Strategic International Business Management: Lidl's Expansion Analysis

This report analyzes Lidl's strategic international business expansion plans, focusing on the comparative analysis of Norway and Mexico as potential markets. The study utilizes PESTEL analysis to evaluate political, economic, social, technological, environmental, and legal factors in each country, revealing Norway's more favorable conditions due to political stability and economic freedom. The report further employs Porter's Five Forces model to assess the competitive environment in Norway, highlighting the bargaining power of buyers and suppliers, the threat of substitutes and new entrants. Through this comprehensive analysis, the report concludes that Norway is the more suitable market for Lidl's expansion due to its stable political and economic environment, despite potential challenges related to labor costs. The report highlights the impact of various factors on the business and its competitive advantage in the market.

Running head: MANAGEMENT
Strategic International Business Management
Name of the Student:
Name of University:
Author Note

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Introduction
Lidl is a supermarket chain which offers global discount. The company is located in
Germany, Neckarsulm. The company has over 10000 stores through which they operate across
United States and Europe. The company is owned and belongs to the billionaire businessman
Dieter Schwarz, who also owns hypermarket Kaufland and store chains of Handelshof. The
company offers products which are of great quality not only in Germany, Europe and United
states, but also across thirty countries, across the globe (Lidl.com 2020). The customers are
offered great shopping experiences at the stores, as they are offered with great options and
facilities, along with products which are available at very affordable and low costs. The shoppers
are thus, provided with the best experiences. The stores also have special product ranges which
are of great and top quality, at even high prices. The structure and design of the stores are of
amazing quality and standards which even make the experiences more enriching. Lidl even has
partnerships with regional and local firms which allow them to offer products to the customers
which meet their requirements and demands (Lidl.com. 2020). The aim of the company is to
keep the customers delighted and surprised by efficient services and products (Lidl.com. 2020).
There has been plans to expand the business across more countries. The companies which have
been taken into consideration for business expansion plans are Norway and Mexico. The aim of
the report is to analyze conditions in the two countries and determine the most suitable one. The
analysis will be conducted with the help of Porter’s five force analysis and VIRO framework
which would help in the process of understanding which country is best for expanding the
business. The macro-environmental factors which might impact the business shall also be studied
to offer a comparative analysis of the two countries (Lasserre 2017). A conclusion will be drawn
from the analysis.

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Task One
Evaluation of the two countries through PESTEL Analysis
PESTEL Analysis is a tool which allow evaluation of the factors which play crucial role
in the external business environment in which a company operates. The factors to be evaluated
with the help of PESTEL analysis are political, economic, social, technological, environmental
and legal.
Political Factors
The political conditions in Norway are found to be better when comparison are drawn
with other countries. Norway has higher levels of political stability, with very limited pressures
influencing the scenario from the political forces in opposition. It has also been found out that
there is no such significant opposing force in the country. The country has suitable conditions for
expanding business as it is one of the most stable countries in the world. On the contrary, the
political conditions in Mexico are unstable. The government in Mexico impacts the businesses in
the country to a great extent, making it difficult to run businesses. The country has high rate of
corruption, making businesses vulnerable because of such practices. The laws and regulations
which are implemented by the government become ineffective in such unstable political
situations which impact the business to a great extent, negatively.
Economic Factors
According to(Heritage.org. (2020). The population of Norway is over three million. The
GDP of Norway was recorded to be across $380 billion in the year of 2019. A considerable
degree of growth has been seen in the country. The company ranked to be the 26th in the list of
freest economy by scoring 73.0 for economic freedom which can be traced in the country. The

