Essay Sample on the Best Environment to Internationalize for Lidl Supermarket Chain

Published: 2022-04-07 05:04:12
Essay Sample on the Best Environment to Internationalize for Lidl Supermarket Chain
Type of paper:  Course work
Categories: International business Business strategy
Pages: 7
Wordcount: 1895 words
16 min read
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Criteria to choose the best country to internationalize to PESTEL Analysis

The best and most appropriate criteria to apply in the examination of the best environment to internationalize for Lidl Supermarket Chain will be best explained by application of the PESTEL analysis. This scrutinizes the new environment having separated it into the various elements, which are the social environment, technological arena, the economic and ecological environments and the political areas.

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Political or Regulation

Mexico has a stable government and political climate. The government is led by a democratically elected president who holds office for two terms of four years each. Constitutionally, the president is elected by more than 50% vote. If this is not achieved a runoff is called for that seeks a simple majority. In the recent past, Mexico has not experienced any significant violence or political friction as have been witnessed in most countries in the world (Katowicz, 1998). Norway is also a highly democratic country that has not had any political or regulatory issues in the past decade. It has experienced a high level of stability and peace through elections and other political engagements. Of these two, Norway is the most stable and country and government.

Economic Environment

Norway's economic stability has given rise to a variety of financial institutions and policies in the same stride. In comparison, other countries may compare either better or worse than Norway. For instance, Sweden is a more advanced country than Norway. This is because they achieved political and social stability earlier than Norway. This ensured they had a good foundation earlier than the latter country. However, there are countries that have not achieved a comparable level both politically and socially with Norway. Coupled with the countries that have had long-standing political and social strife, these countries and regions have not achieved the same level of success in their financial regulation and systems. Mexico, on the other hand, has had a very steady economy, which has been on a steady incline in the past five to ten years. The GDP per capita of the country has increased to 70, 600 US Dollars by 2017 (CIA, 2004). The only time Mexico experienced a decline in economic performance since The Great Depression was during The Recession, which affected all the countries in the world. From the onset, both countries have always been strong and growing economies. According to the CIA World Factbook, Exports from Norway include seafood, petroleum, and financial services. Both Norway and Mexico have several active industries including construction, shipping and water desalination, all of which have the part, however small, to play in the development and the economy. This simply fosters the idea that those are very lucrative markets for the supermarket chain to venture into.

Social

Norway is a European Nation that has been widely known for a variety of reasons including sports. Over time, Norway has moved from being a country that is largely unknown in both financial and political arenas to one that acclaimed stability in the same areas (Pearson Education, 2005, para. 1). It has thus become a symbol of change and a beacon of hope to the countries that have undergone and are still undergoing economic and political strife. In comparison, Mexico has more or less, similar setup, regardless of the geographical variability. It is rich in many minerals such as agricultural production. Mexico (CIA, 2004), like Norway, has engaged in extensive campaigns to enhance their social and economic standings in comparison to global markets in order to attract enough foreign investors to support their 124 million people as of 2017. Norway, on the other hand, is not the very big country and had a population of about 5 Million by 2017 according to the CIA World Factbook (Central Intelligence Agency, 2013). These are best examples of new and emerging markets as compares to matured markets

Technological

Mexico and Norway, once again, are in a more or less similar position in terms of their technological exposure. Mexico is among the third world countries with the longest periods of internal strife and conflicts, has had a very short window to push for appropriate investments in the science and technology department. Norway, on the other hand, has been reported to have more than four thousand and five hundred research groups that specialize in technology. Lidl Supermarket Chain could offer their extensive support for these programs in a bid to penetrate the market appropriately. As far as the consumer market is concerned, Norway and Mexico, all have a need for the presence of diversified products. However, of the two, Norway has a better economic standing and essentially a better position to invite more established corporations in to satisfy their needs.

Environmental

Norway is highly affected by seasonal changes and has cold winters and warm summers. Mexico, on the other hand, is a tropical country with moderate weathers. For both countries, there is increased awareness of environmental management and such issues are held in high and strict regard (Highbeam Research, 2005). Likewise, Mexico is in the information and enlightenment stage of growth where information and knowledge around environmental management are held in very high regard. These are the countries that have a very high influx and activity of environmental awareness, regulations and activism, and as such, Lidl Supermarket Chain should ensure that they have sound processes and procedures to handle these areas. Colombia is also in this group given the fact that it is a tropical country with a myriad of environmental resources at its disposal. It is instrumental in ensuring that these are safeguarded, as they should be.

