International Strategy For Energy And Climate Policies

Benefits of expanding in Canada

Discuss about the International Strategy for Energy and Climate Policies.

One of the prime targets of an organization, in order to raise its market share and profits is to expand their business in new countries. Lidl is a grocery supermarket store of Germany, which is a well developed organization of the nation. In this report, international expansion of this organization has been considered. Three countries that were considered for expansion were Canada, Turkey and Estonia. Among them, it has been found that the most efficient country for expansion would be Canada.

This report consists the beneficial macro factors of Canada that would provide an impact on an international company like Lidl. Porter’s five forces analysis has been considered for Lidl in order to attain the external factors affecting the organization and VRIO analyses has been conducted to analyse the strengths and weaknesses of the organization. In the last section various modes of entering international market has been stated, where one of the efficient methods has been chosen for Lidl to enter the grocer supermarket sector of Canada.   

Lidl is a global supermarket with it’s headquarter in Germany. It provides vast variety of products at a discounted price, through its various supply chains. With the success, the company perceived in the home continent, Lidl aims at expanding its business in the other countries. Among the three countries of choice that has been permitted, depending upon the competitive analysis done, Canada is efficient enough to be the target market for international expansion of business.

As stated by Fertel et al. (2013), the pestle analysis of Canada can be analysed in a detailed way, realising their positive macro factors, the country like Lidl to grow.

Political : Canada has a strong political framework , where, parliamentary democracy and federal system of parliamentary government prevails. Canada has a multi party system, where votes are considered as motions of confidence. The two moist dominant parties of Canada are conservative party of Canada and liberal party of Canada. There are some smaller parties who exert a smaller effect on each other. Liberalism has a special place and has gained support and adversaries in the economy. Ministers are chosen by the prime minister of the country and are appointed by the governor general. The structural framework of the ethical system of politics in the country has enabled them to grow in every aspect.

PESTLE Analysis of Canada

Economical : Canada is considered as one of the wealthiest countries of the world. It has a growth rate of its gross domestic product of 2.46% in the year 2015. Being a developed economy, the country has a maintained growth of such rates. About 70% of the income is generated from the service sector of the economy. 2% income is generated from the agricultural sector. This show that the service sector of the economy is too strong in nature, thereby, leading the country to reach great structural heights. The citizens of the country follow high standard of living and  a market oriented economic system. Various international companies have set their companies in the country, because of its comparatively cheap wages, comprehensive healthcare facilities and social security system. It would be quite beneficial for a country like Lidl to expand their business in this country, thereby , raising the scope of earning high profits.

Social : the average income of the people of the country is $ 49,000 per year. The country faces inequalities in the income distribution of the economy, thereby creating a discrepancy in the income distribution structure of the country.  Education is an important factor that determines the participation of labour force in the economy, yet, due to inequality in the income structure, education is not attained by all the members of the company equally. The poverty rate of the country is high, in comparison to the population of the country. It has been stated that the government does not implement effective steps to eradicate the poverty level of the nation.

Technological : the country is technological very well developed, which provides the citizens of the country with various facilities and equipments. This enhances their mode of communication between each other, thereby raising the accuracy of the mode of business between different parties. The country uses various technological tools and implements them  to raise the assurance of safety and security in the country.

Environmental : Canada is legally incorporated under the department of the environment where the government responsibly coordinates various techniques to raise the stability of the country’s environment. Canada takes great responsibility in maintaining the environment of the nation. It incorporates various methods that helps in maintaining the sustainability of the surroundings.

Legal : the Canadian legal system has been inherited from united kingdom where the constitution pertains strict laws against illegal activities. The legal system of the country has been divided into two main laws and various other minor laws. The two main laws are common law and civil law. These two laws from the base structure of the legal system of the nation. Due to the strong legal structure, unethical activities in the country are quite less in comparison to the others.

Porter’s five force analysis for Lidl in Canada

These favourable micro factors affect the company in a positive way. Hence, Canada is appropriate country for the expansion plans of Lidl internationally.

In order to project a successful business, the internal or micro factors affecting the organization must be analysed, in order to get a clear view of the factors that might strengthen the company and the ones that might prove to be a hindrance for them. to analyse the micro factors affecting Lidl in Canada, porter’s five force analysis has been conducted, where the five forces affecting the company would be bargaining power of the suppliers, bargaining power of the buyers, threat of new entrants, threat of substitutes and industry rivalry. These factors are discussed in detail, below :

Bargaining power of the suppliers : Lidl is a global supermarket chain, that deals in food products. The bargaining power of the suppliers can be easily influenced by the grocery chains and the fear of losing their market share to large super markets. The leading positions of stores like Lidl can easily negotiate with the suppliers to get better promotional prices, where the inability of the small individual chains is noticed (Geppert,  Williams and Wortmann 2015). The suppliers in the country are threatened by large retailers, where the company could source the products from abroad and at much cheaper rates. Being a company with efficient sources and knowledge, the bargaining power of the suppliers gets weak in front of them. Hence, Lidl does not face much hindrance from the suppliers of the grocery products sold in the stores of the firm.

