Strategic Management Report: Lidl's Strategic Direction and Options

This report provides a comprehensive analysis of Lidl's strategic management, focusing on its expansion strategy, particularly in the Indian market. The report begins with an executive summary and introduction to strategic management, highlighting its importance in setting objectives and executing plans to avoid deviations. It then delves into external analysis using PESTEL and Porter's Five Forces frameworks, assessing political, economic, social, technological, environmental, and legal factors, as well as competitive forces influencing Lidl's operations. Internal analysis employs the VRIO framework to evaluate Lidl's resources and capabilities, determining their value, rarity, imitability, and organization. The report further explores strategic options like mergers and alliances and concludes with strategic directions and recommendations for Lidl's sustainable growth. The analysis includes the company's strengths, weaknesses, opportunities, and threats (SWOT), providing a holistic view of its strategic position and future prospects. The report emphasizes the importance of adapting to the changing environment and leveraging opportunities to enhance the company's market share and overall performance.

Strategic Management

EXECUTIVE SUMMARY
The main concern of Strategic management is to set out objective, carry out planning and
execute functioning to meet out the strategic intent by avoiding the chances of deviation. It helps
in the effective functioning of firm for which both internal and external factor needs to be
evaluated. This provide the strategic direction to the company by making the sustainable choice
for the long term growth and development.

Table of Contents
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
External analysis..........................................................................................................................4
Internal analysis...........................................................................................................................7
Strategic option............................................................................................................................9
Strategic direction......................................................................................................................11
CONCLUSION ............................................................................................................................12
REFERNCES...................................................................................................................................1

INTRODUCTION
Strategic management is the essential part of an organisation that include comprehensive
and detailed plan which is prepared to achieve particular goals and objective of an organisation
effectively. It involve the stream of various actions and activities that are designed to cope up
with the changes that exist in external environment and access the opportunity successfully. This
promote the systematic functioning of overall organisation where value is delivered to the
internal and external stakeholder by carrying out the significant functioning effectively (Frynas
and Mellahi, 2015).
For the better understanding of report Lidl which is the grocery company of Germany has
been selected. The company stared its operation in 1930 by Josef Schwarz which deliver the
household products and became one of the evolving retailer of Europe. It currently operate in
approximately twenty eight countries for which around three lac employees are hired. Due to the
emerging size of company it earn new income of worth 1,541,000,000 euro by setting its image
as quality product that can be avail by customer at reasonable prices. Based on SWOT analysis
the key strength of company is the financial strength and economies of scale advantage due to
which it is planning to expand its operation in the potential market that is India which is the part
of Asian market. Similarly, the weakness of company is discounted prices of the product that
basically restrict profitability margin. In context to key opportunity Lidl company need to focus
to prepare the global presence and overcome the threat of competitive pressure with the
objective veto establish suitable position. This report cover topics like demonstration of external
as well as internal analysis essential to prepare the strategic decision. Along with that plan and
implement the specific strategy that is significant for an organisation in terms to carry out the
functioning effectively. Further, in order to expand the operation effectively Lidl amongst the
various strategies like merger and alliance needs to selects the significant process to attain the
strategic decision position effectively.
MAIN BODY
External analysis
External analysis encompasses the role of dynamic environment that is necessary to be
evaluated by an organisation with the objective to identify the existence of potential opportunity

and weakness. This leads to the systematic business operation due to which the manager of Lidl
company before expanding process perform the PESTEL analysis that is explained below:
Political factor: It include the government policies and political condition that needs to
be systematically identified by company before extended or establishing the business entity. Ldli
mainly function in Germany and other developed countries by branching out the operations due
to which it gained huge recognition in all over European Union. Currently, it is planning to
stretch its operation in India where the political condition are less likely stable in context to the
whole Europe. So internal department can overcome the threat by enhancing the political
situation and build strategy accordingly (Gamble, Peteraf and Thompson, 2014). Thus, presence
in emerging economies is the opportunity for company in terms to gain the potential buyer which
are keen to get desirable product and at nominal prices. This can even laid the possibility to
prepare global dominance.
Economic factor: It include the disposable income and gross domestic product of an
economy that help the firm to determine desirable strategy by which they can determine the
external economic condition and articulate strategy accordingly. In emerging economy like India
the purchasing power of consumer is low in comparison to the Germany. So Ldli company needs
to penetrate the whole market by retaining the existing strategy which is selling quality product
to the mass market. This is the opportunity that can flourish the market operation by just
focusing on the prevailing strategy adopted in its home country. On contrary, there are different
economic condition such as recession that act as a threat and directly hamper the profitability and
productivity of firm (Ansoff and et. al., 2018). So to cope with this situation Lidl company
promote the offerings via high discounts as it retain the people from switching cheaper
alternatives.
Social factor: The lifestyle, culture, belief and status are the part of social factor which
needs to be researched by an organisation so that it can drive out effective value. So the company
in Asian market need to spread the awareness in terms of supreme quality and derive out the
value for different classes of society (Lidl PESTEL Analysis & Environment Analysis, 2018).
Delivering the label and certified product engages the interest of customer which is an advantage
situation that help to cater the opportunity of meeting the requirement of customer. Further, the
social factors comprises of taste and preferences of customer that constantly changes which can

