Strategic International Business Management Report: Lidl Super Stores

This report provides a comprehensive analysis of Lidl's international expansion strategy, with a specific focus on the Canadian market. The analysis begins with a PESTLE analysis to assess the political, economic, social, technological, legal, and environmental factors influencing Lidl's potential success in Canada, ultimately recommending Canada as the optimal market. The report then delves into an examination of the opportunities and threats facing Lidl using Porter's five forces framework, assessing the bargaining power of suppliers and buyers, the threat of new entrants and substitute products, and competitive rivalry within the Canadian retail landscape. Internal strengths and weaknesses are evaluated, covering resources, core competencies, organizational technology, capabilities, functional areas, organizational culture, and value chain activities, culminating in a VRIO analysis. Finally, the report explores various modes of entry into the international market, including direct and indirect exporting, licensing, franchising, wholly owned subsidiaries, and joint ventures, ultimately recommending a suitable mode of entry for Lidl's expansion into Canada. The report concludes with a summary of key findings and recommendations.

Lidl Super Stores
Strategic International Business Management
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Table of Contents
Introduction......................................................................................................................................3
Rationale behind Selection of Chosen Market................................................................................3
Political Factor.............................................................................................................................3
Economic Factor..........................................................................................................................3
Social Aspect...............................................................................................................................4
Technological Aspect..................................................................................................................4
Legal Aspect................................................................................................................................5
Environmental Aspect.................................................................................................................5
Summary......................................................................................................................................5
Opportunities and Threats................................................................................................................5
Bargaining Power of Supplier.....................................................................................................6
Bargaining Power of Buyers........................................................................................................6
Threat of New Entrants................................................................................................................6
Threat of Substitute Products.......................................................................................................7
Competitive Rivalry.....................................................................................................................7
Summary......................................................................................................................................7
Strengths and Weaknesses...............................................................................................................8
Resources.....................................................................................................................................8
Core Competencies......................................................................................................................8
Organizational Technology.........................................................................................................8
Capabilities..................................................................................................................................9
Functional Areas..........................................................................................................................9
Organizational Culture.................................................................................................................9
Value Chain Activities.................................................................................................................9
VRIO Analysis...........................................................................................................................10
Summary....................................................................................................................................10
Evaluating Various Modes of Entry..............................................................................................10

Direct Exporting........................................................................................................................10
Indirect Exporting......................................................................................................................11
Licensing....................................................................................................................................11
Franchising................................................................................................................................11
Wholly Owned Subsidiaries......................................................................................................12
Joint Venture..............................................................................................................................12
Recommended Mode of Entry...................................................................................................12
Conclusion.....................................................................................................................................12
References......................................................................................................................................13
Appendix........................................................................................................................................15

Introduction
The current paper is focused on understanding the international market expansion strategy of
Lidl. Three countries have been analyzed for the company and the suitable one has been
suggested. The analysis of the countries was done using PESTLE Analysis (see Appendix).
Canada is selected as the country for investment. Lidl is a discount supermarket from Germany
which has more than 10,000 stores in Europe (Geppert et al, 2015). The company was
established in 1930 by Dieter Schwarz. A brief analysis of strengths, weaknesses, opportunities,
and threats has been conducted. In the end, various modes of entries into the international
markets are assessed and a suitable one is suggested.
Rationale behind Selection of Chosen Market
Based on the brief PESTLE Analysis, it has been decided that the Canada is the right country for
the company. The detail PESTLE Analysis of the Canada tries to understand the benefits that can
be gained by the company. In end a summary has been given based on the analysis.
Political Factor
The political situation of the country is stable. The country is currently headed by a democratic
government and there are less likely that any major change is going to take place in coming few
years in the political situation of the country (Lightbody, 2006). The stability in the policies
designed by the government can also be witnessed. Most of the policies have been developed not
to disengage the interest of the businesses within the country.