Bargaining power of the customers : according to porter, as the products provided by the company get standardized and undifferentiated in nature, there is a rise in the bargaining power of the consumer, as they are able to compare the products of the company with their close substitutes. Lidl strategically frames various policies that help in customer retention of the company. The company uses the technique of self servicing in the stores, where the customers are allowed to choose their products and get their own handbags or carry bags. The company does not focus in selling only food products. It has launched a new garment segment since 2014, which created great buzz among the consumers. The company aims at meeting better needs, better choices and constant promotion to be made by the firm, thereby attracting the attention of the customers towards themselves. These efforts made by the country prove that the customers have a great bargaining power over Lidl, as they easily implement all the facilities for the customers, that makes their experience of shopping in Lidl much easier and raise their loyalty towards the firm.

Threat of new entrants : the grocery market structure is dominated by few superior competitors in Canada, like Walmart, Kroger, Costco, Target and Loblaw. Lidl has been one of the most efficient supermarkets in its country, thereby having a well spread popularity all over the world. The company is well known for its services and products provided in the economy. The prevailing supermarkets of Canada have been through various issues, that have created a hindrance for them to stabilise their market shares. new entrants entering the market needs high promotional value along with huge investments on the facilities to be provided to the customers. Lidl is a well-developed company, which already has a fair share of promotional value all over the world. Hence, it would not be difficult for the company to stabilise its position in Canada. It is a well developed company, which has huge capitals to be invested for large economies of scales and gain differentiation in the product and services offered. It would not be feasible for new entrants to enter the market so efficiently; hence, the threat of new entrants in the market is low (E. Dobbs 2014).

Threat of substitutes : substitution reduces the demand for a particular product, where there is a threat of switching the demand for a particular product to the other similar ones. There is a threat of substitutes ion the market of grocery stores, as there are various supermarkets, retailers and small chains business are available in a well developed economy like Canada. Small firms are able to sell the same product at a much lower price than the supermarkets. This acts as a negative impact on Lidl. The company must implement effective strategies and plans that would help in evolving from this threat and promoting its brand in such a way, that the products are adhered to a quality of differentiation to it.

Industry rivalry: there has been a significant growth in the grocery market among the dominant players in Canada. They have a great store size, with varieties of products, easy handling facilities, hassle free transactions, increase number of retailers and other prominent characteristics. With a high standard of living in the country, the people are demanding for better and sophisticated ways of marketing for their products, thereby, enhancing the growth of supermarkets in the country. This has initiated a positive effect on the leading supermarkets of the nation, whereby, there is a tough competition among each other, with respect to the attainment of maximum market share. Lidl has to implement various innovative plans and strategies that would be efficient enough to attract the customers towards the new international supermarket. People are already aware of the brand due to its leading performance in United Kingdom, thereby, providing Lidl with an incentive of being already in favour. The company must focus on price and value, while reinforcing the added value elements of their service (Rothaermel 2015).

For a company such as Lidl to expand its business overseas, it would be quite an efficient approach to analyse the strengths and weaknesses adhered to the organization while framing the best approach of international expansion. Amongst all the analysis done, one of the most efficient frameworks to analyse such a situation is the VRIO framework. This framework was framed in order to identify the attributes that the firm must possess in order to be sustainable in the field of comparative advantage (Chapman 2012). According to the VRIO analysis, the resources must be valuable, rare, imperfectly imitable and organized.

To analyse the strengths and weaknesses prevailing in Lidl, the VRIO framework had been analysed. The following results are stated briefly below :

Value : Lidl is one of the most famous grocery supermarket chain in united kingdom. It has great value in the industry and has stood with high comparative advantages among the others. It provides its customers with the best quality of products and services that adds to the value of the company (Grünig and Kühn 2015). This firm has been using the resources quite efficiently by implementing them in the better utilization processes. Customers trust the brand which has thereby raised the annual growth sales of the company quite significantly. Hence, it can be said that Lidl has the capability of exploiting the resources efficiently and neutralize the threats it has attained from new entrants by gaining loyalty of the customers (Zentes, Morschett and Schramm-Klein 2016).

Rarity : being in the field of grocery supermarket store, the concept of rarity in the resources is not appropriate. There are no unique resources that could be used by the company in order to produce the good and services (Knott 2015). In order to source a sustained comparative advantage in the economy, Lidl has implemented various new products such as fashion apparels and other efficient grocery items under its own brand name, that are not available among the small retailers. There is a comparative advantage in this segment. Yet, there is no unique proposition of the firm that helps it to stand out among the crowd of supermarkets. In order to attain such qualities the company needs to implement various marketing plans and management strategies, as the product in which the company mainly deals at is quite easily available among various producers, thereby, reducing the chances of rarity.

Imitability : being in the field of grocery supermarket chains, there are various other retailers and leading supermarkets that are selling the same products. Hence, there is a high chance of substitution, raising the chances of imitability, in order to overcome such an issue, Lidl has launches its own brand of apparels and various other products that are sold only by them. This has raised a barrier to imitability to a certain extent. Yet, these characteristics are not efficient enough to eradicate the problem completely. Hence, it is quite important for the country to issue plans in order to generate a strong barrier in this aspect.

