Running head: LIDL COMPANY ANALYSIS 1

Lidl Company

Student’s Name

Institution Affiliation

Date
LIDL COMPANY ANALYSIS 2

Table of Contents
Introduction.....................................................................................................................................3
The rationale for the selection of the chosen market using PESTEL analysis..................................3
The competitive intensity of the industrial environment of Lidl in Norway using five forces model
.........................................................................................................................................................6
The threat of new entrants..........................................................................................................6
Bargaining power of suppliers......................................................................................................7
Bargaining power of buyers.........................................................................................................8
Threats of substitutes...................................................................................................................8
Rivalry existing among competing firms......................................................................................8
The firm’s internal environment using VRIO framework.................................................................9
Valuable:.....................................................................................................................................10
Rare:...........................................................................................................................................11
Costly to imitate:........................................................................................................................11
Organized to capture value:.......................................................................................................12
The modes of entry available to Lidl and recommend the best mode..........................................13
Non-controlling interest.............................................................................................................13
Establishing international stores as a part of the foreign expansion.........................................13
Takeover or merger....................................................................................................................14
Joint venture..............................................................................................................................14
Franchise model.........................................................................................................................15
References.....................................................................................................................................16
Appendix........................................................................................................................................17
Comparative PESTLE analysis of Mexico against Norway..........................................................17
LIDL COMPANY ANALYSIS 3

Introduction
Lidl company is an international discount supermarket based in Germany. The

supermarket operates in more than one thousand stores across the U S and Europe. The company

operates within retailing industry. The firm is a chief competitor in the industry that does not

have very many companies. The company operates internationally and will extend its operations

to Norway and Mexico in the future. Macro-environmental factors in a market are key in

determining the success and growth of a business in a particular country. Also, the internal

business factors come into play in contributing to the success of the particular company. The

report seeks to evaluate both the potential markets and conclude which would be more favorable

for Lidl investment.

The rationale for the selection of the chosen market using

PESTEL analysis
Norway is an ideal market for Lidl as the macro-environmental factors are favorable for

business operations. Political stability in the country can only affect Lidl’s operations positively.

Though there are some regulations made on how to conduct businesses, the country is not known

for abuse of power by those in authority. Thus, as long as Lidl observes the regulation in place,

the political forces will not prevent the business operations. Also, due to the country’s political

and economic stability, it has a record of security as it is a monarchy without opposition pressure.

As a result, it is almost impossible for a business operating in the country to have its property

and resources destroyed during episodes of violence. There is political satisfaction among the

citizens of Norway. Due to stability, there are many opportunities for social, financial, and

individual growth in the country. Political stability in the country contributes to the record of low

crime rate and absence of transnational disputes in the world.

LIDL COMPANY ANALYSIS 4

Figure 1: PESTEL framework

Economic stability and continuous growth in Norway creates a conducive environment

for Lidl. This is because the purchasing power and buying patterns of individuals are greatly

influenced by the economic stability of a country (Liang, 2012). As the majority of the citizens

have a good income and high living standards, they have fewer problems in acquiring items from

the supermarket. The poverty level in the country is reported to be very low. Also, the

unemployment rate is at 2.4% indicating that most of the citizens have positive purchasing power

and buying patterns. On the other hand, the increase in global consumption of goods and services

favors business investments all over the world.

Consumers in many parts of the world, Norway included having a rising tendency to

spend more on what they want more than what they need (Liang, 2012). Thus, there are a good
LIDL COMPANY ANALYSIS 5

number of impulse buyers in the nation that in turn favors Lidl expansion to the country. Norway

has a long history of political and economic stability as well as a healthy stock exchange and

fiscal responsibility. As such, many investors would want to invest in the country with such

favorable characteristics. The natural resources including oil and fish stocks play a significant

role in boosting the nation’s economic status. The government also plays a role in enhancing

economic growth by curbing unemployment. Norway is listed among the most competitive

economies in the world. with such favorable economic factors, the country will support Lidl

growth as a business.

Advancement in technology in Norway is favorable for Lidl’s expansion to the country.

