Discuss about the Business Management of LIdl Company.
In this report, the external factors for the setting up new busienss in Mexico and Norway have been taken into consideration. This report divulges the PESTLE of the Mexico, competitive intensity of the country and available modes of the entry for the LIdl Company.
The organization is focusing on the global expansion. In this report, the two countries are taken into consideration which is Mexico and Norway. Mexico is taken into consideration in order to enhance the share in the new country. Pestle analysis will be conducted of Mexico in this section. There are various micro environmental factors that state that Mexico is the best country for expansion.
Selection of the country
The main reason of selecting the country is based on their increased national income, GDP rate and positive intervention for setting up new ventures. The GDP of Mexico shows 8,201.31 USD (2016) which is 2% higher as compared to last two years data. The government support program for the foreign entity is also very positive. If the growth rate is taken into consideration, it has been evaluated that the growth rate in 2017 is more than 21% and in 2016 the growth rate was more than 2.3 %. The super market industry of the Mexico has also shown the 6% growth rate in super market retail business. It is positive indicator for setting up new business in Mexico (Ibarra and Blecker, 2015).
In the below discussion the attractiveness of the country in terms of PESTLE analysis will be discussed.
Political Factors
In this section, the focus will be given on understanding the political system of the country. By taking into consideration the political conditions of Mexico it is evaluated that it is favorable and stable. There are various reforms that have been created by the government of Mexico (Atkin et al., 2018). The stable political environment of Mexico and strengthen foreign direct investment supporting policies will be positive indicator to set up new business in Mexico.
The policies and laws for creating strategic alliance and cartel in Mexico is positive which will assist in creating effective competitive advantage in the market and also enhanced the economic growth. It can be evaluated that the changes and reforms and supporting busienss laws for new ventures will assist the organization to grow effectively (Eloranta and Turunen, 2015). The political stability is there in the developed countries. Due to the laws and policies that political factors have given impact on the retail companies. Stability in political factor helps to enhance the increment in the overall market share of the organization (Bettis et al., 2016.).
Economic environment
Mexico is known as 15th largest economies globally. It is analyzed that country is dependent more on the US as it is the largest trading partners of Mexico and also exports are done. Also if the growth rate is taken into consideration, it has been evaluated that the growth rate in 2017 is more than 21% and in 2016 the growth rate was more than 2.3% (Torres?Preciado et al., 2017). It is also analyzed that GDP of the country is enhancing and this is only the major reason for entering the market for expansion. In this country, it is also analyzed that banking sector is enhancing with the high rates for offering corporate loans to the people. There are many credit agencies who offer funds to the organizations. The positive Economic factors of the Mexico and positive balance of trade showcases that company would be positively affected by the foreign exchange exposure on international level
Social Factors
In this factor, it is analyzed that environment of the country take into consideration some of the factors like demography, culture, habits, and preferences. All these factors impact the overall demand and supply of the products in the country. When the focus is given to retail and supermarket sector it is seen that it depends on the preferences of the individuals. This sector mainly considers the consumer products that are sold on a routine basis (Van Rompay et al., 2016). It has been evaluated that the area of the country is large as compared to other European countries. The populations of Mexico lives in cities and towns and the customers who are targeted are living in cities and towns (Voigt et al., 2017). The people in Mexico are more inclined towards the quality of the products and services. In addition to this, use of advance technologies by the company will also be another symbol of attraction in Mexico.
Technological Factors
Technological factors play a great role in the organization as it is seen that the activities are conducted after analyzing the technologies used by the organizations. Technology also gives direct impact on the overall marketing and distribution strategy adopted by the company (Grundy, 2017). Mexico has a good process of telecommunication. This affects the organizations in a positive manner and also helps to overcome the problems prevailing in the company. It can be easy for the organization to set the organization and take help from Mexico related to technology. The use of cyber computing communication plan and availability of the advance technologies in Mexico will be the positive outlook for organization to create core competency in the product differentiation strategy.