Economic Factor
The inflation level of the country has been in control to some extent and provides enough
disposable income to the customer that they can invest on various products. However, due to the
recent economic changes at the global level has made people more cautious and therefore in such
cases products with lower budget can be preferred (Burnett & Newman, 2014). The reason can
be the orientation of the people to save some money for the difficult times.
Social Aspect
The society of Canada is open to the people and companies coming from abroad. Within Canada,
the sense of belongingness among the people is strong and they actively take part in various civil
and community related activities. Moreover, one can witness most of the Canadian people
volunteering for various activities that are oriented towards the whole society (Novak, 2013).
There exists strong family relationship among them. The social safety net within the country
provides equal opportunity for the well-being of all everyone living within the country. Such
social aspect added with the economic consideration can be the right place for Lidl as more
shopping activities can be witnessed.
Technological Aspect
Technological advancements can be witnessed within every aspect of life of Canada, whether it
is everyday lives of the individuals, mining activities, use of mobile technology, or the use of
technologies in Agriculture (Infiniti & Manual, 2013). If the data is to be taken into
consideration, in the year 2011, 2,69,60,000 people were using the internet which is about 80
percent of the total population. Such wide reach within a country is a feat rarely achieved around
the world. Companies such as Lidl will get great opportunity in directly connecting with its
customers.

Legal Aspect
There are no major hurdles as per the legal procedures are concerned. The ease of doing business
ranking of 13 shows the minimal roadblock in terms of rules and regulations. The only thing is
that the companies have to follow the usual employment policies, operating policies,
environmental, and other such policies to operate seamlessly (Griffin and Pustay, 2012).
Environmental Aspect
The most part of the country is non-agricultural and only few percentage of land is used within
the country for agriculture. The limited production is enough due to the limited population size.
Unlike United States, Canada is dimly populated. The government is concerned about the
environment and it is mandatory for the companies operating in the country that they follow such
rules.
Summary
Overall it can be said that the external factors of Canada is appreciable enough to allow Lidl to
operate in this country. There seem no major political or legal hurdles that can act as a road
block in starting the business. Moreover, the current economic conditions in US and around the
world are likely to orient Canadian population towards the discount stores like Lidl.
Opportunities and Threats
This section is concerned with understanding the various aspects that contribute to the
opportunities and threats to Lidl. The Porter’s five forces have been considered for the analysis.

Bargaining Power of Supplier
The bargaining power of supplier is strong as there other store chains who are willing to give
good price (Fernie & Sparks, 2014). Therefore, it is important for Lidl that it builds good
relationship with the suppliers to ensure that it maintains the promise of discounts to the
customers.
Bargaining Power of Buyers
The number of buyers within the firm is huge and the company is likely to have less influence on
the purchase decisions of the customers even in the longer run. However, it cannot be said for
sure that the longer run will be challenging for the company if right strategy is taken into
consideration (Celuch et al, 2015). The presence of numerous stores within the country provides
customers enough opportunities to switch from one company to another to make the purchase.
The reason is that there is less to zero switching costs associated with that and the customers can
choose from the wide options. The purchase within this industry is relatively small and all the
consumers are either from households or individuals who engage in purchasing products for their
own use. Therefore, there are less opportunity for companies such as Lidl who can struck any
mega deals.
Threat of New Entrants
The threat of new entrants within the industry is high as the cost of entry, which is the major
driver, is very low (Lusch et al, 2015). Anyone who have minimum amount necessary for
opening the retail stores can open at any nook and corner of the city and engage in selling the
same product that are sold by Lidl and other such companies. Moreover, the impact of brand
development is limited in this sector. The customers easily switch among the stores. Building a