This is because the company will be able to use technology in conducting their operations

(Srdjevic, Bajcetic & Srdjevic, 2012). the firm will be able to boost the efficiency and

effectiveness of its operations by employing technology. Also, the cost of business practices will

be low as technology can replace employees’ labor. In addition, activities such as marketing,

distributing, and selling products will be made easier (Hartline, Mirrokni and Sundararajan,

2009). The company can be able to reach customers within a short period of time. On the other

hand, the customers will be able to access information regarding the firm and the products they

offer with ease. Most importantly, the high use of technology is associated with the thriving

business operations.

Legal factors in the country contain rules and regulations regarding business operations.

the factors are seen to be favorable for businesses as they are generally favorable. The workers in

the legal system are competent and uphold fairness in dealing with people; whether they are

locals or foreigners. Also, the legal system protects people from possible abuse of power. This

implies that no one is treated favorably when it comes to rules and regulations.
LIDL COMPANY ANALYSIS 6

The poverty level is low in Norway whereby it is as that level from high literacy levels,

political and economic stability, and business development. As a result, citizens are likely to

engage in healthy social activities rather than activities such as thefts. As the unemployment rate

is low, most people are able to sustain themselves in a good life where they earn and spend to

improve their livelihood. On the other hand, individuals are likely to influence each other

positively in purchasing patterns and consumer behavior. As Lidl expands its investment in the

country, chances are the company will thrive from the favorable social behavior that is conducive

for business’ growth.

The market environment in Norway favors the survival of a business. Proper incentives

are in place to support the growth and expansion of a business. The incentives set up by the

government include proper infrastructure as well as transport and communication systems.

What’s more, the country contains natural resources that could be used as raw materials in

processing products. Also, the environment of the country is perfectly maintained whereby it has

not been destroyed through ways such as pollution. With a favorable environment, it is likely that

Lidl will thrive in Norway.

The competitive intensity of the industrial environment of

Lidl in Norway using five forces model
The threat of new entrants
Considering the Norway market, the threats of new entrants of Lidl is a weak force. This

is because it is difficult to attain the economies of scale in the industry. As a result, it is costly for

new entrants to perform their production processes. Lidl as well as other companies in the

industry sell highly differentiated products rather than employing standardization. As a result, the

customers in the target market would most likely look for differentiated products as they make

purchases. For the reasons, the threat of new entrants is a weaker force (Mathooko & Ogutu,
LIDL COMPANY ANALYSIS 7

2015). As Lidl operates in Norway, it is likely to have few new entrants in the retail industry. On

the other hand, the new entrants would require high capital to invest in the industry. Thus, it is

difficult for new entrants to establish businesses within the industry.

The aforementioned factors are likely to contribute positively towards the Lidl’s

operations in Norway as it is easy for the company to dominate in the market. the new entrants

can easily access distribution networks thus they can easily set up the distribution channels when

coming to the business. The factor strengthens the threat of new entrants’ force. The retailing

industry has strict policies and regulations in conducting business. this would make it difficult

for entrants in Norway to establish their businesses.

Bargaining power of suppliers

Lidl operates in an industry that has many suppliers as compared to the buyers which

makes them have little control over prices of goods and services. The factor favors the firm’s

operation in Norway as it will not be easily overcharged by the suppliers for the goods or

services. Also, this implies that their cost of production will be low and the company will be able

to optimize its profits. In addition, the products offered by the suppliers are standardized rather

than differentiated. The bargaining power of suppliers is made weak by the fact that Lidl can

switch between suppliers who meet their requirements. What’s more, there are no substitutes for

products rather than the ones offered by the suppliers in the industry (Mathooko & Ogutu, 2015).

As it operates in Norway, other companies within the industry would take advantage of the weak

bargaining power of suppliers. Also, the competitors can be able to easily offer the products

offered by Lidl as the supplies are easily accessible and highly affordable.
LIDL COMPANY ANALYSIS 8

Bargaining power of buyers

The buyers in the industry have few companies to choose from as they are far too many

than the number of firms in the industry. As a result, the companies have much control over the

prices of goods and services as the buyers do not have much of a choice. In Norway, the

company would control its profitability to a big extent whereby it can use innovation to attract

customers as it controls the pricing of its products. Consequently, the bargaining power of the

buyers is a weak force. Also, as product differentiation is high in the industry, it becomes

difficult for buyers to find alternative sellers of a particular product within the industry. The

customers at Norway would be less price sensitive as the economic status of the country is high

and the poverty levels are low. On the other hand, the income level of the majority of

Norwegians is relatively high. As a result, Lidl can control the prices to its favor in the country

so as to optimize its profits.