Legal Factors
Every country has its own legal and administrative system and it is important for the company to consider the rules and regulations given by the organization. By focusing on Mexico it is seen that the process of importing has been made easy with the help of government and administration system. It has been analyzed that the organizations require more time in learning about the overall system of Mexico so that expansion can be done easily. This is necessary as it helps to understand the difference considered by the organization. This assists the organization to set up a good business in Mexico as it helps to enhance the market share in an effective manner. The traits and tariff rate imposed by the Mexico government on the import and exports of goods is very less. It wants to promote the international trade with other countries. Therefore, this kind of legal program may be undertaken as positive factors for setting up new busienss in Mexico (McCay et al., 2014).
Environmental Factors
These factors emphasize on the overall surroundings of the country that has given impact on the activities of the organization. By focusing on Mexico it is seen that the organization has considered various rules and regulations that help to make the activities sustainable. Also by considering the reforms, it is evaluated that one of the reforms are energy reforms that help the organization to realize the value of the resources. The motive of the country is to make rule and regulations so that proper technologies and regulations can be considered effective. The environmental factors of Mexico are very positive and would assist organization to set up its business plants in positive environment. However, there are several industrial areas in which company could set up its business in Mexico (Lechman and Marszk, 2015).
Michael Porter’s Five Force Model
In the recent scenario, it is analyzed that marketing plays a great role and helps the companies to achieve competitive advantage in an effective manner. It is analyzed that one of the best strategies that should be taken into consideration by the companies is global business expansion. Also, the report emphasizes on five force analysis of the market so that the competitive situation of a specific market can be evaluated. Also, there are many changes in the retail industry of Mexico that helps the company to survive for a long time in the market. There are many small companies who are facing a high level of competition but the new trade concepts are considered.
The intensity of Competitive Rivalry
The level of competition is very high in the retail sector of Mexico. High level of competition is faced by Lidl and it is important for the company to emphasize on the external factors of the market. There are large firms who are conducting their activities on large scale and also varieties of products are offered in the retail sector (Porter and Heppelmann, 2014). The level of competition is high so it is important for the company to remain competitive and also to achieve large market share so that activities can be conducted smoothly (Mendoza-Velazquez, 2017). The competitors of Lidl are Wal Mart, Kroger, and whole food markets.
Bargaining power of Buyers
The major factor is bargaining power of buyers in which the impact is seen on the buyers of the organization. Buyers focus mainly on the price of the products so it is important to maintain proper pricing so that sales can be enhanced. In Lidl supermarket, the switching cost is low if the comparison is made with one retailer to other (Solberg et al., 2016). In the recent scenario, the customers have the knowledge about the products so it is important for the organization to offer quality products to the customers. In the US also it is analyzed that the products are purchased in less quantity as compared to the overall revenue of the organization. The population of Mexico is so large that it gives impact on the monopoly (Klimek and Hansen, 2017). If the bargaining power is high then it is seen that industry profits will be low.
Bargaining power of Suppliers
Bargaining power focuses on the overall power the suppliers have to control the activities and also the market. It helps to enhance the prices by taking into consideration their capability to conduct the activities. It also considers the number of suppliers that are present in the market and market suppliers will enjoy more monopoly if there are few suppliers. If monopoly is there then it can be possible to enhance the position. The large population of suppliers can impact Lidl. There are many competitors who are making their space the competitive environment of the retail sector. Lidl has the low bargaining power of suppliers (Berliner and Erlich, 2015).
Threats of substitutes
The threat of substitution is related to the location, size, and nature of the business. This threat is related at the time of switching from one product of the company with another product of the company. Also, the focus is given on the price and quality of the competitors and also on the taste of the customers. To analyze the threat it is important that company should take into consideration the buyer propensity to substitute the product. To conduct the activities of the organization it is also important to focus on the external forces. It is analyzed that if the quality of a product is not good then it can be difficult to purchase and they will find the substitute products of good quality. The main threat arises in its daily products such as soap, salt, biscuits and milk.
