Strategic International Business Management: Lidl's Market Entry

This report examines Lidl's strategic international business management, focusing on market entry into Norway and Mexico. It begins with an introduction to international marketing and then assesses the business opportunities in both countries using PESTLE analysis. The report selects Norway as the more suitable market. It then applies Porter's Five Forces model to analyze the grocery chain industry's competitiveness and uses a value chain model to evaluate Lidl's internal value-adding activities. Various market entry modes are considered, with a recommendation for a Greenfield venture. The report concludes with a summary of findings and recommendations, providing a comprehensive strategic analysis for Lidl's international expansion.

Strategic international business management

Table of Contents
Introduction......................................................................................................................................4
Task 1...............................................................................................................................................5
International Business Opportunities of Mexico and Norway (Refer to Appendix)....................5
Task 2...............................................................................................................................................5
Rationale of selecting the chosen market along with critical analysis of the external factors.....5
Political........................................................................................................................................5
Economic.....................................................................................................................................6
Sociological..................................................................................................................................6
Technological...............................................................................................................................7
Legal.............................................................................................................................................7
Environmental..............................................................................................................................7
Task 3...............................................................................................................................................8
Application of Porters 5 Forces Model for analysing Industrial competitiveness......................8
Threats of New Entrants:.............................................................................................................8
Bargaining Power of Supplier:.....................................................................................................9
Threat from Substituted Products:.............................................................................................10
Rivalry among existing industry:...............................................................................................10
Task 4.............................................................................................................................................11

Application of value chain model for analysing the internal value adding activities................11
Primary activities:......................................................................................................................12
Inbound Logistics:......................................................................................................................12
Operations:.................................................................................................................................12
Secondary activities:..................................................................................................................14
Infrastructure of a company:......................................................................................................14
Management of human resource:...............................................................................................14
Development of Technology:.....................................................................................................14
Procurement:..............................................................................................................................15
Task 5.............................................................................................................................................15
Evaluation of various modes of entry available to Lidl with suitable recommendations and
selecting the best option for international market entry.............................................................15
Franchising:................................................................................................................................15
Acquisition:................................................................................................................................16
Greenfield Venture:....................................................................................................................16
Best fit option (Green field investment)....................................................................................16
Conclusion.....................................................................................................................................17
Reference List................................................................................................................................19
Appendix........................................................................................................................................22

Introduction
The term international marketing refers to the function of marketing standard that is used to
persuade the varied wants and needs of different customers that exists across the countrywide
borders. In this assignment, the evaluation of two countries (Norway and Mexico) with respect
to Lidl (a supermarket company) based in Germany has been taken into consideration to identify
the target market for international strategy expansion. Lidl is a global super chain market
founded in the year 1930 with its headquarters based in Germany (Lidl.de, 2019).

Task 1
International Business Opportunities of Mexico and Norway (Refer to Appendix)
Task 2
Rationale of selecting the chosen market along with critical analysis of the external factors
Based on the Pestle analysis in Appendix 1 , the score of Mexico is 34/60 and that of Norway is
49/60 which suggests that Norway will be the ideal international market expansion choice due to
its economic feasibility and the country uses more advance technology in production and
manufacturing process of a product. In Mexico, the business environment is relatively unstable,
as the political structure is bureaucratic by nature. Moreover, Mexico also has higher prevalence
of crime rate that makes the business environment vulnerable. Also, from the above table it is
quite clear that, Norway is a highly developed economy having higher Human Development
Index. The environmental hazards in Mexico are considerably higher than that of Norway.
Therefore, from the above discourse, it can be said that Norway is more suitable for international
business expansion of Lild. Critical analyses of the external factors are detailed below.
Political
One of the major constraints associated with the political environment of Mexico is its
Bureaucratic structure which could make the internal business expansion of Lild unstable.
Irrespective of having a relatively safe political environment, the bureaucratic environment refers
to a set of complex rules and regulations which might be challenging for an international
business expansion. Chances of duplication and imperialism are quite common with Bureaucratic
environment which could be challenging for Lild. Furthermore, it is prone to conflicts, which