Threats of substitutes
The retailing industry which Lidl operates in contain few substitutes for the products

offered. The threat of substitutes is thus a weaker force in the industry. If the company employs

competitive incentives in Norway, it is possible to dominate the market by offering a product that

satisfies its customers. the few substitutes available are very expensive and of high quality. Most

of the buyers would not prefer to pay higher prices for the products that they already pay. As

such, Lidl still remains to be advantageous while operating in Norway. Studies indicate that the

buyers within the industry are less likely to switch between substitutes considering the fact that

the firms are few in the industry.

Rivalry existing among competing firms

The competing firms are not many in the industry within which Lidl operates. As such, it

is noted that their rivalry is not high considering each of the companies is able to capture its
LIDL COMPANY ANALYSIS 9

customers quite well. Also, as most of the firms are big, they employ incentives to attract

customers each in their own way. What’s more, the high differentiation of products plays a role

in giving each firm uniqueness of some kind such that the customers are less likely to look for

substitutes (Liang, 2012). The firm can thrive well in Norway considering the weak force of

rivalry among the existing firms. Each of the firms operating within the industry in Norway

would have a large market share.

The firm’s internal environment using VRIO framework

VRIO analysis of Lidl will help in identifying the four major attributes that enable a

company to gain a competitive advantage in the market. the framework suggests that a company

should be valuable, rare, imperfectly imitable, and perfectly non-suitable. Thus, capabilities and

resources are very crucial in a firm so as to attain successful results. They facilitate the

competitive advantage of the company.

LIDL COMPANY ANALYSIS 10

Figure 2: VRIO Framework

Valuable:
Strategies and resources are essential in helping a firm to conduct its operations. This

includes exploiting the opportunities available. According to the success the company has had, it

is clear that it employs the necessary resources to effectively execute its operations (Castellani,

2012). Also, the firm has a history of seizing the available opportunities for the good of the

business. The resources and the capabilities of the firm also enable it to defend itself from the

threats it faces from time to time. Lidl focuses on having strategic resources that yield benefits to
LIDL COMPANY ANALYSIS 11

it. The resources are majorly the intangible resources that are characterized by inimitability. The

intangible resources include the skills and knowledge of the employees. The expertise of workers

cannot be imitated by other firms. The company invests in improving the quality of its human

resources through training and seminars among others. With high expertise in conducting

business, Lidl is able to attain efficiency in all its operations ranging from production to

marketing practices.

The value of the firm’s resources enables it to satisfy its customers as well as increasing

their value. To attain this, the operations conducted are customer-centered as well as the firm’s

decisions. They are all aimed towards satisfying the consumers. Differentiation of the products

enables the company to create the value of its resources. Also, the decrease in products’ prices

increases the value. The firm is known for selling its products at low prices as well as using

discount sales. Consequently, the firm is able to acquire a competitive advantage without much

straining.

Rare:
Rare resources are those that are not common among the other firms. The resources give

a company uniqueness in its operations such that it cannot be imitated by the competitors. Rare

resources give Lidl a competitive advantage over rival companies. The firm is able to use the

resources to produce unique products that are highly differentiated (Castellani, 2012). The

competing firms find it difficult to produce the exact same products as they do not have access to

the kind of resources used to produce them.

Costly to imitate:
The aspect means that the resources and capabilities used by a company are costly to be

imitated by other firms in the industry. As a result, other companies do not imitate the resources.
LIDL COMPANY ANALYSIS 12

Imitation can be done through duplication or substitution. As Lidl has got valuable and rare

resources, they are hard to imitate as it will be costly. Also, having resources that are difficult to

imitate implies that the company has attained a great competitive advantage over the rival

companies. The firm’s resources are costly to imitate as they contain three major characteristics;

casual ambiguity, historical conditions, and social complexity.