brand when being a new entrant is likely to be challenging but can be handled easily with good
amount of investment in the promotional activities and persisting in the market for few years.
Threat of Substitute Products
The threat of substitute products within this industry is at moderate level. There are various other
companies with various offers on the table that keep attracting the customers to them. The right
shopping environment and discounts can attract more customers (Swoboda et al, 2015). Lidl
being a discount store, has the capability to attract the customers to its stores.
Competitive Rivalry
The competitive rivalry in Canada is strong amid store chains such as Jim Pattison Group,
Overwaitea Food Group, Loblaw Companies, and others. The Canadian market has companies of
different shapes and sizes that can compete against Lidl very strongly. The nature of retail firms
with the market is aggressive. The company can experience strong challenge in operating in the
initial few months. Moreover, the company has to continuously keep eyes on its competitors to
know their moves and keep influencing the population with the various promotional strategies.
One of the important aspects is that as there exists few good companies in the Canada market
already, therefore, it is expected to take more time for the Lidl to gain the faith of the customers.
Summary
Based on this analysis it can be stated, that there is more likely that the company will face tough
times in the initial days of its business in the country. However, with little persistence and with
the right marketing effort, things can be favorable for Lidl. Moreover, it can be stated that the
ability to provide appreciable discounts on its products, the company has enough opportunity to
cater to the Canadian population and attract them to the stores.

Strengths and Weaknesses
This section is concerned with understanding the strengths and weaknesses of Lidl on various
parameters. There are various internal aspects within the country that help the companies sustain
in the market. Mentioned below are those aspects of Lidl while understanding which is strength
and which one is weakness.
Resources
The company has good amount of human resource and they are comfortably working with the
company. The human resources within the company are the major asset of Lidl as the entire store
activities and effective functioning depend on them (Skippari et al, 2014). The company has
ensured that it hire and nurture the right talent within the company which is one of the strengths
of the company.
Core Competencies
The ability of the company to provide appreciable level discounts can be considered as the major
core competency. The company has been able to procure at the right price from the suppliers and
sell them at the right price within the stores (Krzyżanowska & Tkaczyk, 2015). The prices can be
witnessed to be generally lower in price than the competitors and that is the reason why
customers in European Union prefer to flock towards Lidl. This can also be counted in the
strengths of the company.
Organizational Technology
The company uses state of the art technology. All the billings are done through integrated billing
system. Moreover, the company engages in automated inventory management technology.
Through this technology, the suppliers are integrated with the store inventory and they are

allowed to manage the stocks. The constant updates of the stock levels at the stores to the
suppliers ensure that the stores do not fall short of products.
Capabilities
The company has knowledgeable individuals at the shore and they are able enough to utilize the
information from the market to convert those into useful information (Stensson et al, 2015).
Moreover, due to the experience of more than half a century, the company has gained enough
understanding about the market which acts as the strongest point.
Functional Areas
The functional areas of the company are working properly and there minor challenges that do not
require major concern from the company head (G). Though all the functional areas are working
effectively, one of the concerns is the lack of coordination which sometimes bring challenge with
the management of more than 10,000 stores.
Organizational Culture
The organizational culture of the appreciable and one has enough autonomy to take decisions
within the company as far as it does not impact the reputation of the company. The type of
organizational culture of Lidl can be guessed from its ability to stand the tide of time for more
than eighty years and crossed more than 10,000 stores and still growing. The individuals within
the organization are encouraged to share ideas and information that can help the company grow
further. It looks like large family spread across the countries.
Value Chain Activities
The value chain of the company is able to provide the right value to the customers with effective
integration of suppliers, buyers, and other functional areas such as marketing, human resources,

and others. All these areas collectively work towards providing more than what customers want
from Lidl.
VRIO Analysis
Valuable Rar
e
Imitable Organized
Resources Yes Yes No Yes
Core Competencies Yes Yes To some extent. Yes
Organizational
Technology
Yes No Yes To most extent.
Capabilities Yes No To some extent. To most extent.
Functional Areas Yes Yes Yes To some extent.
Organizational Culture Yes No No Yes
Value Chain Activities Yes Yes Yes To most extent.
Summary
Based on the analysis of these factors, it can be stated that the company has enough strength to
move ahead in the competitive market of Canada and gain some appreciable position.
Evaluating Various Modes of Entry
This section is concerned with analyzing the various modes of entry into the Canadian market
and the suitable one has been suggested for Lidl in the end. As it is super store chain, therefore,
the entire consideration will be in this respect.
Direct Exporting
Through this approach the company will be directly engaging itself with the customers, suppliers
and other form of stakeholders to conduct the business. This method requires the company to
have appreciable knowledge of the market and people prior to engaging in any sort of

