Within the last few years, LIDL has grown tremendously. As early as 2010, the shares of the market had grown by 17% in its retailing of groceries alone. Many research activities have analyzed the company’s operation mechanisms and concluded that LIDL would still perform good several years to come since it uses the traditional retailing technique. Apart from that, the company employs a dynamic yet simple logistics and supply chain network. It is the belief of LIDL that it could increase its success levels by reducing SKU numbers in its ranges of logistic products compared to those of Walmart and Tesco. The lines of products that LIDL has selected are those that are widely employed (Alder, 2016). Otherwise, LIDL is planning to expand its operations in two major markets in the names of Mexico and Norway. Before expansion into the named markets, LIDL is planning to undertake a thorough strategic analysis to determine strengths and weaknesses of the two. By so doing, the company, through this activity, shall compare and contrast Mexico and Norway as potential markets using a number of analysis tools (Alvesson, 2012).
In this case, the paper will recognize the use of Comparative PESTEL Analysis to help in developing the intended strategic analysis and rationale of selection.
Mexico as a country is located in the southern regions of North America. The country covers around 1,972,450 sq. kilometer with a population of over 112,400,855. The Mexican language is Spanish. The capital of Mexico is Distrito Federal and the city is recognized for its socialism, athleticism, and diverse cultural aspects (Bernard, 2011).
Political Factors: LIDL has established that the political subdivision of Mexico encourages the understanding of the country’s system of politics. In the country, “federal authorities” have the mandate to enforce law statutes with actions of such federal authorities influencing a big figure across provincial boundaries. Apart from that, the country’s tax rates vary from one province to another with local authorities affecting such patterns (Chatman and Eunyoung, 2013, pg. 11). Issues on poverty are caused singly by political and geographic factors. The country has a political-economic system that creates a sense of poorness. Apart from that, the government applies World Bank and The International Monetary Fund that accommodate most business (Bruce, 2016).
Economic Factors: In Mexico, economic impacts differs from one industry to the other. Otherwise, FDI (Foreign Direct Investing) in the country has increased with time from $ 14 billion in 2009 to $ over 21 billion in 2017. The World Bank recognizes the country as one of the upper-middle-income states (Knapp, 2006). However, about 44% of the Mexican population is poor and thus, a high rate of economic growth is required to leverage the country from the situation. Contrarily, the country has grown with a mean rate of 4% within a period of one year. The country is also U.S.’s third largest trading spouse and second-largest export market. The table below shows the economic outlay of Mexico in 2017:
|
GDP (official rate of exchange) |
Approx. $ 3trillion |
|
GDP Per Capita |
Approx. $ 18,590 |
|
Annual existent GDP growth |
Approx. 7% |
|
Rate of inflation |
Approx. 7.1% |
|
Natural resources |
Natural gas, lumber, lead, Zn, Cu, Ag, Petroleum |
|
Goods (trade) |
Exports: Approx. $500 billion Imports: Approx. $ 250 billion |
Social Factors: According to the findings of LIDL, social subdivision helps in creating understanding on the demographics of customers in the country through such segments as rural-urban cleavage, distribution of income, richness centers, level of education, and health care facilitation. Around 77% of Mexicans live in urban areas with many Mexicans emigrating from countries that lack occupation chances. Cites that are close to the US like Tijuana and the rest experience rise in population because of increased business opportunities (Kroeber, Kluckhohn and Untereiner, 2015).
Technological Factors: LIDL has established that subdivision on technology is a way of establishing useful information regarding the country’s telecom and engineering levels. On the same, Mexico’s cooperation with the US on issues around the 2,000-mile boundary line has helped the country in planning for transit, provide solutions to environmental concerns, as well as create economic wellness (Louis, 2017). Technology has also changed the purchasing form of consumers as well as their general lifestyles. The use of personal computers has encouraged online purchasing of goods and services. Manufacturing of merchandise also currently involve the use of new technologies thereby increasing product quality as well as service efficiency (Learning Business, 2009).
Legal Factors: The legal outlay as well as corporate contractions of Mexican firms depend on a number of legal factors. For instance, Mexico’s legal environment is structured in a manner that it specifies the kind of business firms that can or cannot operate in particular areas. A number of U.S. regulative bureaus affect business operations in the country. Such institutions include EPA (Environmental Protection Agency), OSHA (Occupational Safety and Health Administration), EEOC (Equal Employment Opportunity Commission), and SEC (Securities and Exchange Commission). According to the fundamental law of 1917, the country must have a federal democracy in which powers are separated into three main arms, the legislative arm, the executive, as well as the judiciary. On the other hand, conformity costs estimates vary and are likely to transcend to about $100 billion every yearly. Most of such costs are broken down to consumers (Louis, 2017).
Environmental Factors: The business environment of Mexico encourages cooperation. However, its physical outlay and environmental conditions includes a number of factors such as environmental sustainability and encouragement of industrialization and urbanization (Business Management, 2017a).
Political Factors: The political system of Norway, like those of its Nordic neighbors is traditional and in the form of a constitutional hereditary monarchy. The country’s parliament is elected via a proportional system after every 4 years. On the other hand, the country is politically stable, highly developed and modernized because of a very strong economy. Apart from that, the company has a strong foreign investment growth for the past five years (Business Management, 2017a).