Organized to capture value:

The available resources must be utilized accordingly so as to benefit a particular

company. As such, Lidl uses effective strategies to utilize the available resources in its business

operations. This way, they are able to attain a competitive advantage in the market. the company

employs its resources by considering the external environment. Market research is done

extensively to gather information regarding the situation in the market; the product’s demand and

the new products available. Thus, the management systems of Lidl are organized as well as

policies, processes, and strategies in order to optimize the use of the resources available.

Lidl has focused on its resources and capabilities because they are the major contributors

to the success of the company (Castellani, 2012). The firm continually improves its resources so

that they can yield the best results upon implementation. Consequently, the management team

ensures that only strategic resources are acquired. Strategic resources are beneficial to a company

as they contain favorable characteristics including value, rare to find, and inimitability. Through

the use of strategic resources, the competitors are not able to outperform the company. The use of

the resources is also done in a strategic and organized manner so that they can be effective.

What’s more, the external factors are considered when utilizing resources in the company.
LIDL COMPANY ANALYSIS 13

The modes of entry available to Lidl and recommend the

best mode
There are several modes of entry that can be used by Lidl in its expansion strategy. They

include non-controlling interest, setting international stores, merger strategy, franchise model,

and joint venture.

Non-controlling interest
The mode of entry is majorly employed by companies at their initial expansion stages.

Most of these companies lack sufficient intelligence from foreign markets. Also, they lack

expertise in establishing international operations. thus, a particular firm might make a choice to

invest in already-existing companies in a foreign country. In the case, the firm acquires the

minority stake in the business whereby it lacks control over the operations and management of

the business. The mode of entry might be expensive in the long last considering that the firm will

acquire a minority stake and fail to control the operations. In other words, it will have no control

over the profit-making processes at play.

Establishing international stores as a part of the foreign expansion

In this approach, the company of interest conducts its international expansion by

establishing stores in the foreign market. the establishment is done according to the attractiveness

of the expanding market (Allen & Carlson, 2018). the approach is majorly used by the fashion

companies and designer brands. After the establishment, the stores are operated in a foreign

country by the mother company in the home country. By opening a showroom, a particular firm

is able to promote its brand in a foreign country whereby the customers are able to view the

variety of products offered. Such a firm use foreign stores as an expansion of their company in a

foreign country. Employees are trained and resources employed to properly manage international
LIDL COMPANY ANALYSIS 14

operations. Good returns are acquired from the kind of operations upon proper management.

However, the firm will not have entered in the market fully.

Takeover or merger
In this mode of entry, a company buys a local firm in a foreign market and operates it

under its management (Pan & David, 2012). Through merger or takeover, a firm is able to gain

instant access to the sales network and markets. Also, it is able to take over the market shares of

the firm upon proper management. The business transfers all the processes including the

management and all the involved operational processes over a short period of time. Adoption of

the model of market entry requires a firm to have all the knowledge regarding the market of

interest so that it can effectively operate to satisfy its customers and outperform the existing

competitors. On the other hand, it is necessary that a particular firm has adequate knowledge of

the strategic options of the kind of business. some companies opt to buy out the existing network,

infrastructure, and the established resources and convert the existing brand and thus they are able

to gain a large market share within a short period of time.

Joint venture
A joint venture entails a trade agreement made between the international firm and

suitable business partners in a foreign country. A joint venture works in favor of both parties.

through a joint venture, the foreign company gains access to the market share of the local

company as well as its reputation. On the other hand, the domestic firm has the ability to expand

the product portfolio through its involvement with the foreign company. The reputable the brand

name of the international firm the better for the local firm as the business will have a large

market share. The nature of different joint ventures differs from one agreement to the other. The

success of the business operations will depend on the effectiveness of the relationship between
LIDL COMPANY ANALYSIS 15

the two companies. Both the firms should work towards common objectives for the success of

the joint venture.

Franchise model
The mode of entry, the international company engages a domestic business in a foreign

country based on the franchise agreement (Pan & David, 2012). The operations of such a

business are conducted as per the mother company. Also, the brand, products’ ideas, marketing

formats, sales, and brand promotion are conducted according to the parent firm. engagement of

the right partner in a franchise yields great success for the business. Such a partner is one with a

great reputation and a large market share. Also, the partner should share the same objectives and

visions as the parent company. What’s more, they should be willing to invest in the business so

as to get returns from the operations.