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country is attributed to have economic stability which is favorable for businesses, Norway.
Norway has great natural resources as well as safety which allows business expansion to be
suitable. On contrary, the reports of Heritage.org. 2(020) reveal that the economic conditions in
Mexico are less favorable for businesses. 6.0% is the inflation rate in Mexico, whereas, GDP
(PPP) is recorded to be 2.5%. The regional traders are benefitted in the country, which can be
understood with the help of GDP rate of the country (Heritage.org. 2020). Thus, the expansion,
in Mexico, will not be as favorable. The country ranks to be the 66th country in the list of freest
economy which was published in the year 2019.
Social Factors
Mexico is a country which has poverty as well as affluence, going hand in hand. There
are several social aspects, which might be challenging to conduct business, such as the gap
between the rich and the poor. Over 50% of the total population live in poverty, which makes up
a very large number. The country is heavily dominated by Spanish speaking people. On the other
hand, despite their primary language being Norwegian, English is known by most of the
population, which makes it favorable for companies to expand their business, as it will be easy
for communication purposes and lesser barriers will be there. There are other social factors
which would benefit businesses as there are great social practices, which make the environment
positive and likeable. Norwegian people consider outdoor activities to be very important to their
living and lifestyle.
Technological Factors
As Mexico and United States share borders, there have been technological advancements,
which have allowed people to look for advancements and jobs to better their living conditions

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and lifestyle. Even though it should be noted that technology and use of internet are mostly used
by businesses and enterprises, heavily, rather than the entire population rigorously. On the
contrary, Norway is the country, which attract businesses, because of tech-savviness and desire
for technological advancements by the population of the country. The reason behind the growth
of the country and its industry is because of the desire for connectivity and technological
development among people and initiatives by the government.
Environmental Factors
The Mexican government has several laws such as the General Law of Ecological
Balance, which makes it often difficult for companies to conduct their businesses. There also is
the Environmental Protection (LGEEPA) which aim at protecting the environment. Abiding by
these regulations and laws are very crucial to consider businesses. Whereas, on the other hand,
Norway has several policies such as environmental and value added taxes. There are several
initiatives which are taken by the government to take change and control damages which are
caused to the environment. The impacts caused on the environment are being dealt with, with the
help of various initiatives.
Legal Factors
Mexico does not have any minimum requirement if capital for initiating a startup even
though, the process of acquiring a license is expensive and time consuming, Mexico also has
rigid laws of labor, which makes it very difficult for companies to conduct businesses in the
eternal environment. On the other hand, the government in Norway has a framework which is
much more transparent and efficient. The government allows and enables company to innovate,

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create and make entrepreneurial growth in the country. The rates of corruption is also very low,
making it favorable and proper legal framework for conducting business.
Task 2
Rationale for Selection of the Chosen Market
The evaluation with the help of the PESTEL analysis suggest that Norway has better
conditions for setting up a business. Thus, the better county for the intended business expansion
for Lidl is Norway, as opposed to Mexico in the given scenario. From the PESTEL Analysis, it
can be understood that the political stability in Norway is much higher as compared to Mexico.
In Norway, there is no such oppositional force which might influence the business, whereas, the
businesses are controlled and influenced by the government to a great degree in Mexico, which
can be understood with the help of the literature offered by Gulanowski, Papadopoulos and
Plante (2018) on international strategy and business. The government in Mexico has been found
to be corrupted in several instances, which can be very negative for the businesses in the country.
Norway has great store of natural resources, which makes it a better choices for companies to
have their businesses be expanded in the country. Norway also has scored 73 in the global index
for having the freest economy, whereas, the score which has been obtained by Mexico is much
lower. Mexico is a country which has been seen making growth with their GDP and high rate of
inflation, yet the score for having freedom in economy is lower as compared to Norway.
Corruption is one of the greatest reason behind expansions being unfit when it comes to a
comparison with Norway, as Norway ranks to be the 26th among countries with freest economy,
in 2019 (Heritage.org 2020). As has been stated by Harrison (2013) business organizations will
be favored in such conditions of political stability and availability of resources which also meet

