Strategic International Business Management: Lidl's Expansion Plan

This report analyzes Lidl's potential expansion into Mexico, evaluating the strategic and economic factors that influence such a decision. The analysis uses frameworks like PESTLE and VRIO to assess the external environment and Lidl's internal resources, respectively. Political and economic stability, lower labor costs, and technological advancements in Mexico are highlighted as potential benefits. The report also considers the competitive landscape using Porter's Five Forces, identifying the power of buyers and the threat of rivalry as significant factors. Ultimately, the report provides a comprehensive overview of the opportunities and challenges Lidl faces in expanding its operations to Mexico, emphasizing the importance of adapting to local conditions and consumer preferences. Find more solved assignments and study resources on Desklib.

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Management

Contents
Introduction................................................................................................................................3
The chosen option: Mexico........................................................................................................3
Porter five forces of Lidl in Mexico...........................................................................................6
Several entry modes for the market expansion of Lidl..............................................................9
Conclusion................................................................................................................................10
References................................................................................................................................11

Introduction
Lidl is the supermarket grocery chain that has its operation in around 30 countries across the
globe. Lidl has started its discounting store in 1973 and has around 650 stores in diverse
regions of the world. Lidl always take superiority in providing the customers with best
quality products at lower prices by ensuring that they work closely with the suppliers. Lidl
always remain passionate regarding sourcing locally whenever possible. In the paper,
discussion has carried on the Lidl expansion at Mexico. For this different strategic framework
has been discussed. Pestle analysis has been undertaken in order to know the external factors
that will affect Lidl positively as well as negatively. Further, VRIO framework has been
discussed for knowing the resources that creates value for Lidl. At the same time, it will also
help in knowing which resources are rare and can or cannot be imitate by others.
It is true that globalisation has changed the way how business operates its brand in the world.
due to continue changes in the trading policy as well as stiff competition, companies are
giving emphasis on starting their business operation in such companies which has best
practices and less restrictions. Various factors affect the market entry for firm in order
country. The major factor includes the increase in demand for services and product,
technological changes that compelled the business to expand its business.
The chosen option: Mexico
Lidl must expand its business operation in Mexico because it is found to be cost effective
region which can assist the organisation to enlarge its wings within shorter duration.
Political factors: Political factor is also most significant factor that is required to be
considered by country while expanding its business in any particular company. For ensuring
effective working, Lidl will be required to undertaken geopolitical strategies in consideration,
which will further help in keeping the product prices lower, and as a result, it will require low
investment in order to ensure its expansion in Mexico. As compare to Norway, it is seen that
Mexico performance in innovation has supported more due to government policies and steady
reforms. Moreover, it is found that this political factor has led the several investment schemes
for the multinational companies to see Mexico has the potential hub for emerging economy in
terms of artificial intelligence as well as internet of things. Moreover, it is also seen that

Mexico enjoys the economic and political stability. There is not recession found in Mexico as
its doing economically well.
Economic sector: from the report, it is found that the retailing sector of Mexico will also rise
to 63.2 per cent in 2020. Due to not too much competition in the market of Mexico, Lidl have
the opportunity to adopt essential strategies for effective planning. At the same time, labour
cost is also low in Mexico as compare to other countries. In Mexico, the average worker is
paid $2.60 including tax. As compare to this, Norway has NOK 183 average labour cost
which is 435 of the Mexico. Therefore, it is beneficial for Lidl to enlarge its business in
Mexico rather than Norway. This will also led to enough employment opportunities for the
people of Mexico. At the same time, employees of the Lidl will also be provided the expenses
of and some other expanses in order to keep them motivated. In addition to this, it is seen that
Mexico has wealth of resources. At the same time, country also gas varied sources of raw
material accessible in the country. It is found that people are giving more emphasis on the
online sales. Several big retailers have also started doing their sales online. It is because
online shopping is becoming the most significant part of the retailers business. Lidl has
already undertaken the research regarding online delivery service in Australia that will not
requires it to spend too much time on bringing its online services.
Social factor: At the same time, Mexican urban and young population also benefits from the
high income. However, they largely prefer to shop at modern retailing formats. This proves to
be the positive aspect for Lidl to grow its retailing business in Mexico. At the same time,
rising vegetables and fruit are also some of the categories that is demanded by middle class
income people. Due to the different and extensive kind of duties, it is also at ease for the Lidl
business consultant to hire more advanced and skilled employees. At the same time, this will
helps in motivating Lidl to engage different workers for the factory operation. Thus, Lidl with
also get several benefits in the beneficial stage when it will open its business in Mexico.
Technological factors: due to the rapid advancement in technology, it is found that business
processes that are significantly situated in some of the other centre can interconnected with
the help of technology in better way. Due to the direct assistance from Lidl headquarter, there
is no such big problem in transportation or communication. At the same time, it is also seen
that workers of Mexico are much skilled as compare to other employees as they mostly prefer
to study in the technical background. As compare to Norway, Mexico is seen to be
technological advanced. From the report published on technology advancement in Mexico, it