act as a threat of Ldli company. It can only be compensated by regularly anticipating the
changing requirement and simultaneously matches the current need and requirement of audience.
Technology factor: It represent the innovative or technical way that assist the firm to
maintain its pace and enhance the market share of company. For the distribution of product in
India the company can use the innovative technique like use of online play to demonstrate its
various category through online catalogue. This engages the attention of customer which is an
opportunity and used to maintain the electronic customer relationship management. Further,
adoption of latest technology enhance the cost and expenditure of company which leads to the
immense burden. Thus, it can only set off the threat if Lidl firm find using technology
significantly enough to attain its purpose and overpower competitive pressure.
Environmental factor: Environment factor represent the surrounding or external
environment that need to be effectively understand by the company before incorporating any
operations. This progressively help the Lidl organisation to ensure that all activities are carried
out suitably by lowering down the chances of carbon footprint and eliminating use of plastics in
order to gain the attention from society. Adequate Corporate Social Responsibility not only help
the firm to exploit the global market but also maintain the trust of internal as well as external
stakeholders.
Legal factor: This include the legislation or government law which is one of the most
prominent factors that is mandatory for an organisation to adopt and follow effectively. While
extending the operations in India there are certain legal laws like fixed working hours and child
labour act that need to be understand by the the internal manager of Lidl organisation and carry
out effectively. Therefore, this promote the global presence of brand effectively.
Porter's five force analysis
It is a framework that comprises of different competitive forces which are studies and
analysed with the perspective to shape the functioning of industry and determine necessary
strengths or weakness by formulating effective corporate strategy. In terms of Lidl company
these forces help to define the competitive pressure that can direct affect the industry and provide
direction by which it can handle diverse forces effectively. Explanation of different forces are
listed below:
Bargaining power of suppliers: Supplier are basically responsible to offer the necessary
raw material to company that they can finally deliver by transforming it into necessary product.

In terms of Lidl company which is one of the largest company of Europe in terms of revenue and
market share experience moderate to low supplier forces. Due to the wide operation supplier are
more prone to deliver the quality product at reasonable prices so that they can maintain suitable
relationship with company. Even the company need to deal with supplier of Asian market by
maintaining effective relationship with them and get the products on time.
Bargaining power of buyer: As retail industry cater the needs of diverse customer within
stipulated period of time so there are different large and small retail company that are into similar
type of business. This has increase the options or alternatives for customers of different regions
like India as well as Europe which laid to high bargaining power of customer (Ginter, Duncan
and Swayne, 2018). The Lidl company deals with this situation by analysing the strategies of
tough competitor and bring modification accordingly. Additionally, it is known well in European
countries for its discounted prices so that company need to inculcate same within Asian market.
Threat of new entrants: Due to the possibility of immense probability there are
numerous new entrant that exist with the perspective to grow and expand its operation. As Lidl
company stretches its business in large geographical market and has gained renowned image so
the pressure from new entrant is low. The company can further sustain competitive position by
taking the benefit of economies of scale and diversify the business operation effectively.
Threat of substitution: There are different type of retailing company that build
competitive strategy and offer different product within the same platform (Noe and et. al., 2017).
This determine the substitution pressure for the Lidl company is high which generate the threat
to sustain the existing customer base of company. In order to deal with this situation it need to
constantly realise the customer about its enrich product and service that are better from other
rivalry available in market.
Industry Rivalry: The rivalry for household and retail products is high because there are
ample opportunities that can lower down the profitably of firm. Herein, Lidl company which has
the large size are diversifying its operation in the Asian market that is India which so the
challenge for company in terms to build the image and competitive with existing rivalry. The
company can only deal with this situation if it generate brand image through extensive promotion
techniques.