Organized : if the resources of the company are not properly organized, then it does not create any comparative advantage for the company (Pesic, Milic and Stankovic 2013). Lidl provides an efficient cooperative and properly organized environment in its workplace. This enhances the growth of the organization. It hires experienced and skilful staff members that help in generating creative ideas and thoughts for the company. Lidl puts effort on maintain long-term relationships with the employees, thereby providing them with better incentives and facilities. The technologies that are implemented in the company are of the updated value. Lidl aims at attaining superior performances in the industry.

After conducting this analysis, it could be said that Lidl has value, maintains rarity to a certain extent and has an organized environment. Hence, the company has a sustainable comparative advantage, which means that their performance is sustainable above normal (Tedeschi 2013). In order to achieve the supreme stage of all the four qualities, Lidl needs to implement various strategies to avoid imitability of the product and the methods followed by the company.

Modes of entry into an international market are the various ways in which a company can implement in order to enter the international market, thereby attaining market share and high profits. There are various modes of entry, which a company can undertake, yet, the company must choose the most efficient of them all, as it would provide the company with the incentive of positively affecting its future business (Laufs and Schwens 2014). In this section, after analysing various modes of entry into international market , the most efficient method would be chosen for Lidl to enter into Canada.

Licensing : licensing includes various methods of franchising and contract manufacturing. In licensing, a fee is charged by the organization in order to use its technology, resources, brand or expertise (Brouthers 2013). Under franchising, a franchiser provides branding, expertise, ideas  and all the facilities that accompany needs to expands its business in a foreign country.

International agents and distributors : agents or distributors help the organization as being a part of it and marketing in the international market on behalf of the organization. They charge a commission  on behalf of the promotion and sales done . Agents are not committed to only one organization; this does not raise any loyalty factor from them, though there costs are comparatively lesser than the other modes of entry (Johanson and Mattsson 2015). Distributors, take the ownership of the goods, thereby, they have an incentive of raising profit from their transactions done.

Strategic alliances : this is the association that forms between the competitors of the country, were the countries do not enter into any partnership with each other. They are independent of each other and remain separate, yet, they abide the rule o entering into alliances to maintain their own market share (Hohenthal, Johanson and Johanson 2014).

Joint venture : joint ventures are equity based relationships that are followed by two organizations, in which each organization owns a proportion of the company shares. It is quite beneficial for  new entrants to form this venture, as it would strengthen the stability of that organization in a new market (Fitzsimmons and Fitzsimmons 2013).

A company like Lidl , needs to choose an efficient method of entering into international market , threat would help in sustaining the stability of the company in the new country. Canada already has some of the leader grocery supermarket chains that are highly efficient in selling all kinds of products and services to the consumers. Inclusion of a new entrant like Lidl into the market would not be appropriate enough to generate the demand among the consumers. One of the efficient methods of entering international market for the company, therefore, would be Strategic Alliances (Berman and Evans 2013).

Lidl has been a well-developed organization back in its home country. It has shown huge raise in growth perspectives of the company. The company is quite famous globally; therefore raising its demand among the members of the country is not impractical. The threat of substitutes and threat of competitors is quite high for Lidl in Canada. Therefore, the only efficient method of entering the global market would be forming strategic alliances with these companies.

By forming strategic alliances with the leaders of grocery supermarket chains both the organizations would attain their objectives on their own by independent and separate entities. The share the benefits and profits that is attained out of the partnership and continue to contribute to the alliance, until it gets terminated (Kaplan and Atkinson 2015). It is one of the most appropriate method for entering the international market, where both the countries are from different regions of the world.

Strategic alliances help the companies to attain organization benefits, thereby providing Lidl with the opportunity to learn about the consumer habits and cultures. It would help the company in incurring lesser costs of entering a new market. Competing with the rival would incur huge costs, whereas, creating alliances with them would be beneficial for both the companies (David and David  2016). There would be a scope of reduction in competition between them. Lidl has a strong base in its home country, thereby; it could affect the market shares of the existing grocery supermarkets in the economy. By attaining strategic alliances, the existing firm of Canada would be equally beneficial as the new entrant would be. As Lidl has a sustainable comparative advantage, it is efficient in competing with the other firms, yet, its not so feasible for the company to establish the business in a well developed nation (Burke 2013). Hence, forming strategic alliances is considered to be one of the best mode of entering foreign markets in the economy.

Conclusion

Canada, due to its attractive macro factors, has been chosen as the most efficient country for the expansion of Lidl. From porter’s five force analysis and VRIO framework, it has been analysed that Lidl has a strong background with a sustainable environment within the organization. Yet, the company faces some hindrances due to imitability and non rarity of the products. This results in attaining a sustainable comparative advantage of the organization. According to the mode of entry into international market, strategic alliance has been considered as the most efficient method of entering the market of Canada. This would help both the new company entering the market and th existing leader firms of the country.

References

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