triggers instability within the business environment. In comparison, Norway has a democratic
political environment where the rules and regulations are much simpler, thus assisting foreign
market entry with ease. Furthermore, a democratic environment tends to be more supportive
towards free trading (Fleximize, 2019). It is usually responsive towards the altering requirements
of business as it is subjected to fair laws and tax regulations.
Economic
As mentioned, Mexico ranks 15th in terms of nominal GDP in the year 2018, however, economic
disparity is also visible within the economic environment of Mexico. Enhanced rate of inequality
has resulted in economic disparity for Mexico, which ultimately gives birth to poverty. In
contrast, Norway is subjected towards a developed economy having the highest per capita
income, which makes it a preferential choice for Lidl for its international market expansion
(En.portal.santandertrade, 2019).
Sociological
Openness, gender equality and provision of equal rights have a positive influence on the life style
of individuals residing in Norway (Norway, 2019). Individuals with physical disabilities are
also subjected to equal opportunities and the cultural intolerance is relatively less in Norway as
well. The broader cultural perspective will be an ideal situation for international business
expansion of Lidl. In case of Mexico, there is a lot of cultural clash and there is a disparity
between rich and poor.
Technological
The technological connectivity amongst Mexico and USA are strong in handling mechanical
constraints, however, it directly highlights the dependency of Mexico over US. While technical

education has enhanced, the rate of technological advancement is relatively slower than that of
Norway. It is heavily influenced by US, however, as far as the technological infrastructure is
concerned, there is still a long way to go. In contrast, Norway is anticipated to be the next largest
centre of technology after China. It is an advanced industrialised nation by investing 1.6 of the
GNP towards scientific research and technological advancement, therefore, making the
international business expansion more feasible for Lidl.
Legal
It is considered that Law and rules within Mexico is a lacklustre, as the criminal rates are
relatively high resulting in financial offence. It could be a constant threat for an international
market expansion, as the productivity of the business might get hampered due to the unstable
environment. Therefore, Lild will be more vulnerable towards legal lawsuits if they expand their
business in Mexico. The implementation of SDI strategy by Norway ensures proper mantainence
and monitoring of rules and regulations, thus reducing the chances of corruption within the
business environment of Lidl.
Environmental
Urbanisation, industrialisation and increasing population reflects upon the environmental
constraints in Mexico. Not only industrialisation has resulted in increasing of waste resulting in
water population, it has also resulted in air pollution, resulting in many chronic diseases for
humans. Since the population is rising, the environmental hazards tend to rise, affecting the
health of more individuals. The environmental policies in Mexico are weak and are reluctant
towards initiation of strict measure against such occurrence. In contrast, the government of
Norway is much more active in resisting air and water pollution. Improvisation of city life by
transforming into a care free city and progression of zero emission vehicles are efficient in

tackling air pollution (UN Environment, 2019). Considering the environmental feasibility,
Norway could serve as a safe internal business expansion for Lidl.
Task 3
Application of Porters 5 Forces Model for analysing Industrial competitiveness
Porters Five Forces is a framework of holistic strategy that takes planned decision away from
identifying the present competition. This framework analyses that how Lidl Company would
construct a sustainable competitive strategy in grocery super chain market. The below five forces
helps Lidl Company to expand a strategic position in Norway and thus explores cost-effective
opportunities in grocery chain super market sector.
Threats of New Entrants:
In a country like Norway, Lidl Company would tackle the new entrant’s threats by innovating
new goods and services. As new products not only attract new consumers, but also appeal sold
consumers, therefore, the company will have a competitive advantage (Shaikh, Karjaluoto and
Häkkinen, 2018). The company would also minimize the fixed cost by building the products
scale economy. As Norway focuses on advancement of technology, Lidl Company would invest
on Research and Development. In Norway, the new entrants would not enter in a dynamic
grocery chain industry; where the recognized company like Lidl Company keeps defining the
products standards regularly.
Bargaining Power of Supplier:
Almost all the companies associated with the grocery chain super market buy their products from
different suppliers. The suppliers in the leading position would reduce the margins of Lidl
Company earnings in the market. The stronger supplier may negotiate their power to remove

high prices from the company in grocery chain super market. The overall impact of suppliers
bargaining power is that it reduces the overall earnings of grocery chain super market. In a
country like Norway, Lidl Company would tackle supplier bargaining power by constructing the
proficient supply chain management with numerous suppliers. The company would experiment
the product by using various materials from different suppliers so that if the products prices rises;
the Lidl Company can shift to another. As the third party producer has low bargaining power in
grocery chain super market, the company would also develop enthusiastic dealer to deal with
high bargaining supplier power in Norway (Fossum, 2019).
Figure 1: 5 Forces Analysis of Lidl Company
(Source:Shaikh, Karjaluoto and Häkkinen, 2018)
Bargaining Power of Buyers:

