Report on Business Decision Making: Lidl's New Store Launch Strategy

This report delves into the business decision-making process surrounding Lidl's plan to launch a new discount supermarket chain, considering the competitive landscape in the UK. It presents primary data gathered through a customer survey to assess preferences regarding price, location, and convenience, alongside secondary data analyzing Lidl's financial performance relative to competitors like Tesco, Sainsbury's, and Morrison's. The analysis encompasses sales revenue, gross profit margin, operating profit margin, net profit ratio, and market share to determine Lidl's competitive positioning. Key findings from the primary research indicate that customers prioritize both price and quality, and prefer both physical and online shopping options. The secondary data reveals Tesco as a market leader in terms of revenue and profitability, posing a significant competitive challenge for Lidl. The report concludes with recommendations for Lidl to focus on price and quality, integrate both physical and online channels, and develop strategies to enhance its financial performance and market share in the competitive UK retail market. Desklib provides access to this and similar solved assignments for students.

Business Decision Making

EXECUTIVE SUMMARY
Business decision making refers to the selection of suitable option out of several
alternatives available. For this project, Lidl has been selected which offers retail products or
services to the customers at discounted price. In this, for assessing customer’s preferences and
attitude towards new store survey has been conducted. In addition to this, secondary sources
have also been evaluated for getting suitable information. It can be summarized from the
evaluation that customer’s give more priority to both price and quality of products. Thus, by
making focusing focus on such aspects Lidl can get desired level of outcome or success. In
addition to this, it has assessed that customers prefer to purchase products from both physical and
online store. Thus, at the time of developing competent strategic and policy framework regarding
new store launching business unit should keep in mind such aspects.

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Primary data collection................................................................................................................3
Analysis of primary data set........................................................................................................6
Collection of secondary data.....................................................................................................16
Analysis of secondary data........................................................................................................18
Key findings...............................................................................................................................20
Conclusion and recommendations.............................................................................................21
REFERENCES..............................................................................................................................23

INTRODUCTION
In the current times, business units are required to take significant decisions about
operations by evaluating market growth opportunities and competitor’s activities. Manager is
assigned with accountability to make optimum utilization of funds by doing assessment of
investment opportunities. The present report is based on the case scenario of Lidl which is
planning to launch discount supermarket chain. However, in this regard, high level of
competition takes place in UK as there are several retailers namely Sainsbury, Morrison’s Tesco,
ASDA etc are offering products or services at discounted prices. In this, report will shed light on
the customer’s preferences with regards to the supermarket chain in terms of price, location,
convenience etc. Further, report will also highlight the extent to which financial performance and
position of Lidl good in comparison to the competitors. By this, firm would become able to take
significant measures for performance improvement and maximization of profitability.
MAIN BODY
Primary data collection
In order to assess customer’s needs, wants and preferences with regards to discounted
supermarket chain primary data will be gathered by Lidl through the means of survey via
questionnaire. Hence, survey will be conducted on 50 customers of Lidl to identify their
preferences pertaining to product, price, place and promotion. Through this, Lidl can set
appropriate marketing mix and thereby would become able to gain competitive edge over rivals.
Questionnaire is included in appendix
Analysis of primary data set
Theme 2:
Particulars Responses % of responses
25-35 years 10 20%

26-45 years 15 30%
45-55 years 15 30%
56 years and above 10 20%
Total 50 100%
Theme 3: Gender
Particulars Responses % of responses
Male 20 40%
Female 30 60%
Total 50 100%

Theme 4: Education
Particulars Responses % of responses
Diploma 5 10%
Graduation 10 20%
Post-graduation and diploma 25 50%
No higher studies 5 10%
Total 50 100%

Theme 5:
Particulars Responses % of responses
£3000-5000 7 14%
£5000-7000 12 24%
£7000-9000 18 36%
£9000 and above 13 26%
Total 50 100%
Theme 6:
Particulars Responses % of responses
Part time 15 30%
Full time 25 50%
Student 10 20%

Total 50 100%
Theme 7:
Particulars Responses % of responses
£300-500 5 10%
£500-700 12 24%
£700-900 15 30%
£900 and above 18 36%
Total 50 100%

Theme 8: Customers do shopping from Lidl’s store more frequently
Particulars Responses % of responses
Often 10 20%
Weekly 12 24%
Twice in a week 15 30%
Monthly 13 26%
Total 50 100%

By doing primary research, it can be said that the 30% of the respondents prefer doing
shopping twice a week with Lidl and 20% of the respondents prefers doing shopping more often.
Theme 9: Both the modes are preferred by the customers for shopping purpose
Particulars Responses % of responses
Visiting of physical store 25 50%
Online mode 25 50%
Total 50 100%