Five Forces Model for Lidl

Porter's five forces differ by industry (Porter, Argyres, & McGahan, 2011). In the aircraft business, the issues included are intense business differences between dominant producers and those who place the biggest orders for supplies are strong, while the threat of entry, threat of substitutes, power of their suppliers are more benign. This is because it is virtually impossible to enter into this business and offer tangible threats to the existing manufacturers. This is in a close examination of the incumbent organization, in comparison to the company already present in the industry. The investigation should and can be widened to correspond to and appreciate the issues and disputes in the industry, and those that face a probable participant. (Porter, 2008)

Bargaining power of suppliers

The major suppliers in the supermarket or consumables industry are very few. These ones supply the supermarket or consumables with product and services. The product manufacturers have as much influence as the facility providers due to the frequency of interactions. Apart from the purchase order servicing arrangements which many corporations do, the interaction with facility providers is one off in the settling of lease obligations. The interactions with these suppliers, on the other hand, are as frequent as that with the customers. This makes the bargaining power of the suppliers very high, possibly the highest in the industry.

Bargaining power of buyers

In any given business, the clients or customers are the main focus of any developments and are accorded the most bargaining power, within the limits of costs incurred by the organization. In the supermarket or consumables industry, there is so much competition that the customers have all the bargaining power since they will choose the organization that has the most attractive package. This is evident in two major ways, the first being the fact that the world is in the middle of an economically empowered stage. This means that the economy is the major driving force and any organization that adheres or focuses on the economy of its customers will easily win.

The threat of new entrants

It is very hard to have a new entrant into the supermarket or consumables industry. A new entrant, in this instance, means an entirely new organization that is built from scratch. However, other instances could serve as threats of existing corporation in the industry. Examples of these are mergers and bigger acquisitions. However, to beat this, Lidl supermarkets need to ensure it maintains a huge level of trust and goodwill from its existing clientele. Owing to the goodwill already achieved the organization will challenge any local organizations and businesses that might pose a challenge to it and its market share.

Threat of substitutes

There are very few substantial threats to the supermarket or consumables industry as far as the substitution is concerned. This is because supermarket or consumables services have been implemented to bridge the gap that could not be covered with any other thing. However, for short distances and few needs, an extensive network of convenience stores in neighbourhoods can easily substitute the supermarket or consumables. However, this is a short-term endeavour and cannot in any way affect the industry in the long-term perspective. These, in a huge way, bring out the advantages that the organization has over its competition. The fact that the customer can easily find a combination of good service and affordability is too attractive for the client to even contemplate moving to other competitors. (Powell, 2001). This is the embodiment of goodwill and a good reputation, which are an organization's intangible resources

Competitive rivalry within an industry

This is perhaps the only force of Porter's five that applies across all networks and industry, except the monopolistic entities, most of which are government owned. It simply aims at showing how the target organization takes the competition. This is in both the proactive ways and reactive means of engagement. Lidl has a huge competition in the general terms of the supermarket or consumables industry. However, strictly netting it down to the category of supermarket or consumables that focus on cost reduction, it has only one major competitor: Fotex. Lidl is not only one of the largest supermarket or consumables in the country, but it is easily the second largest in Europe measured by the number people served. It is, further, represented and performs well in many other countries in the world and as such; its reputation goes beyond more than the original region of incorporation. Unlike other organizations or supermarket or consumables, Lidl focuses on the reduction of costs for its customers and a general positive service to its customers. This approach has ensured that the corporation is financially able to manage its resources and invest in new and better avenues that can satisfy their clients.

Its human resources have been hailed by reviews as some of the most friendly and informative in the industry. They respect other people's cultures, and they have very strong communication skill. Lidl also embraces another aspect of competitive strategy in the financial strategies and teams it employs. The teams have good knowledge in the financial field that easily ensures they make very good and beneficial investments in the region. This has boiled over into the acquisition of better physical resources which have provided the organization with long-term benefits.

VRIO Framework

The Question of Value

Lidl is one of the largest and most profitable organizations currently. Whenever it sees value in a certain market it is easily involved to obtain its value as it satisfies a need in the market. The question of value requires that an organization analyse the strength it has to neutralise and external threat within the industry using its resources. As such, Lidl ranks highly because it has sufficient resources to manage any threat from competitio...

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