is found that economy of Mexico has the capability to gain around $245 billion in GDP
growth by the year 2025. Therefore, Lidl will be able to gain more advantages from Mexico
than Norway in terms of its growth. Therefore, it can take the advantage of this situation by
bringing its online service app where customers can easily order the product and get it on
time.
Environmental factors: due to the increasing concern of companies toward environment, Lidl
will try to produce the goods in sociable way that will prove to be valuable for its home
country and for Mexico too. However, the company product will be required some of the
transportation cost if it will start its manufacturing process in Mexico. At the time of
transportation of its product, it will be required to take care of the pollution by using fuel
efficient vehicles. For fulfilling its concern toward suppliers, Lidl can also start investing in
programs to help in enhancing the livelihood for growers in Mexico. Lidl Foundation can
assist the suppliers in using sustainability measures by improving the condition of small
farmers through financial assistance (Frost and Sullivan, 2019).
Legal factors: For ensuring the product safety as well as quality of products, consumer
protection agency named PROFECO has power significantly. In order to control the working
and illegal function of the retailers, it can place sanction on the manufacturers that is out of
compliance, elimination of unsafe idea from the production, as well as can ensure the product
safety investigation (Xinhua, 2019). For bringing the Mexico in compliance with labour
practices of U.S, it has made several changes in the labour laws. For protecting the factory
workers, Mexico had allowed the labour suits to taken to court. On every packaging of the
product, it is also essential for companies to include the precautions and warning for the
products.

Porter five forces of Lidl in Mexico
Power of Buyers: It is found to be the most significant modification in order to analyse the
consumer behaviour. It is seen that Mexico consumers are mostly attentive of their health.
Due to this, they mostly prefer healthy and renewed products from the retailers. However,
there are several discounted retail stores and supermarkets in Mexico that requires it to
effectively take into deliberation the products that are sold at attractive and discounted price.
This will directly lower down the customers switching cost and by this, Lidl will be able to
sell its products at the attractive price. In this way, bargaining power of buyer is moderate.
Lidl can take the advantage at Mexico because the rising disposable income led the consumer
to invest more in healthy products. consumer mostly preferring buying products from those
retailers where they get the opportunity of online buying.
Bargaining power of suppliers:
It is true that several big traders are available in Mexico. Due to this, the major objective of
retailers is to confirm the market solidity. Due to this, Lidl supplier is also required to
Reasons for
choosing
Mexico in
front of
low labour cost
increasing
social media
use
quality for products
that will prove to be
fruitful in front of
protection agency
PROFECO
rising demand
of vegetables
and furits
aming middle
class

consider all these factors so that there is no possibility of fluctuation or delay in the process
of delivery. At the same time, it is also found that varied suppliers also ensure the selling of
their products right to the end consumer at very low price. This tends to weaken the suppliers
situation in today’s environment of marketing. In this way, it can be stated that supplier’s
position is moderate.
Threat of new entrant: it is not too easy for the retailers to enter in the retailing market due to
the various pricing schemes and price level fluctuations of several stores in industry. The
small cost of exit entry in the food retailing industry also give variations on the consumer
behaviour and provides the chances to niche market for developing and growing successfully.
At the same time, it is stated that lower market growth is considered as attractive for the new
entrant. Due to this, threat of new entrant is moderate.
Competitive buyers: the major retailers in Norway are Meny, Kiwi, Spar, Joker and Europar.
Research done by Mkherjee (2018) highlighted that low price retailing market brings most of
the sales. Due to this, it presents the opportunity for Lidl to attract the customers. Retailers of
retailers are starting to develop their branding that mean Lidl will be able to achieve because
it already has developed its brand in past several years and have the experience in around 30
countries.
Threat of substitute: the different substitute in the food retailing industry is fast food industry,
restaurant as well as some other services of delivery. It can also be stated that food service is
seen as supplement” as compare to auxiliary market. Due to this, it plays a significant role in
order to change the customer attitude in long run. In this way, threat of substitute is weak
(Issa, Chang and Issa, 2010).
Threat of rivalry: competition is higher in the food retailing industry and it is not due to the
customers switching cost. The major reason is the competition as well as changing price of
market. it force Lidl to use the competitive pricing. Due to this, price war is found in the
market. Consumers at the same also search for finding or looking over new offers. In this
way, threat of rivalry is high in the market.
VRIO Framework
1. Value: Lidl is able to develop several values in the low pricing retailing industry such
as higher quality products, products variety, leadership, responsibility. These values
significantly work in the Lidl favour. It directly states that company is competitive as

