Lidl (https://www.lidl.com/) is a German global discount supermarket chain operating across some 30 countries globally. The company is looking to further expand internationally.

Using Lidl as a case company, produce a report that addresses the 5 following tasks:

TASK 1. 

Evaluate the following 2 countries to identify which represents the most potentially attractive target market for Lidl's future international expansion strategy:

• Mexico
• Norway

In order to evaluate which of these 2 countries represents the most potentially attractive target market, you are required to undertake a comparative PESTEL analysis of those macro-environmental factors of the 2 countries that are relevant to Lidl. 

– Worth 20% of the overall mark

– Not included in the word count

• This background analysis must be included as an appendix, presented in table format and must be no more than 5 pages in length. 

• Data should be recent, primarily quantitative and obtained from appropriate sources (e.g. the most recently published World Economic Forum's Global Competitiveness report).

• A scoring system should be used for each macro-environmental factor / sub-factor for each country to show whether each factor / sub-factor is more or less attractive for your company. These scores should then be totalled for each country in order to arrive at an overall scoring of attractiveness for each country.
• Further guidance on undertaking the comparative analysis of the 2 countries is available in the Assignment Briefing slides on Blackboard. 

TASK 2. 

Discuss the rationale for the selection of your chosen market. Your rationale should be justified with a more detailed discussion of your PESTEL analysis of the macro-environmental factors of your chosen market that you have presented in the appendix for Task 1. This discussion should explicitly consider the implications of the macro-environmental factors of your chosen market for Lidl.

– Worth 20% of the overall mark; 825 words.

• This task must be presented in the first section of the main body of your report.

TASK 3. 

Apply the 5-Forces model to critically analyse the competitive intensity of the industrial environment of Lidl in your chosen market. A SWOT analysis is not acceptable.

– Worth 20% of the overall mark; 825 words.

• This task must be presented in the second section of the main body of your report.

TASK 4. 

Analyse the firm's internal environment in order to EITHER:

i) critically evaluate the resources and capabilities of Lidl and the competitive implications of these for the company when entering into your chosen market (this will require an application of the VRIO framework)

OR:

ii) identify Lidl's internal value-adding activities and critically evaluate which of these will be most relevant in supporting the company to enter into your chosen market (this will require an application of the Value Chain model). 

A SWOT analysis for either option is not acceptable.

– Worth 20% of the overall mark; 825 words.

• This task must be presented in the third section of the main body of your report.

TASK 5. 

Critically evaluate the various modes of entry available to Lidl and recommend – with justification based on the findings of your analyses in Tasks 2, 3 & 4 above – the most suitable mode of entry that will enable this strategic international expansion to be a success for the company. 

– Worth 20% of the overall mark; 825 words.

• This task must be presented in the fourth and final section of the main body of your report.

Introduction

Grocery retailing is experiencing globalization at a tremendous rate. Despite their successes, retailers had to encounter disastrous forays is foreign markets resulting in market exits (The Economist, 2015). Over the last few years, Lidl is known for its success stories related to international expansion strategy. It is regarded as one of the world's largest hard discount grocers with primarily offerings its own brand of goods at low prices, allowing almost no premium priced products. Lidl has a strong position in its home market Germany and other European countries like the UK (Gale, 2018). Its expansion into global markets is achieved through the understanding of the geographical limits of its model and systematically advancing in their chosen territories. In this report Lidl proposed entry to Mexico is analysed through PESTLE analysis, Porter's five forces analysis and the VRIO framework. It is observed that though there are stark differences between Lidl's home country Germany and Mexico, consumers' attitude and buying patterns are a driving force.

Rational for Market Selection

With the use of PESTLE analysis, different factors which influence a company but not vice versa through its business strategy are observed (Shabanova, Ismagilova, Salimov, & Akhmadeev, 2015). Using PESTLE analysis, the political, economic, social, technological, legislative and environment conditions prevailing in the country selected for market entry are analysed. Mexico and Norway are the countries identified by Lidl to expand its business operations. Based on the factors analysed in Appendix A, it is observed that Norway is well-developed when compared to Mexico. However, the Mexican market is selected based on the emerging opportunity for foreign business to capitalize on the consumer-led economic growth.

Mexico is geographically well-located as it is in close proximity to the Unites States where Lidl is currently operational and other South American countries, which allows the lowering of trade costs. Mexico is a member of various free trade agreements; especially it is part of NAFTA and associated with the European Union and Japan (Villarreal, 2017). It is known for educated, skilled and low-cost labour that reduces overhead expenses for Lidl stores. Further, the population of 127 million and the abundance of natural resources is an added advantage for the revenue generation and product procurement. Due to Mexican Pesos close association with the USD, depreciation in exchange rates has a significant impact on the financial stability of the country (Spoon, 2016). The government has undertaken several fiscal and monetary reforms to stabilize macroeconomic conditions which are a favorable phenomenon for Lidl to invest in real estate purchases and store constructions.

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