Most of the companies within the supermarket grocery chain sell products at low price to their
buyers. Consumers always seek for offers and discounts. The lesser and more dominant the
consumer base is; the larger would be the buyers bargaining power. As the Lidl Company would
be shiftingin Norway, the company would construct a huge customer base which would be
helpful in minimizing the buyers bargaining power (Baade, Decker-Lange and Brexendorf,
2018). It would also give an opportunity to streamline their production and sale process.
Threat from Substituted Products:
When any similar type of product and services in the market are likely to meet the needs of
consumers in various ways; then the profit of the company suffers. The danger of product
substitute is very high from the present value proposition of the company (Johannessen and
Sterud, 2017). The Lidl Company would implement the strategy of product oriented rather than
the service oriented in Norway.
Rivalry among existing industry:
If the competition between the companies is strong; then it would drive low prices and reduces
the company revenue. This rivalry would toll the entire company long term revenue. The
company can face certain competition from existing rivals such as REMA 1000 and Jacob’s
Majorstuen (Kim et al. 2019). However, since the company has a global consumer base and
established branding, the rivalry from existing industry will be low. In Norway, the Lidl
Company would build a sustainable segregation by constructing an economy of scale so that it
can contend in an efficient way. The company would work together with Norway competitors to
maximize the size of market.

By identifying the five forces analysis of Lidl Company with respect to Norway country, the
strategy of Lidl Company would gain a complete image of what impact the company profits in
grocery chain super market. The company would analyse the changing game trends at the
beginning and would softly develop the opportunity. From the study above, the analysis had
shaped the strategy of Lidl Company in Norway that what threats might occur and what type of
competition the company may face in Norway.
Task 4
Application of value chain model for analysing the internal value adding activities
The concept of value chain analysis is a process of separating various business activities in
primary and secondary interface. It is used as a very important tool for analysing activities
around the industry and relating the activities to a company competitive assessment.
Primary activities:
The primary chain value activities of Lidl Company are openly engaged in advertising and
producing the product to the existing consumers. The primary activities of Lidl Company
comprises of inbound logistics, operations, outbound logistics, sales and marketing and services.
All these activities are considered primary activities of a company because with the help of the
primary activities, an organisation is able to manage its operational activities properly.
Inbound Logistics:
It is very crucial to extend the tough relationships with different suppliers as their help is very
essential to distribute, receive and store the product. The absence of inbound logistics in Lidl
Company in Norway may face severe challenges in development of product phases. The concept
of inbound logistics needs Lidl Company to spotlight on every aspect of product transformation.

Some instance of inbound logistics may include: input storing, product retrieval and distributing
the products (Minner, 2019). With the help of inbound logistics like the input storing and product
distribution, the company is able to improve its operational efficiency.
Operations:
The concept of operations generally includes service and manufacturing operations. It is very
important for Lidl Company to identify the operation strategy for efficiency maximizing,
competitive success and production improvisation. In Norway, the productivity maximization
would help Lidl Company to increase profit, achieve constant growth and set strong bias for
product competitive benefit.
Outbound Logistics: It generally comprises the interfaces that distribute the product by passing
via several mediators. There are some of the outbound logistics in Lidl Company which
generally include product handling, development, warehousing, transportation, andproduct order
dispensation (Chandra, Ghosh and Srivastava, 2016). In Norway, the Lidl Company would
optimize and identify the product logistics in order to explore the source competitive advantage
and accomplish industry goal.
Sales and Marketing: At this step, the Lidl Company would emphasize on the product
differentiation and the benefits of proposed products to influence consumer in Norway.The
product with different features and standardized functions does not create consumer value till
Lidl Company invests on the activities of marketing and sales of the product in Norway. Several
instance of Lidl Company marketing activities are advertising, force sales, costing, constructing
relations and selection of product channels. In Norway, the Lidl Company would use the funnel
market approach to reconstruct the product marketing.