Internal analysis
VRIO framework refers to the internal resources and capabilities that needs to be
constantly access by company as it represent clear perspective that identify whether it is
providing competitive advantage or not. Also it offers the opportunity to company where it can
make optimum use of resources and build suitable position.
Factors Valuable Rarity Imitable Organized Result
Global
presence
Yes No Yes No Competitive
parity
Skilled staff Yes Yes Yes Yes Temporary
Competitive
advantage
Products Yes Yes No Yes Competitive
advantage
Financial
resources
Yes No No No Competitive
parity
Valuable: This involve the use of favourable resource that significantly adds value in the
functioning of company and neutralise the presence of external competition. The resources that
adds value to the company includes the wide presence of Lidl company in the European union
which has particularly enhances the sales of company. Along with that products are the valuable
resources of respected company because the internal personnel and management immensely

focuses to maintain the quality of its offering (Hill, Jones and Schilling, 2014). Employee are the
key factor of an organisation that function to attain the objective by successfully transforming the
raw material into the finished items. So the manager provide the efficient training and
development session in order to enrich their existing capabilities and gain the long term success
effectively. Thus, due to the wide presence the company leverage the advantage of financial
resources which are valuable and help to carry out systemic operations to exploit the opportunity.
Rarity: Resources which are valuable can only offer the competitive advantage to Lidl
company if they are rare. As it is the signifiant way that can assist firm to gain the satisfaction
and derive out best possible value in order to overpower the competition pressure (VRIO
framework, 2018). So amongst the different resources Lidl gets the privilege of rare resources in
terms of skilled worker as well as quality product. This enhances the probability of firm to gain
the success by satisfying the interest of the customer. Along with that as the company in near
future will build plant and retail store in India so it needs to constantly enhance the capabilities
of their employees and update its knowledge regarding the different variants of company. This
helps to maintain the quality of diverse offerings and retain the interest of diverse customer.
Imitable: Imitation refer to the process of duplicating the resources of company so that
customer can easily substitute or switch to the competitor's product (Rothaermel, 2017). If the
brand are easy to imitate then it leads to the temporary competitive advantage like there are
several large retailer that can after the expansion of company in India and widespread their
operation as well. Along with that by organising training and development the existing
knowledge and skill can be constantly updated. So this does not help the firm to gain long term
success. Whereas, there are certain aspect such as quality offering of the company can not be
imitated by the other rivalry this leads the the core advantage to the company because they can
use the innovative technique in order to bring out various variants as well as choices of customer.
Financial resources are again the strength of company that needs to be utilised to diversify the
operation, conduct market research as well as while extending the product range. This
significant is the desirable position that strengthen the existing
Organised: It reflect the management processes, culture as well as prices that help to
capitalise the functioning of firm (Hitt and Duane Ireland, 2017). It is vital for the firm that need
to use their resources effectively so that they can again the advantage of long term sustainable
development. This is the successfully situation where the overall success and objective are meet

without any threat from the existence of competitive pressure. Further, company with the help of
its quality product can establish its operations in both home and host country and seek the
sustainable interest of the customer.
Strategic option
Porter's generic strategy covers different competitive strategy that can assist firm to
gain the profitability and maintain the systematic functioning. So while dealing with the external
market firm need to establish the effective strategy that can enhance its performance and help
them to carry out immense functioning. Basically there are two approaches that include low cost
where the objective is to stretch its operation in each and every corner of the geographical area.
Further, differentiation strategy is used to set the unique image and target the segmented group
like premium customers. Thus, both are advantageous if adopted effectively and the explanation
of strategy in context to Lidl company are explained below:
Cost leadership: Under this generic strategy the company gain the competitive edge by
low cost method and has the scope to target the broad including both national and international
market. This is the preferable way to fight against the competitive pressure usually the large
companies uses this strategy in order to diversify its brand in different market by pursuing the
sue of economies of scale (Meyer, Neck and Meeks, 2017). Such strategy can be effectively used
by Lidl company as it expand the arena of company in terms of dealing which leads to the
portfolio investment. The main significance of this method is that it can exploit various
opportunity by using advance technology and mitigate the chances of risk due to the existence of
external factors. Hence, as the per unit cost of the product is low by due to the large market
demand enhances the long term profitability and productivity of firm.
Differentiation: This strategy is based on the dimension of unique attribute that enhances
the value of product amongst the customers and helps to set the prominent position. As per Cost
leadership, differentiation strategy is too used to target the broad market. This assist the company
to gain ample of opportunities so it position the product as prestigious brand and due to the
advance attribute the customer remain ready to pay the premium pricing. Such strategy can be
adopted by Lidl company where with the help of promotional technique such as digital media the
company can be positioned as the renowned brand that offer the quality product to the customer.
If the customer find the quality is unbeatable then surely middle as well as high income group
people can lead to profit maximisation due to the high margin (Stead and Stead, 2014). So here