As stated by the above graph, the cusomers are preferring both the modes of shopping
equally (50%), that is, physical store shopping and online mode of shopping.
Theme 10: Price and quality factor comes under priority when customers do shopping
Particulars Responses % of responses
Price 25 50%
Quality of products 15 30%
Availability of brand or
varieties
10 20%
Total 50 100%

Based on the above outcome, the 50% of the customers gives priority to the price of the
product, followed by 30% preferring qualityand the remaining 20% gives weightage to the
brands and variety of the products.
Theme 11: Customers agreed that location factor influences customer’s purchasing decision?
Particulars Responses % of responses
Agree 8 16%
Strongly agree 12 24%
Neutral 15 30%
Disagree 7 14%
Strongly disagree 8 16%
Total 50 100%

The above graphical representation shows that the 30% of the respondents thinks that
location does not influence their purchasing behaviour while 24% strongly agrees to the point
that location has a huge influence over their buying behaviour while 16% strongly disagrees with
the fact.
Theme 12: Discounting offers influences shopping decisions of customer significantly
Particulars Responses % of responses
Agree 15 30%
Strongly agree 25 50%
Neutral 5 10%
Disagree 2 4%
Strongly disagree 3 6%
Total 50 100%
Based on the outcome of the above table, it can be drawn that 50% of the respondents
agrees to the fact that discounting offers has a great impact on their shopping decisions. In
contrast, only 10% disagrees with this assumption.

Theme 13: Tesco and Lidl click in customers mind first when they go for groceries
Particulars Responses % of responses
Tesco 15 30%
Lidl 15 30%
Asda 10 20%
Sainsbury 5 10%
Morrison’s 5 10%
Total 50 100%
By conducting the primary research, it was revealled that both Lidl and Tesco comes into
the mind of customers for doing shopping as comapred to other retailers such as Asda (20%),
Sainsbury (10%) and Morrison’s (10%).
Theme 14: Lidl products or services offer high value for money to the customers
Particulars Responses % of responses
Agree 12 24%

Strongly agree 17 34%
Neutral 13 26%
Disagree 4 8%
Strongly disagree 4 8%
Total 50 100%
It can be interpreted from the above graph that 34% of respondents strongly agrees that
Lidl provides high value to its customers and 8% are of the opinion that it does not provide value
to the customers.
Collection of secondary data
With the motive to evaluate position and performance of Lidl in against to the other
leading companies of UK retail industry data has been gathered from annual reports. In this
context, evaluation of gross, operating and net profit margin has been done. Through this, Lidl
can assess the extent to which it is performing better over the competitors in monetary terms.

Sales revenue
Year/
companies
Lidl Tesco Sainsbury Morrison’s
2017 418.6 55,917 26,224 16,317
2018 474.5 57,491 28,456 17,262
2019 63,911 29,007 17,735
Gross profit margin: GP / net sales * 100
Year/
companies
Lidl Tesco Sainsbury Morrison’s
2017 5.2% 6.2% 3.7%
2018 5.8% 6.6% 3.7%
2019 6.5% 6.9% 3.4%
Operating profit margin: OP / net sales * 100
Year/
companies
Lidl Tesco Sainsbury Morrison’s
2017 2.1% 2.4% 2.7%
2018 2.7% 1.8% 2.5%

2019 3.2% 1.1% 2.2%
Net profit ratio: NP / net sales * 100
Year/
companies
Lidl Tesco Sainsbury Morrison’s
2017 -0.07% 1.37% 1.87%
2018 2.10%% 1.02% 1.80%
2019 2.07% 0.69% 1.38%
Market share
Year/
companies
Lidl Tesco Sainsbury Morrison’s
2017 5.2% 27.8% 15.8% 10.4%
2018 5.5% 27.4% 15.5% 10.4%
2019 5.9% 27% 15.4% 10.1%
Analysis of secondary data
 The sales revenue for the company refers to the income received through selling the
goods or providing services to the customers. From the data collected, it can be said that
the in terms of revenue Tesco is leading in the market, followed by Sainsbury and then
Morrison. Lidl is far behind these companies (Martínez, Galván and Alam, 2017). On
looking at the sales revenue trend of these three companies it can be said that the Tesco is
growing at the faster rate of 14.2%, Sainsbury is growing at 10.6% and Morrison’s at
8.6% taking 2017 as the base (Annual Report and Financial Statements. 2019). On