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high quality and standards. Lidl will be immensely benefitted, in such conditions, if the business
expansion is made in Norway as opposed to Mexico.
The government of Norway has great initiatives which ensure safety and protection to the
businesses which operate in the country. The effectiveness of the judiciary and the government
makes the country have high integrity. It is also highly regarded for being the third among 180
countries to have the least corruption rates. In order to maintain integrity, there are several
measures which are taken by the government to keep corruption practices in check and control.
The regulatory framework in the country is transparent which makes businesses well perceive
their plans and actions to achieve success and sustainability in the country. Norway government
ensures that there is stability of economy in the country. However, hiring of employees in
Norway, might be costlier as compared to Mexico, as government have strict labor laws which
protect labor and employees, ensuring them their rights and safety. This might pose significant
challenge to Lidl to expand in Norway as compared to Mexico. For Lidl, operating business in
Norway can be costlier, but a safer choice when it comes to safety, sustainability and stability,
Technological and social aspects are better in Norway, again, making it favorable for Lidl to
conduct business in Norway. The modernized lifestyle and accessibility of technology will be of
great help to access and reach out to the target audience in the market. The growth rate in
Norway is lower as compared to Mexico, but it would be more prosperous for Lidl in Norway
because of economic stability and other positive benefits related to expansion.
Task 3
Competitive Environment of Norway

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According to Porter’s Five Forces Model, there are five forces in the industry which must
be paid attention to, in order to gain competitive advantage. The profitability of the organization
gets affected due to these factors. The five factors which influence the business are Bargaining
power of buyers, Bargaining power of Suppliers, Threat of Substitutes, Threat of rivals and
Threat of New Entrants.
Bargaining Power of Buyers
The bargaining power of the buyers in the market is quite high, because of the availability of
various alternatives which are available in the market. The customers in the market prefer
products which meet high quality and standards. However, they look for the availability of these
products at low rates. In the opinion of Rothaermel (2016), if there are several products which
are available in the market for the customers to purchase, the bargaining power increases. Wang
(2014) have opined that if there also are several substitute products which make the competition
high. The customers, thus have high bargaining power as they can choose and switch from one
product to another due to the availability of choices.
Bargaining Power of Suppliers
The suppliers, in the market has low bargaining power. This is due to the availability of
many suppliers in the market, which brings down the bargaining power. The cost of switching
for the suppliers are low in the market. Lidl can make use of knowledge in order to enter the
market and capitalize it for their benefit. In the words of Dobbs (2014) the company can posit
themselves at a good point in the market by not depending on the suppliers heavily. The
company can, thus strengthen themselves in the Norwegian market.
Threat of Substitutes

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The Norwegian market is dominated by substitute products which make competition in
the market rigorous. It can pose challenge to Lidl to enter a market with such high competition
and there is high threat coming from substitute products. There can be other companies offering
similar products at cheaper rates, which the customers will get attracted to, which will pose
threat to Lidl (Grigore A.M., 2014). Thus, Lidl will have to innovate and create, in order to
thrive the market.
Threat of Rivals
In the Norwegian market, the companies are codependent. The action of a company
affects and influence others in the same market. The grocery market in Norway has grown by
4.2% in the recent years, which is good for Lidl, as it is expected to grow in the years to come as
well. The rivalry is strong, thus. The leader in the market is Norges Gruppen.
Threat of New Entrants
The companies which enter the market bring innovation, which is a threat to Lidl. This
might affect sustainability and profitability of the company, Thus, Lidl must pay attention to this.
The companies can easily enter the market as there is freedom of economy, even though there sis
high economies of scale in the country. However, companies require high capital requirements
to enter the market, which would make the new companies bear high expenditures. Even though,
it is difficult to enter the market, they can pose serious threat to Lidl.
Task 4
VIRO Framework

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The VIRO framework is very useful to assess the internal resources and capabilities of an
organization. The framework allows to identify the strengths and competitive implication od the
company, especially when a business expansion is intended. The VIRO, which is being
conducted for Lidl will help in the process of analyzing the resources which can be improved to
gain competitive advantage.
Valuable
The valuable resources would include its financial capabilities and resources which are
possessed by Lidl. The company has potential to invest and carry out an expansion, which is
intended to be in Norway. Lidl will be able to coordinate and operate its business in Norway by
offering high quality food products in the market but at low and affordable prices, which will
attract the buyers. The products which are offered by the company in the market are valuable
resources to the company. According to Ariyani and Daryanto (2018) the company has great
customer base, which constitute of the valuable resource, possessed by the company. The
company has made of various strategies to achieve the great consumer base. The market position
has been secured by Lidl with their initiative for value for money, which has satisfied the
customers to a great degree. The company also has online selling platforms, which makes it
distinguishable from other competitors in the market. The company also has well trained staffs,
who are of utmost value to offer great services and products in the market.
Imitable
The resources which are possessed by the company cannot be imitated by other
companies in the market easily. The financial positioning and resources of the company are one
the most difficult to imitate. These have been acquired by the company by making profits for a