communication as it might disrupt the relationship before it begins (Parker and Van Praag,
2012). Lidl has no prior experience of Canada so this method would not be suggestible as one
mistake due to limited market information may impact the strategic decisions of the company.
Moreover, the exporting activity cannot be suitable option for a super store business. Space and
people are required in this.
Indirect Exporting
The indirect exporting requires placing an intermediary exporter in the middle to export the
goods from one country to another. However, as Lidl is a super store and it does not engage in
production and instead it caters to the end consumers, therefore the company has to be in front of
the customers instead of using indirect exporters.
Licensing
Licensing refers to the process when the companies engage in licensing the intellectual
properties such as technology, the way of working, name of the brand, and others to the external
party to use and operate their own business (Speckbacher et al, 2015). It is not sure how the
brand of the company will be used on the unknown land; therefore, this method cannot be stated
as a suitable strategy for Lidl.
Franchising
Franchising can be stated as the extension of Licensing. In this the company, along with the
brand names, also provides the strategy to brand the company name, concepts, expertise, and
almost all the aspects that are imperative for the successful operation of the business in the
international market (Kacker et al, 2016). This method can be accepted by Lidl. The reason is

that the company can give franchise to someone who is aware of the Canadian market and is
willing to take the brand ahead.
Wholly Owned Subsidiaries
The company can acquire any existing store chain within the Canadian market. However, it is
less likely that the decision for such an extensive investment will pay off in the longer. On the
contrary, if this mode is accepted, then the company will have opportunity to own local expertise
in the form of acquired market which can be used to gain influence in the market.
Joint Venture
Joint Venture with another company can be a viable opportunity but there is less likely that the
company will be able to find someone with the willingness to venture with it. However, one
thing can be stated that any store willing to increase its strength by being in a venture will prefer
this offer. This move by Lidl might discourage the ability to build individual brand in the market.
Recommended Mode of Entry
Based on the analysis of the various modes of entry for Lidl, it can be stated that the Franchise
can be the best option for Lidl. The reason behind this is that the company does not even have to
invest major capital into the country and with limited sharing of expertise, brand knowledge and
selection of right spirited individual, can get the job done of bringing the brand in front of the
customers. When the brand gets developed enough, then the company can engage in other forms
of merger, acquisition or other forms of strategies.

Conclusion
In the end, it can be stated that Lidl has some opportunity in the Canadian market and based on
the strengths and opportunities available with the company and in the market respectively, the
company can move ahead with the decision of entering into the market. However, initially
franchising has been suggested due to less risk involved in this format regarding cost and human
resource.
References
Geppert, M., Williams, K., & Wortmann, M. (2015). Micro-political game playing in Lidl: A
comparison of store-level employment relations. European Journal of Industrial Relations,
21(3), 241-257.
Lightbody, J. (2006). City Politics, Canada. University of Toronto Press.
Burnett, K., & Newman, L. (2014). 2 Urban policy regimes and the political economy of street
food in Canada and the United States. Street Food: Culture, Economy, Health and Governance,
46.
Novak, M. (2013). Aging and society: A Canadian perspective. Nelson Canada.
Infiniti, B., & Manual, F. I. U. (2013). Thought Technology. Canada.
Griffin, R. W., & Pustay, M. W. (2012). International business. Pearson Higher Ed.
Celuch, K., Robinson, N. M., & Walsh, A. M. (2015). A framework for encouraging retail
customer feedback. Journal of Services Marketing, 29(4), 280-292.