analysing the revenue of these big giants in comparison to the Lidl it can also be said that
the Lidl is facing a very tough competition and is not near these organizations in terms of
revenue.
 The gross profit margin refers to the gross profit as a percentage of sales. It measures the
performance of the company’s sales and production (Edwards, 2016). The gross profit
margin of Tesco has shown an increasing trend as it has increased from 5.2% in 2017 to
6.5% in 2018. Even the gross margin of Sainsbury has increased from 6.2% to 6.9% in
2019 but at a slow pace and Morrison has shown a decline in its gross profit margin as it
has reduced to 3.4% in 2019. The increasing ratio indicates that the organizations are
moving towards getter growth and also indicates that the cost of production is less in
comparison to the revenue which has led to the higher gross profit (Annual Report and
Financial Statements. 2019). Tesco and Sainsbury both are growing at the higher rate
which shows their higher performance levels. While Morrisons is shown a drop in ratio
which may be because of increase on cost of sales.
 The operating profit margin of the company indicates how much profit the company is
making after paying off its all variable cost in relation to the production. It is expressed in
the percentage form and indicates the efficiency of the company (Imanda, 2017). The
operating profit margin of Tesco has shown an increasing trend whereas in case of
Sainsbury and Morrisons there is significant drop in the operating profit margin. The
higher and increasing ratio is more favourable in comparison to the lower ratio because it
indicates that the company is making enough money from its business operation
(Morrisons Annual Report and Financial Statements. 2019). Based on this, it can be said
that the operating margin ratio of Tesco and morrisons is good which indicates that they
are top competitors for Lidl. It can be also be analysed that the with the increasing
revenue, the operating profit margin is also increasing which shows it operational
efficiency.
 The net profit ratio of the company expresses the relationship between the net profit and
the net sales. The main purpose of this ratio is to evaluate the profitability of the business
from its main business operation because of which it excludes all the non-operating
revenue and expenses (Hadi, 2018). The net profit margin of Tesco has increased from
negative 0.07% to + 2.07% which indicates the efficiency level of the business in

managing its business operation. In case of Sainsbury, there is clear decrease in the net
profit ratio from 1.37% in 2017 to 0.69% in 2019. In Morrisons, the ratio has decreased
but not that high. By comparing the ratio of these three organizations, it can be said that
the Tesco is leading with respect to net profit ratio. It can turn out to be the tough
competition for Lidl.
 The market share refers to the portion of the market that is being controlled by the
particular company or a product (Edeling and Himme, 2018). The market share of Tesco
is very high which is at 27% but it has reduced from 27.8% in 2017. The market share of
Sainsbury has also dropped to 15.4% in 2019 to 15.8% in 2017 while in case of
Morrisons the market share has reduced to 10.1% from 10.4% in 2019. This fall in
market share indicates that the preference of the customers for the particular company’s
product has shifted to another company (Wunsch, 2019). This may also mean that the
sales of the company is affected which in result has affected the net profit. Thus, Tesco is
the market leader and a big competition to Lidl.
Key findings
Key findings of primary data
 Based on the primary data collected, the key things that are identified is that most of
the customers of the Lidl are between the age group of 26-45 years and 45-55 years
and the most of the customers of it is females as 60% of the response is received by
them.
 In terms of education level of the customers, the major customers of the company are
having the education of post-graduation and diploma which accounts for 50% and
then comes the graduates with 205 response and the remaining 20% includes diploma
and no higher education customers.
 The income level of the customers mostly ranges from £7000-9000 and £9000 and
above which contribute to 36% and 26% respectively. It is then followed by £5000-
7000 and then £3000-5000 which accounts for 24% and 14%.
 The major customers of Lidl are the people who have been working full time which is
almost 50% and 30% are part time workers and only 20 % accounts for students.

 For buying the retail products, the customers are willing to spend as high as £900 and
above which is agreed by 36% of respondents and 30% agreed to the expenditure of
£700-900.
 Based on the responses received, it is observed that the majority of the customers are
willing to do shopping from Lidl either twice a week or monthly basis. The twice a
week accounts for 30% and monthly accounts for 26%. There has been an equal
response in respect to the preferred shopping mode which is physical and online
mode.
 Most of the customers gives priority to the price of the product (50%) and then the
quality (30%). The location of the store has an influence over the purchasing decision
of the customers for which 24% of the respondents have strongly agreed and 30%
does not consider it as an influencing factor.
 The discounting offers has a huge influence offers the customers and when it comes
to groceries Tesco comes in the mind of customers first and then Lidl and after which
other competitors. Also, the products or services offered by Lidl is considered as
value for money and strongly agreed by 34% of the respondents.
Key findings of secondary data
Based on the analysis of the secondary data, it can be said that Tesco is the leading
supermarket chain, followed by Sainsbury and Morrisons. In terms of revenue, all the three
company are the big giants with large amount of revenue in comparison to Lidl. The gross profit
margin of the companies is also high and are at the growing stage except Morrisons. But the net
profit margin of the Sainsbury and Morrison has declined. The market share of the all the
companies are declining and the market share of Lidl is close to Morrisons and it can take some
initiatives to increase its market share and occupy the place of Morrisons.
Conclusion and recommendations
By summing up this report, it can be concluded that customers lay high level of emphasis
on discounts and quality of products. It can be inferred from survey evaluation that Lidl
customers are giving more preference to their convenience, wide variety and discounted
offerings. Thus, business unit should keep in mind all such aspects while developing strategic
and policy framework. Hence, Lidl is advised to include more varieties and brand within store.