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long period of time. On the other hand, the services and products which are offered by the
company in the market are easily imitable. According to Song and Sung (2015), if other rival
forces probe and research well about the product ranges which are offered by Lidl, can be
imitated. The strategies which are developed and implemented by the company can also be
imitated but the patents cannot be, as they are protected legally.
Rarity
The financial capabilities of Lidl are rare, which makes the business great. The position
which the company has secured over the years is commendable and rare. On the contrary the
product ranges of the company are not too well differentiated, and thus, they cannot be
categorized as rare. The employees of the company are very well skilled and trained which a
veery rare possession of the company is. The benefits which are enjoyed by the employees such
as compensation rates, are also rare. The patents, also are rare resources.
Organization
The financial resource enable the company to capitalize the market and create great
value. The organization is very well structured too. The resources of the company can be made
use of, to attain competitive advantage. The strategies are well developed to implement them
usefully and make use of them, at the most required places. The threats can be well combatted,
thus. The company needs to reassess the patents as they are not very well organized for the
company’s benefit.
Task 5
Various Modes of Entry

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There are various ways in which expansion can be made in the foreign markets. These
modes of entry have their own advantages as well as disadvantages. The most effective and
suitable mode of entry for Lidl, will be selected in this section by providing an analysis.
Licensing and Franchising
The process involves rights being transferred to other companies who are able to make
use of the products and services. Licensing is used by companies which has great share in the
market. Whereas, Franchising is used in order to gain tractions in the foreign market. Licensing
also involves competition and disruption in the business, which might be very risky.

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Direct Exporting
The process involves selling of services and commodities in the market directly. The
products are sold in the market by using own resources. This is often the easiest process of
entering an international market. With the help of direct exporting, many expenses can be
avoided in order to offer products and services in the target country. There can be agreements
and contracts between agents and regional firms, which ensure distribution of products. This
involves lesser risks but knowledge about the local market and trends are very crucial.
Greenfield Venture
This process involves acquiring of land and various different facilities, to initiate business
in the international market. However, it should be understood with the help of literature of
Andersen, Ahmad and Chan (2014) this is the most expensive process for conducting business.
Greenfield Venture also involve complex processes to abide by laws and regulations, which
might restrict the business to a great degree and increase risks.
Partnering
Partnering is the process through which partnerships are formed with local businesses. It
is a necessity which is very important while entering newer markets (Hitt, Li and Xu 2016). This
brings down the risks involved in the process along with the business partners, as the risks get
shared. In case of Lidl, there can be cultural barriers to get into such a partnership.
The Suitable Entry Mode
The entry mode which is most suitable for Lidl to enter Norwegian market is Direct
Exporting. This market strategy will be most effective as Lidl will be able to sell their goods and

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services while making use of their own resources. The company has great financial potential
which they can use to devise their own sales program and approach the agents. These local
agents will represent Lidl to the great target customer base in Norway. As they have better
knowledge of the market, the company will be benefitted.
Conclusion
It can thus be concluded by saying that the most suitable country for the expansion is
Norway. After making important considerations, it has been seen that Norway will be more
favorable as compared to Mexico, as the macro environment is more suitable for expansion.
Norway has greater political stability free economy, and supportive investments. The corruption
level in Norway is much lower, which is better for businesses and hence is favorable for Lidl.
The report consists of five force analysis which reveals the competitiveness. The resources have
also been evaluated with the help of VIRO framework. The market entry mode has been chosen
to be Direct exporting, after assessing various modes of entry.

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