Franchise model would work best as a mode of entry for Lidl. This is because unlike the

other modes of entry, the company will have control over the operations of the business.

According to the model, all the practices, and management processes are conducted as per the

parent company. As such, Lidl will have the majority influence over the business. Likewise, the

firm will gain more profits according to their bigger stake in the business. The business will even

succeed more if Lidl partners with a reputable firm in Norway as it will already be having a large

market share.
LIDL COMPANY ANALYSIS 16

References
Allen, N., & Carlson, M. J. (2018). Focus: Why McDonald’s Tax practices matter to the global

labor movement. International Union Rights, 25(1), 8-28.

Castellani, P. (2012). Corporate University and company’s competitiveness: the case of Lidl

Italia. In Proceedings of the 11th Toulon-Verona international conference on quality in

services (9pp. 1000-1012). Firenze University Press.

Hartline, J., Mirrokni, V. and Sundararajan, M., (2009). Optimal marketing strategies over social

networks. In Proceedings of the 17th international conference on World Wide Web (pp.

189-198). ACM.

Liang, Y. P. (2012). The relationship between consumer product involvement, product knowledge

and impulsive buying behavior. Procedia-Social and Behavioral Sciences, 57, 325-330.

Mathooko, F. M., & Ogutu, M. (2015). Porter’s five competitive forces framework and other

factors that influence the choice of response strategies adopted by public universities in

Kenya. International Journal of Management, 29(3), 334-354.

Pan, Y., & David, K. T. (2012). The hierarchical model of market entry modes. Journal of

international business studies, 31(4), 535-554.

Srdjevic, Z., Bajcetic, R., & Srdjevic, B. (2012). Identifying the criteria set for multicriteria

decision making based on SWOT/PESTLE analysis: a case study of reconstructing a

water intake structure. Water resources management, 26(12), 3379-3393.

LIDL COMPANY ANALYSIS 17

Appendix
Comparative PESTLE analysis of Mexico against Norway
Mexico Norway
Political factors: Political factors:

-Local governments affect businesses by -The country has political stability whereby

providing incentives to support many laws and regulations support

businesses. -However, the trading business for the growth of the nation.

partners body (WTO) increases

political costs for investors.

Economic factors: Economic factors:

-44% of Mexicans are poor thus there is a -Norway has a stable economy that affects the

high need for economic growth hence consumers’ purchasing power

encouraging foreign investors. positively.

-The percentage rate of economic growth -The unemployment rate in the country is

makes the Mexican government 2.4% which is among the lowest in the

support free trade, especially for the world.

Americas.
Social factors: Social factors:

-The country has favorable sociocultural -The social factors in Norway are favorable

factors for a business including a rise for the growth of a business as the

in the economic status of the citizens individuals in different social groups

and increase in literacy levels. influence each other in making

However, as the poverty level is high, purchases. This is because the number

there could be negative influences on of poor people in the country is low.

purchasing power among individuals.

Technological factors: Technological factors:
LIDL COMPANY ANALYSIS 18

-The recent developments in microcomputers -There is a great advancement in technology

are positive in increasing customer in Norway whereby consumers make

base. purchases online.

-Advancement in technology has created -Business is able to conduct its operations

many business opportunities through efficiently through the vast use of

the internet. technology.

-High use of technology increase efficiency in

production, distribution, and

marketing processes.
Legal factors: Legal factors:

-Mexican Laws determine how and if an -The legal system of Norway contains

investor will establish a business favorable regulations for business.

including employee relations, -The workers in the legal system are

consumerism, competitive practices, competent.

and the environment.

-The laws and regulations favor business

operations.
Environmental factors: Environmental factors:

-Mexico has got environmental problems due -Norway contains many natural resources

to rapid urbanization, whereby they have maintained the

industrialization, and population environment well.

growth. Most natural resources have -Some of the natural resources are ready to be

already been exploited. used as raw materials.

-There is proper infrastructure in place

LIDL COMPANY ANALYSIS 19

including transport and

communication systems.