Fernie, J., & Sparks, L. (2014). Logistics and retail management: emerging issues and new
challenges in the retail supply chain. Kogan Page Publishers.
Lusch, R. F., Serpkenci, R. R., & Orvis, B. T. (2015). Determinants of retail store performance: a
partial examination of selected elements of retailer conduct. In Proceedings of the 1995 World
Marketing Congress (pp. 495-504). Springer International Publishing.
Swoboda, B., Berg, B., Schramm-Klein, H., Pop, N. A., & Dabija, C. (2015). Does the Impact of
Retailer Attributes on Store Image Vary Between Retail Formats? Insights from the Romanian
Grocery Retail Market. In Marketing in Transition: Scarcity, Globalism, & Sustainability (pp.
328-328). Springer International Publishing.
Skippari, M., Geppert, M., Williams, K., & Rusanen, O. (2014). The dynamic interaction
between internal and external pressures for MNCs HR management practices: The case of Lidl
Finland. In Threats and Possibilities Facing Nordic Working Life: The 7th Nordic Working Life
Conference, University of Gothenburg, Sweden, June 11-13, 2014. Book of Abstracts and
Programme. Edited by In T. Isidorsson. Gothenburg: University of Gothenburg. ISBN 978-91-
981195-5-8 (NB. Contains only absracts). University of Gothenburg.
Krzyżanowska, M., & Tkaczyk, J. (2015). Redefining products as a positioning strategy: A case
of the partnership for health. International Journal of Management Cases, 17, 81-97.
Stensson, D., Strömberg, A., & Alfredsson, J. (2015). The Effects of Repositioning as a process
of Rebranding in terms of Brand Equity, Corporate Identity, and Brand Image: A case study on
Lidl.

Parker, S. C., & Van Praag, C. M. (2012). The entrepreneur's mode of entry: Business takeover
or new venture start?. Journal of Business Venturing, 27(1), 31-46.
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of entry into new businesses: Internal resource accumulation vs. access by collaborative
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Appendix
Comparative PESTLE Analysis
Canada Estonia Turkey
Political Democratic stable
government. Stable
policies.
Member of EU and
NATO. Provides
ample political and
economic freedom.
Principle of
democratic
representation is
followed
Economic Tenth largest
economy in world.
Involved in NAFTA,
OECD, and others.
1.6% inflation. EDB*
@ 13th. Good income
level.
Current currency used
is Euro and the bank
economy is preferred.
Purchasing power of
populace is low as
income level is low.
Minimal tax
provisions. Good
environment for
entrepreneurs.
Business and
economic
environment
improved. 27% is
industry and the rest is
agricultural. Limited
service sector.
Government focused
on decreasing the
deficit and increase
savings.
Social Belonging to Educated individuals. Policies considered to

community very
strong. Trust factor
for others appreciable.
Prefer shopping in
established shops.
Higher level
education. Most
population area filled
with Russians. Open
to external companies
in limited manner.
increases the social
quality. Health care
system behind other
EU areas. Around
6.3% of GDP on
health.
Technological Around 80% of
Canadian population
uses internet which is
seven percent
improvement above
past year.
Most advanced e-
societies. Accepts and
learn new
technologies quicker.
People enjoy learning
and using mass
technological
products
R&D in progress and
policies are expected
regarding
technologies.
Technology growing
at double digit speed.
Legal Less legal
intervention in
business activities.
Stable laws and
regulation. Favorable
for external business
Laws related to
businesses are quite
similar to the England
and Germany. The
employers have to
incur higher cost for
each of the employee
hired.
Tripartite system
under process.
Supreme is the final
listener that includes
various governmental
institutes. Near to
stable rules and
regulation.
Environmental Thinly populated
country. Extreme long
and cold winters.
Only 8% used as
agriculture rest forest.
Government
concerned about
environment.
Four seasons and
appreciable
environment
condition.
Government oriented
towards environment
in limited manner.
Pollution level
increasing.
Environment has
more than required
CO2 level. GHG+ per
person three times
than EU and OECD
countries.
*EDB: Ease of Doing Business
+GHG: Green House Gas