Economic Factors: The main economic activities in Norway is exploitation of natural resources that includes hydroelectric power, petroleum, and fishing. The economy’s GDP has also grown from $500 billion in 2014 to about $800 billion in 2017. On the contrary, the GDP per capita is currently at an approximation of $80,000. Apart from that, Norway is one of the richest countries worldwide in terms of GDP per capita. The country also has its public finances boosted by revenue generated from the petroleum sector (Business Management, 2017b).
Social Factors: Norway is also considered as one of the world’s most beautiful countries. It has several attractive sites such as the midnight sun and mountains as well as Fjords. The country is also known for the natives’ vibrant cultural lifestyles. The cities are as well cosmopolitan and therefore, full of stunning Scandinavian architecture. However, the country is sensitive to global business cycles. On the contrary, the economy of the country has experienced robust growth over a short period. The standard of living in the country is high compared to other countries in Europe. Such is because the government adopts a strong, integrated welfare system (Business Management, 2017b).
Technological factors: Like Mexico, technology has also done a lot in the enhancement of business operation in Norway. As LIDL establishes, customers will go for online inventories and stores instead of physical locations. Otherwise, clients could make online bookings of products and request for delivery or use maps to locate best stores.
Legal Factors: Norway’s legal framework is traceable to the Land Registration Act (2005) and the Division Act of 1995 all of which determine the registered cultural heritage of the country. Apart from that, since Norway is part of the EEA (European Economic Area), it has adopted the INSPIRE initiative. Such means that there are particular laws, some of them business laws that the country has to implement. Trade in the country is therefore, made easy (Pettigrew, 2015, pg. 571).
Environmental Factors: The government of Norway is highly aware of international and domestic environmental concerns. Some of the challenges that the government is trying to fight include exposure to water and air pollution because of emissions from neighboring nations. Otherwise, the country has assumed a major role in the context of international environmental protection (McKenna, 2012).
Political Factors (Explanation of Criteria)
Mexico, according to LIDL, is composed of, “federal authorities” with the mandate of enforcing law statutes and influencing a big figure across provincial boundaries. Mexico also has tax rates that vary from one province to another with local authorities affecting such patterns. The country is also faced with issues on poverty that are caused singly by political and geographic factors. Norway on the other hand, has a traditional political system. However, the country is politically stable, highly developed and modernized because of a very strong economy. Figure 1 in the appendix gives an analyzed scoring system for political factors affecting both countries.
As mentioned before, economic impacts in Mexico differs from one industry to the other. On the contrary, the country has FDI (Foreign Direct Investing) policy which has helped in realizing an increase in foreign investment from $ 14 billion in 2009 to $ over 21 billion in 2017. Contrarily, the country has grown with a mean rate of 4% within a period of one year. Norway, on the contrary, has an economic GDP growth from $500 billion in 2014 to about $800 billion in 2017. The current organization’s GDP per capita is approximately $80,000. Apart from that, Norway is one of the richest countries worldwide in terms of GDP per capita. Figure 2 in the appendix gives an analyzed scoring system for economic factors affecting both countries.
In Mexico, LIDL finds out that around 77% of Mexicans live in urban areas with many Mexicans emigrating from countries that lack occupation chances. Cites that are close to the US like Tijuana and the rest experience rise in population because of increased business opportunities (Tamang, 2013). On the contrary, Norway has a beautiful nature with several attractive sites such as the midnight sun and mountains as well as Fjords. Apart from that, its people have vibrant cultural lifestyles. In addition to that, the cities are as well cosmopolitan and therefore, full of stunning Scandinavian architecture. Figure 3 in the appendix gives an analyzed scoring system for social factors affecting both countries
According to LIDL’s strategic analysis report, Mexico’s cooperation with the US on issues around the 2,000-mile boundary line has helped the country in planning for transit, provide solutions to environmental concerns, as well as create economic wellness. Apart from that, Mexico’s level of technology has changed the client’s perception on purchasing. On the contrary, Norway’s technological advancements has encouraged business operations a great deal. Customers have gone for online inventories and stores instead of physical locations. Otherwise, clients could make online bookings of products and request for delivery or use maps to locate best stores (PMA, 2017). Figure 4 in the appendix gives an analyzed scoring system for technological factors affecting both countries.
In Mexico, the legal outlay and corporate contractions of Mexican organizations depend on the company’s legal environment to operate in particular regions. Apart from that, there are a number of regulative bureaus affecting business operations in the country. They include the EPA (Environmental Protection Agency), OSHA (Occupational Safety and Health Administration), EEOC (Equal Employment Opportunity Commission), and SEC (Securities and Exchange Commission) (Poetism, 2017). In Norway, however, the legal framework determines the registered cultural heritage of the country. Apart from that, being part of the EEA (European Economic Area) makes Norway eligible for adopting the INSPIRE initiative. Such means that there are particular laws, some of them business laws that the country has to implement that makes trading easy (PMA, 2017). Figure 5 in the appendix gives an analyzed scoring system for legal factors affecting both countries.