Lidl offers the products at a low price in the supermarkets and also the threat of substitute has a weak impact on Lidl. Also, the small players in the company are focusing more on inducing customers to purchase the products. So, local companies can enhance the overall threat of the large companies by offering products at low cost.
The threat of New Entrants
In this factor, the new entry in the market is taken into consideration. In this market, entry is also analyzed on the basis of competition level. The business can enter easily into the market also if there are many competitors but to achieve success is the major part of the company. The organizations also have a risk of bearing a loss in the market share. There are some forces that are elated externally which take into consideration cost of establishment. It is seen that to create a new market in the market is a costly process but Lidl has already established in the market. The supermarket can easily achieve economies of scale by buying the products in bulk and also it affects per unit cost of goods (Rickertsen et al., 2017). So, Lidl should focus on expanding the business activities in Mexico but there are many competitors like Wal-Mart that can impact the activities.
Value chain analysis of Lidl
The report focuses to evaluate the suitable international market for expanding the business of Report also takes into consideration the internal analysis of Lidl by conducting value chain analysis. By the overall framework of a value chain, the organization will be evaluated on the basis of resources and capabilities at the time of entering the market.
The value chain of the Lidl helps to evaluate the activities of the company that enhance that helps to enhance the value of the organization.
There are two types of activities that take place in the value chain analysis of LIdl.
Support activities of Lidl- It related to support activities in which the infrastructure of the firm, technology, HRM, and procurement is taken into consideration.
Primary activities – Second is related to primary activities in which operations, marketing and sales and inbound and outbound logistics of Lidi is undertaken (Iacovone et al., 2009).
Operations of LIdl
All the activities of LIdl are taken into consideration so that input can be converted into outputs and it is known as the operations. By focusing on Lidl, it has been evaluated that the company emphasizes on retail operations. The organization deals in offering customers the products that are used on the routine basis from the store. It is one of the important businesses of the organization and it offers services all over UK (Zentes et al., 2017).
Lidl also focused on the movies and it has started in the year 2009. This activity of the business helps to serve the market by giving DVD on rent. In 2011 the company started offering reasonable online retail services. Lidl also provides online photo service in which the pictures are printed on the products that are offered to the customers globally (Geppert et al., 2015).
Inbound and outbound logistics of Lidl
The operations of Lidl consist of the process of collecting, receiving and storing the products in the warehouse. Lidl installed the auto pick and packaging provision so that distribution of products can be done effectively. It is analyzed that there are more than 104 channels of distribution and the centers manage more than 10,000 stores together. The company focuses on enhancing the distribution center so that the supply chain process can be easy and the customers can also avail the products easily (Hill et al., 2014).
Marketing and Sales
The strategy of marketing adopted by the LIdl is related to the campaign of products (Tench, 2016). Lidl market its products by taking into consideration the statements like Lidl has a surprise for you. This statement states that the problem if the customers are taken into consideration and also the solution is offered for every problem that takes place in the organization (Morais, 2016).
Services
LIdl takes into consideration many services like after sale service, customer support and delivery services so that satisfaction level of the customers can be enhanced in a proper manner.
Human resource
Human resource department of LIdl focuses on the individuals who are conducting their routine activities with them. LIdl tries to select those individuals who are talented. Training can also enhance the overall knowledge and help the people to conduct the activities according to the expectation level of the organization. Lidl also focuses on offering rewards so that satisfaction level and efficiency can be enhanced effectively (Chatterjee, 2017).
Firm structure
Lidl takes into consideration flat hierarchy that helps the stores to be in a managed form and also the activities are conducted smoothly. It assists the organization to conduct the activities in a proper way so that overall goals and objectives can be achieved.
Technology
Lidl offers pick and packaging system to the customers. The activities are controlled by the IT department of the organization. The organization also helps the customers by giving proper online service so that they can order the products by sitting at their home. Through online medium customers order their products and delivery is given to them on time at their home. This enhances overall demand and profits of the organization.
