacts in Mexico differs from one industry to the other. On
the contrary, the country has FDI (Foreign Direct Investing) policy which has helped in

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realizing an increase in foreign investment from $ 14 billion in 2009 to $ over 21 billion in
2017. Contrarily, the country has grown with a mean rate of 4% within a period of one year.
Norway, on the contrary, has an economic GDP growth from $500 billion in 2014 to about
$800 billion in 2017. The current organization’s GDP per capita is approximately $80,000.
Apart from that, Norway is one of the richest countries worldwide in terms of GDP per capita.
Figure 2 in the appendix gives an analyzed scoring system for economic factors affecting
both countries.
C. Social Factors (Explanation of Criteria)
In Mexico, LIDL finds out that around 77% of Mexicans live in urban areas with many
Mexicans emigrating from countries that lack occupation chances. Cites that are close to the
US like Tijuana and the rest experience rise in population because of increased business
opportunities (Tamang, 2013). On the contrary, Norway has a beautiful nature with several
attractive sites such as the midnight sun and mountains as well as Fjords. Apart from that, its
people have vibrant cultural lifestyles. In addition to that, the cities are as well cosmopolitan
and therefore, full of stunning Scandinavian architecture. Figure 3 in the appendix gives an
analyzed scoring system for social factors affecting both countries
D. Technological Factors (Explanation of Criteria)
According to LIDL’s strategic analysis report, Mexico’s cooperation with the US on issues
around the 2,000-mile boundary line has helped the country in planning for transit, provide
solutions to environmental concerns, as well as create economic wellness. Apart from that,
Mexico’s level of technology has changed the client’s perception on purchasing. On the
contrary, Norway’s technological advancements has encouraged business operations a great

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deal. Customers have gone for online inventories and stores instead of physical locations.
Otherwise, clients could make online bookings of products and request for delivery or use
maps to locate best stores (PMA, 2017). Figure 4 in the appendix gives an analyzed scoring
system for technological factors affecting both countries.
E. Legal Factors (Explanation of Criteria)
In Mexico, the legal outlay and corporate contractions of Mexican organizations depend on
the company’s legal environment to operate in particular regions. Apart from that, there are a
number of regulative bureaus affecting business operations in the country. They include the
EPA (Environmental Protection Agency), OSHA (Occupational Safety and Health
Administration), EEOC (Equal Employment Opportunity Commission), and SEC (Securities
and Exchange Commission) (Poetism, 2017). In Norway, however, the legal framework
determines the registered cultural heritage of the country. Apart from that, being part of the
EEA (European Economic Area) makes Norway eligible for adopting the INSPIRE initiative.
Such means that there are particular laws, some of them business laws that the country has to
implement that makes trading easy (PMA, 2017). Figure 5 in the appendix gives an analyzed
scoring system for legal factors affecting both countries.
F. Environmental Factors (Explanation of Criteria)
As mentioned before, the government of Norway is highly aware of international and
domestic environmental concerns. Therefore, it is fighting to alleviate exposure to water and
air pollution because of emissions from neighboring nations. On the contrary, Mexico’s
business environment encourages cooperation. Otherwise, Mexico’s physical outlay and
environmental conditions includes a number of factors such as environmental sustainability

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and encouragement of industrialization and urbanization (PMA, 2017). Figure 6 in the
appendix gives an analyzed scoring system for legal factors affecting both countries.
COMPETITIVE INTENSITY OF LIDL IN NORWEGIAN AND
MEXICAN MARKETS
This analysis section will employ the 5-Factors model to determine the competitive intensities
of LIDL in the Norwegian and Mexican markets.
MEXICAN NORWEGIAN
i) Threats of New
Entrants
LIDL is likely to face competition
from Walmart and Coppel.
Approximately 2/3 of retail sales in
Mexico occur in supermarkets and
grocery store therefore, it cannot be
more surprising to see new entrants
as well as most targeted retail chains
start as convenience stores and
hypermarkets selling retail products
a seen in the case of Coppel store
chain.
New companies have cropped.
For instance, Norges Gruppen
that joined the market recently
has established 2,000 retail
outlets. It also has a market share
of about 43%. It is therefore the
biggest market threat in Norway.
ii) Substitute Products/
Services Threats
Low-income individuals in Mexico
are likely to go for cheaper foodstuff
and other retail goods in grocery
stores. Therefore, sustaining business
Norway has traditional centers
for purchasing goods. However,
with the advent of online stores,
most companies have created

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growth would require business
operators such as LIDL to be more
innovative with the kind of products
they sell. They should consider the
value of price against quality to
succeed in such a market.
specialized chains and products
that are alternatives to the
traditional products. Such
products are in the line of
electronics, clothing, building
supplies, and books among
others (Wolfe, 2018).
iii) Bargaining Power of
Customers
Most Mexican consumers have their
lives blurred by lots of activities and
thus, need products that save their
time as well as help them gain lots of
control. They would therefore,
advocate for retail products that help
them in such ways.
The Norwegian customers have
a sense influencing whatever
they would like to buy.
Therefore, they require perfect
products. In other words, their
need for quality rather than
quantity is likely to affect their
pattern of buying. Companies
should therefore, sell good that
are value-oriented to capture the
attention of clients.
iv) Bargaining Power of
Suppliers
In Mexico, suppliers compete for
profits from companies. As a result,
they charge more for the inputs they
make. Such is also as a result of no
exclusive territories, advertising,
Norwegian market is aggressive
towards ensuring economic
growth and thus encourage sales
optimism and direct selling.
Suppliers then have easy time

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financing, and displaying. going for the right companies at
the correct prices.
v) Competitor Rivalry The Main market rival that LIDL is
likely to face in this market is
WALMART. The chain store is well
established in several countries
including the United States
(Lombardo, 2017).
Around 85% of individuals in
Norway are active users of social
networks. Therefore, companies
such as Coop Marked have
established dedicated online
buying and selling services with
door-to-door deliver and thus
have captured more than 70% of
the market.
ANALYSIS OF INTERNAL ENVIRONMENT OF LIDL
The management of international businesses require attention in two major arears, supply
chain and logistics operations. On the same, LIDL realized that small lines of production
provide significant assortment with around 80% of general sales generated by private labels.
Such logistic strategies create more room for storage, worker productivity, and better
management of inventories (Schein, 2015). Yet there is another vital aspect of logistics
management and supply chain that has inculcated much success for LIDL. Such is the
employment of a dense distribution network alongside outlets that are highly standardized
worldwide. No matter where the company ventures next, it will employ a similar strategy for
its supply chain and logistics management (Poetism, 2017).