even if segmented group is small but can compensate all the expenditure of company in
exchange of the supreme quality derived for the welfare of company.
Cost focus: As per this generic strategy the firm concentrate to become market leader by
serving the narrow area suitably. For this the company set the nominal prices of their product and
services and effectively penetrate in the confined market effectively. Due to the low availability
of the finance and pressure of existence in the international environment they restrict their
operation and mitigate the chances of loss due to less risk factor. In terms of the Lidl company
can use this strategy by which it can confined its operations to the particular market and leverage
the advantage of high customer loyalty. Usually the company undergo the extensive market
research where it constantly takes the feedback from customer and perform the daily regime
significantly.
Differentiation focus: This is again the focused strategy under which concentration is
given to the narrow market and serve them with prestigious quality. At this stage the organisation
generate low volume in terms of sales and revenue due to its restricted awareness (Morden,
2016). Along with that due to the low availability of the number of substitute Ldli company can
set the premium pricing that need to be paid by customer in order to satisfy their require. Further,
the customer gets the opportunity to experience quality product by serving the whole market
favourably. Thus, strong operation and stable position significantly assist the company to gain
the suitable profitability but they need to remain curious about the external market otherwise this
can affect the position and loss the strong customer base.
Therefore, amongst the different strategy it has been determined that the Lidl company
can adopt the Cost leadership approach where it focuses to target the broad market which is not
only confined to Germany but Asian market as well. This is the most significant way to generate
the global presence by selling out quality household product effectively.
Strategic direction
Strategic direction simply determine the route of firm that need to be followed to gain the
growth as well as development. This si the essential approach that simply include the whole
planning procedure athat need to be followed by the company in order to attain the particular
goal and objective effectively. It basically act as a guidance that educate the different group
member and staff what activities needs to be carried out to reach out either short or long term
target (Morschett, Schramm-Klein and Zentes, 2015). It significantly enhances the position of

firm by diversify its operation from its home country that is Germany to the totally new country
which is Asian market. The company does not have experience of working in the emerging
economies but it carry out its operations to explicitly enhance the profitability by generating the
potential buyer. Amongst the different types of strategy Lidl company can effectively adopt the
Diversification strategy as it help the company to understand the new market and behaviour of
customer such as their buying pattern, consumption habit and so on. On the basis of research the
company need to modify its product and bring certain alterations so that the costumer of Asian
market specifically India can get the best possible value at desirable prices.
Further, to carry out this process effectively the company can form the strategic alliance
with the existing retail industry of India such as Future Group. This is the favourable way by
which respective company can smoothly enter into the new geographical market and mitigate the
chances of risk. As the profiastability and risk ration shared between the different partcise so
rather than operating alone that can formulate the effective terms and condition based o0n which
the functioning gets easier and smoother. Lidl company can indulge into the alliance for
diversification as there are various advantage associated with it. Like, it empowers the
knowledge and resources sharing that reduces the burden of sole operation in the company. Also
the market condition of India is totally different from its current market so it empower the skill
and way of doing the business operation. Along with that the company can enhance its capability
and overcome the existing competitors pressure due to the collective effort of the parties.
Forming significant alliance can instigate company to access the target market and engage them
by widespread the awareness about its quality product that is much more better from other
competitors (Vogel and Güttel, 2013).
CONCLUSION
From the above discussion it has been concluded that strategic management is every
essential for the organizations where management of the company formulate strategy and make
sure to implement in well manner. It is the ongoing process of planning, monitoring and
controlling, so managers should perform that which helps them to maximise the overall
operational efficiency as well as effectiveness. In order to expand their business operations in the
new market, organization need to evaluate macro as well as micro environment in order to
identify the key driven facto. It further beneficial for the managers to formulation their strategies
accordingly because these factors affect the production as well as profitability of the company.