well as effectively take care of the human resource which directly helps it in
increasing its presence at several countries (Neis, Pereira and Maccari, 2017). Due to
its low cost goods, it has the power to ensure competition with other large
supermarkets in the industry (Díaz, Ivanic and Watanabe, 2020).
2. It is found that Lidl stores are rare which is directly linked with the competitive
challenge of the firm. At the same time, varied classes of the products presented by
Lidl have also declared the shortage of the market rarity.
3. Due to the nature of its organisation, it is not easy to imitate the Lidl products. It is not
due to the supplementary superstores that ensuring the beginning of similar products
in market or due to artificial of products by Lidl from superstores. However, it is
stated that Lidl organisation must work in such a way that managers tend to adapt to
the regional or national level (Tulung, 2017).
Strong strategic competencies are also found on the resource-based side of Lidl which
ensures the necessity to explore the capabilities and resources. At the same time, there
are different other advantages of the resource based view which help in making the
better strategic decisions. Lidl also depends on the operative management and it has
tailored and realized its plan in effective way where it can adjust to the socio cultural
plan of nay region. The three proficiencies are seen to be most significant, through
which an organisation enter into the industry. Firstly, Lidl will require the finance
from Germany so that it can effectively enter into Mexico. At the same time, the
strategic capabilities also play a key role which facilitates the organisation to be active
in the environment so that Lidl can regulate itself consequently to the entire changes
and operate itself properly in the Mexican market. There are various resources and
competencies available for Lidl. Among those, the significant threshold competence is
the requirement of budget in the industry separately from intangible aspects and
marketing of company. The core capabilities of Lidl are its productive staff, low
prices, as well as better customer service supervision as compare to some other
competitors available in the market. some other significant resources also includes
contacting at banks and thereby ensuring collection of desired information from
several other stores and supplying goods at low and cheap value for the customers.
However, it is also required to undertake the proper information of the industry as
well as improved infrastructure so that survey or information is done in effective way.
The requirement of human resource management is also important and thus the staff
morale aspect is required to be considered.

Several entry modes for the market expansion of Lidl
Greenfield Investment is considered to be adopted by Lidl for effectively expanding its
market in Mexico. Entry through this market entry mode will prove to be advantageous and
better for utilising the product in effective way. It is only possible if company will expand by
following the process of greenfield investment. This market entry mode will also provide the
advantages to Lidl especially on his field (Carrion, 2016). Therefore, it will upsurge the
capability to keep the cost of business to lost through changed procedures of lowering down
its extra cost like customer service and different processes of saving. At the same time, it is
also stated that if Lidl will adopt other mode of entry, there are chances of putting the
company on risky stage. This might hamper the whole productivity of business. Another most
significant for choosing greenfield investment as it is not very tough to do investment in the
Mexican market due to comparatively low investment than any other company or industry.
This will assist the Lidl in ensuring its expansion in quick span of time as they are very few
strong retailers who are functioning in the Mexican market. However, it is also said to enter
through joint venture if it want to collaborate or expand with any other enterprises (Maglaras,
Bourlaki and Fotopoulos, 2015).
Another mode of entry that can be sued by Lidl is franchising that allows businesses to run
under the logo (Grünig and Kühn, 2018). Qualities of the product is however similar to that
to its mother company. Under franchise, franchisor supplies the entire products by ensuring
Higher
quality
product
attractove
Lidl stores
Productive
staff
nature of
work

the regular checking of quality in order to retain the original brand name. Under this entry
mode, Lidl could also use the local investor that are not effectively established for selling its
products. This mode of entry is cost effective and company is able to keep the higher control
of its investment. It also helps in enabling the quick and effective development of its
international market (Evans and Richardson, 2007). As compare to this, strategic alliance is
another way through which Lidl can offer the several products in the market of Mexico. The
agreement has been done between the two companies, each bringing a particular resource or
skill. However, it only encompasses technology, the process of distribution. Or production
However, every company retains its management. Finally, the company can establish its
operation in Mexico with the help of wholly owned subsidiary. It is said to be purchasing any
locally built up business, rather than building a new one. It eradicates the starting of
distribution as well as manufacturing from scratch. An established company tends to give
immediate market presence and mitigates the costs of marketing (Varela, 2018).
Conclusion
From the above discussion, it can be concluded that development of Lidl through the mode of
greenfield investment or any other mode of expansion will prove to be faster and will assist
it in sustaining for long run. It is also effective for Lidl to offer some benefits and incentives
to its employees in order to keep them motivated for work. It is not quite essential for Lidl to
give its emphasis on the lower products of price in order to compete with others retailers. Due
to the increasing concern of people in Mexico toward online shopping, it will be easy for Lidl
to provide transparent online shopping app for the customers. It is also essential for Lidl to
choose the greenfield investment or any of the foreign direct investment in order to establish
its brand in the market.

References
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