This in turn helps in attracting both existing as well as potential customer base and thereby
contributes in organizational growth. Along with this, it has been articulated that financial
position of Tesco is good over the rival firms. Moreover, in terms of discounted offering, Tesco
secured leading position and thereby enhanced customer base to a great extent. Thus, for
increasing customer base and maximizing both productivity as well as profitability Lidl should
focus on developing competent discounting strategy. Further, for increasing sales company
should focus on activities pertaining to sales promotion. In addition to this, by exerting control
on expenses Lidl can improve profits and meanwhile improves financial position.

REFERENCES
Books and Journals
Edeling, A. and Himme, A., 2018. When does market share matter? New empirical
generalizations from a meta-analysis of the market share–performance
relationship. Journal of Marketing. 82(3). pp.1-24.
Edwards, J. B., 2016. Modern gross profit analysis. Journal of Corporate Accounting &
Finance. 27(4). pp.45-55.
Hadi, W., 2018. Analysis of The Effect of Net Profit Margin, Return on Assets and Return on
Equity on Stock Price (Case Study on Consumption Industrial Sector Companies Listed in
Indonesian Sharia Stock Index at Indonesia Stock Exchange in 2016). The Management
Journal of Binaniaga. 3(02). pp.81-92.
Imanda, F., 2017. THE EFFECT OF OPERATING LEVERAGE AND OPERATING PROFIT
MARGIN TOWARDS INCOME SMOOTHING PRACTICES (AN EMPIRICAL STUDY
ON MANUFACTURING COMPANIES LISTED ON INDONESIA STOCK
EXCHANGE YEAR 2014-2016). ETD Unsyiah.
Martínez, A. B., Galván, R. S. and Alam, S., 2017. Financial Analysis of Retail Business
Organization: A Case of Wal-Mart Stores, Inc. Nile Journal of Business and
Economics, 3(5), pp.67-89.
Online
Annual Report and Financial Statements. 2019. [Online]. Available Through:<
https://www.tescoplc.com/media/476422/tesco_ara2019_full_report_web.pdf >.
Annual Report and Financial Statements. 2019. [Online]. Available Through:<
https://www.about.sainsburys.co.uk/~/media/Files/S/Sainsburys/documents/reports-and-
presentations/annual-reports/sainsburys-ar2019.pdf >.
Morrisons Annual Report and Financial Statements. 2019. [Online]. Available Through:<
https://www.morrisons-corporate.com/investor-centre/annual-report/ >.
Wunsch, N., 2019. Grocery market share year-on-year in Great Britain (UK) 2012-2019.
[Online]. Available Through:< https://www.statista.com/statistics/300656/grocery-market-
share-in-great-britain-year-on-year-comparison/ >.

APPENDIX
Questionnaire
Q.1 Name
Q.2 Age
 25-35 ()
 36-45 ()
 46-55 ()
 56 and above ()
Q.3 Gender
 Male ()
 Female ()
Q.4 Education
 Diploma ()
 Graduation ()
 Post-graduation and diploma ()
 No higher studies ()
Q.5 Income
 £3000-5000 ()
 £5000-7000 ()
 £7000-9000 ()
 £9000 and above ()

Q.6 Working status
 Part time ()
 Full time ()
 Student ()
Q.7 How much do you prefer to spend for retail products and services?
 £300-500 ()
 £500-700 ()
 £700-900 ()
 £900 and above ()
Q.8 How often do you shop from Lidl?
 Often ()
 Once in week ()
 Twice in a week ()
 Monthly ()
Q.9 Which sales mode do you prefer for shopping?
 Visiting of physical store ()
 Online mode ()
Q.10 From the following list to which factor do you give more preference while shopping?
 Price ()
 Quality of products ()
 Availability of brand or varieties ()

Q.11 Do you agree that location of retail store has impact on customer’s purchasing decision?
 Agree ()
 Strongly agree ()
 Neutral ()
 Disagree ()
 Strongly disagree ()
Q.12 Do you agree that discounting offers influences customer decision making about purchase?
 Agree ()
 Strongly agree ()
 Neutral ()
 Disagree ()
 Strongly disagree ()
Q.13 Which brand comes in your mind first when you takes decision in relation to purchasing
retail products on discounted prices?
 Lidl ()
 ASDA ()
 Tesco ()
 Morrison’s ()
 Sainsbury ()
Q.14 Do you agree that products and services offered by Lidl are cost effective?
 Agree ()

 Strongly agree ()
 Neutral ()
 Disagree ()
 Strongly disagree ()
Q.15 Please give recommendation about products or services which Lidl should include in its
store if you have any in mind…..