As mentioned before, the government of Norway is highly aware of international and domestic environmental concerns. Therefore, it is fighting to alleviate exposure to water and air pollution because of emissions from neighboring nations. On the contrary, Mexico’s business environment encourages cooperation. Otherwise, Mexico’s physical outlay and environmental conditions includes a number of factors such as environmental sustainability and encouragement of industrialization and urbanization (PMA, 2017). Figure 6 in the appendix gives an analyzed scoring system for legal factors affecting both countries.
This analysis section will employ the 5-Factors model to determine the competitive intensities of LIDL in the Norwegian and Mexican markets.
|
MEXICAN |
NORWEGIAN |
|
|
i) Threats of New Entrants |
LIDL is likely to face competition from Walmart and Coppel. Approximately 2/3 of retail sales in Mexico occur in supermarkets and grocery store therefore, it cannot be more surprising to see new entrants as well as most targeted retail chains start as convenience stores and hypermarkets selling retail products a seen in the case of Coppel store chain. |
New companies have cropped. For instance, Norges Gruppen that joined the market recently has established 2,000 retail outlets. It also has a market share of about 43%. It is therefore the biggest market threat in Norway. |
|
ii) Substitute Products/ Services Threats |
Low-income individuals in Mexico are likely to go for cheaper foodstuff and other retail goods in grocery stores. Therefore, sustaining business growth would require business operators such as LIDL to be more innovative with the kind of products they sell. They should consider the value of price against quality to succeed in such a market. |
Norway has traditional centers for purchasing goods. However, with the advent of online stores, most companies have created specialized chains and products that are alternatives to the traditional products. Such products are in the line of electronics, clothing, building supplies, and books among others (Wolfe, 2018). |
|
iii) Bargaining Power of Customers |
Most Mexican consumers have their lives blurred by lots of activities and thus, need products that save their time as well as help them gain lots of control. They would therefore, advocate for retail products that help them in such ways. |
The Norwegian customers have a sense influencing whatever they would like to buy. Therefore, they require perfect products. In other words, their need for quality rather than quantity is likely to affect their pattern of buying. Companies should therefore, sell good that are value-oriented to capture the attention of clients. |
|
iv) Bargaining Power of Suppliers |
In Mexico, suppliers compete for profits from companies. As a result, they charge more for the inputs they make. Such is also as a result of no exclusive territories, advertising, financing, and displaying. |
Norwegian market is aggressive towards ensuring economic growth and thus encourage sales optimism and direct selling. Suppliers then have easy time going for the right companies at the correct prices. |
|
v) Competitor Rivalry |
The Main market rival that LIDL is likely to face in this market is WALMART. The chain store is well established in several countries including the United States (Lombardo, 2017). |
Around 85% of individuals in Norway are active users of social networks. Therefore, companies such as Coop Marked have established dedicated online buying and selling services with door-to-door deliver and thus have captured more than 70% of the market. |
The management of international businesses require attention in two major arears, supply chain and logistics operations. On the same, LIDL realized that small lines of production provide significant assortment with around 80% of general sales generated by private labels. Such logistic strategies create more room for storage, worker productivity, and better management of inventories (Schein, 2015). Yet there is another vital aspect of logistics management and supply chain that has inculcated much success for LIDL. Such is the employment of a dense distribution network alongside outlets that are highly standardized worldwide. No matter where the company ventures next, it will employ a similar strategy for its supply chain and logistics management (Poetism, 2017).
On international market competitiveness, LIDL understands that what makes a country viable is its national prosperity. This also translates to the country’s industries to ensure innovation and upgrade processes. LIDL as a company is able to compete with several multinational corporations in the industry because of the existing pressure and aggressiveness of the market (Shah, 2017). According to LIDL business report 2017, using the Global Competitiveness Index in measurements of factors that drive prosperity and growth in long-term basis as well as determining new markets is a vital strategy for the company. The same could be useful in identifying challenges and benefits of policymaking as well as designing projects in new markets or countries. However, in as much as the notion of economic supremacy and market competitiveness has evolved a lot, LIDL has seen a buildup of several shifts in its strategic management that has fundamentally transformed the context in which the company’s decisions on policing are made otherwise, fostering financial growth (Dublin, 2013).
Having strategically analyzed the market layout of Mexico and Norway, LIDL intends to employ direct exporting and online sales as the major sales methods.
Through this mode, LIDL attempts not to create partnerships or provide licenses but rather have its products sold to distributors in both Norway and Mexico. Such distributors will be charged with selling their products to consumers (Rai and Panna, 2015). By so doing, LIDL shall have avoided investing its capital in developing manufacturing facilities in the two markets. Instead, the company will only incur costs of transportation (Poetism, 2017).
LIDL will also attempt to enter the Norwegian as well as the Mexican market indirectly by targeting consumers from the two countries through via Interneting (Smithson, 2017). As most exporting companies e.g. WALMART, the company will not majorly operate through physical locations but via posting its products online for online buyers. LIDL will grasp the advantage that this method is relatively cheap since it only entails creating a website and maintaining it. The same means will be used in marketing the company’s products and services (Reynold, 2014, pg. 33).
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