With the help of technology, the company can easily conduct the activities in a smooth manner. Another technological advancement that is considered is the use of Google analytics for searching the information of the customers and also to know the taste and preference of the customers for the products. This not only enhances sales but also satisfaction level is enhanced effectively (Mortimer, 2016).
Procurement
LIdl focuses on selling products and most of the products are from British growers and suppliers. This states that most of the suppliers belong from the UK and the products are exported from the UK to other countries. It is seen that 70 percent of the products are from British growers.
It is important for the organization to enter the international market so that growth can be achieved. When a company wants to enter the international country it is important to take into consideration best method so that success can be achieved. By focusing on Lidl, it is seen that emphasis should be given to franchise method so that it can be easy to enter the county of Mexico. It is seen that this concept will help the company to enhance the market share in an effective manner (De Haas et al., 2017).
Franchising in Mexico
It is evaluated that franchising is the best method in each sector and it has achieved 10 % growth in the year 2016 (Rosado-Serrano, 2017). Franchising in Mexico will help to enhance the growth and also give a positive impact on the products. Trademark is also one of the important factors that need to safeguard in Mexico. As per the law in Mexico, it is seen that trademark should be taken into consideration by license.
Setting up joint ventures in Mexico
It is observed that joint venture is another option of setting up new business in new country. It is ideally followed when there are complex legal issues or company wants to easily grow by using other core competencies to win over the other rivals.
Strategic alliance
There are several strategic alliances which could be undertaken to set up new busienss in Mexico such as merger, amalgamation and acquisition. However, this alliance is appreciated only when company has direct and indirect relation with the other organizations. It will require high cost of consideration to set up strategic alliance in Mexico.
It is important that the franchising that considers Mexican trademark should be recorded under the Mexican Institute of industrial property. It is seen that registration of the trademark in Mexico should be done within four to six month (Liboni et al., 2015).
Benefits of considering the model of franchisee:
There are various benefits of considering the model of a franchise. First is related to cultural aspects as Lidl is the company that is based in the UK and conduct the activities according to the culture of UK. To enter the market it is important to learn the overall culture in a proper manner. Model of franchisee helps to solve the problem in a proper manner. It is important to learn the culture as one part has the knowledge of the culture and manage the activities accordingly.
Benefits of considering the model of Joint venture
Joint venture helps company to make its organizational culture more customized as per the stakeholders. It is important to learn the culture so that the activities can be managed smoothly and less time can be consumed in managing the activities. If knowledge of the culture is not there then it cannot be possible to conduct and manage the activities effectively.
Benefits of considering the model of strategic alliance
It is the process of undertaking other existing busienss under the busienss control. As it is analyzed that the organization sells its name and trademark to the other company and it requires high outflow of capital. This strategic alliance is used to set up new busienss in Mexico.
Consideration of each factor
Therefore, by evaluating all the information and available strategies, it is analyzed that Lidl should consider franchise option in Mexico and it will help to attain overall profits in a proper manner. It will also enhance the overall image of the company in the market
The last factor is related to motivation of the employees: At the time of entering the international market, it is important for the company to motivate its employees so that activities can be conducted smoothly. Lidl wants to enter the international market than it is important to recruit a manager and conduct the activities accordingly. In case if the manager is the owner of the firm then it can be simple to manage the overall activities on an international level.
Conclusion
Based on the overall analysis it is analyzed that every organization should evaluate the market at the time of expanding the business on a global basis. For Lidl Mexico is the suitable country to expand its business. It will help to enhance the overall market share in a proper manner. Also it is evaluated that franchising method is suitable to enter in Mexico as there is proper resources to enhance the overall market share. It is important for the company to enter into the market so that goals and objectives can be accomplished. It will also help to enhance the overall profit of the organization. If company is able to enter into the market in a proper way by focusing on marketing strategies then goals can be accomplished.
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