Assignment Sample on GCM-M04 Strategic Management
Introduction
The study is going to discuss the strategic management process of Lidl whose headquarter is in Germany. It is a retail company that operates 11000 stores across Europe and the US. The study has effectively identified and critically evaluated the possible strategic directions of the company and also focused on the strategic goals of the company. The company wishes to establish its marketing operation in the Indian market by understanding the overall scenario of the country. This study has also analysed and considered both macro and micro environmental factors as well as the external and internal capabilities of the organisation. Moreover, this study provides some effective suggestions to overcome the issues in the organisation that helps to expand its business in the Indian market.
Background of the chosen company and opportunities to expand
Lidl started its journey in the global retail sector in 1973 in Ludwigshafen, Germany. Since then, the organisation has been operating successfully in around 32 countries globally, with an estimated 341,000 employees (Lidl, 2023). The mission of the organisation has always remained the same in terms of offering high-quality products including baked goods, meat, and household items at significantly low prices. In addition, the mission statement of the company also indicates its determination to work with business partners by emphasising sustainable relationships and contributing positively to local communities, along with ensuring the achievement of long-term success by making investments in the training and development of employees (Lidl, 2023).
Figure 1: Logo of Lidl
(Source: Lidl, 2023)
The vision statement of the company is to enhance the life of its customers by providing quality products at a market-leading value for ensuring customer satisfaction, as it always considers customers at the heart of its business (Lidl, 2023). Hence, the organisational value of Lidl ensures that “good groceries should be accessible to everyone” (Lidl, 2023). The organisation has a significantly strong presence in the European market and it has also expanded in different regions including the US, where it has around 140 stores (Lidl, 2023). The business model of the organisation is based on providing the best quality products at a significantly low cost, which is ensured through its cost control and business activities.
Figure 2: Net sales of Lidl from 2016 to 2026
(Source: Bedford, 2022)
The organisation has been providing a great focus on the maintenance of sustainability which is also benefiting it in terms of ensuring a positive brand image and influencing customers’ buying behaviour (Lidl, 2023). Hence, the organisation has been witnessing a continuous growth in its global sales. In particular, since 2016, the organisation is witnessing significant growth in its net sales, which has the potential to augment in upcoming years (Bedford, 2022). Specifically, currently, the net sales of the organisation are approximately 115.9 billion Euros, which are estimated to be approximately 131.2 billion Euros in the upcoming 3 years, as illustrated in figure 1 (Bedford, 2022).
There is an extensive opportunity for the organisation to expand in the international market. In this regard, it would be beneficial for the organisation to expand in the international market, where it can achieve success, as the retail market of India is growing. Indian retail market size is expected to grow with a CAGR of 9% and be valued at $1.8 trillion by 2030 (IBEF, 2023).
Strategic goals
Lidl is a retail company in Germany that was established in 1973. The company has already served the areas of the EU, the US, the UK, Switzerland, Bosnia, and Herzegovina (Lidl, 2023). The company has some specific strategic goals that help the company to establish its business in the Indian market. Strategic management is considered as a process of setting procedures, organisational goals, and objectives for making an organisation more competitive (Kabeyi, 2019). This is the reason that strategic management typically focuses on effectively deploying employees as well as resources for achieving organisational goals. Relating to this, the core strategic management aspect of this company is to deliver outstanding customer satisfaction. The company ensures to provide market-leading quality products and services to the customer and constantly implements innovative and optimising technology to develop their service more efficiently (Lidl, 2023). Moreover, the company wants to expand its business outside Europe with a sustainable relationship with the business partner. Additionally, the company always focuses on the local communities and understands their requirements and generates a positive impact on them.
Critical evaluation of possible strategic direction that the organisation might adopt
Macroenvironmental factors say
PESTLE
| Factors | Implication | Impact |
| Political | ● Government initiatives toward foreign direct investment (FDI) (Sites, 2023)
● Government support through reducing GST (Mediratta, 2022) |
High |
| Economic | ● GDP at 7.21% in 2022 (O’Neill, 2022)
● Inflation rate at 6.89% in 2022 (O’Neill, 2022) |
High |
| Social | ● Population at 1,416,570,326 as of 16th March 2023 (World meter, 2023)
● Changing needs of consumers towards online shopping |
High |
| Technological | ● Intensive use of modern tech in retail (Jaitly, 2021)
● Immense growth of logistics (Sun, 2022) |
High |
| Legal | ● Sales of Goods Act 1930 (India Code, 2023)
● Consumer Protection Act 2019 (India Code, 2023) |
Medium |
| Environmental | ● Journey of the retail industry towards sustainability (India Retailer Bureau, 2022)
● The focus on reducing plastic waste (Mint, 2022) |
High |
Table 1: PESTLE
Political
The Indian retail sector is getting extensive support from the government. The Indian government has allowed 51% FDI in multi-retail and 100% FDI in single retail (Sites, 2023). Additionally, several investments have been made from Sahara India, Bharti Walmart, and others for expanding and setting up retail businesses, expanding outlets, and others (Sites, 2023). The government is also supporting a reduction in the GST in the gloomy period (Mediratta, 2022). From there, it can be stated that the Indian retail industry has a substantial opportunity for growth over the next few years. The political support for the retail industry is having a high impact on the industry which can be an opportunity for Lidl to have a profitable business in India.
Indian economic condition is noticed to be on the positive side as per the understanding gathered from the GDP and inflation in recent years
the increasing level of GDP in India can be noticed substantially which can be denoted by the advancing condition of the country which can present a flourishing opportunity for the retail industry to expand. Additionally, in regard to inflation, India is at 6.89% in 2022 that has further forecasted to decrease to 5.14% in 2023 (O’Neill, 2022). Thus, with lowering and increasing rates of inflation and GDP respectively, the economic condition can be defined to be in a fruitful state that can benefit the retail industry.
Social
India is noticed to have an extensive increase in its population over the last decade. As of 16th March 2023, the population of India stood at 1,416,570,326 which is equivalent to 17.7% of the total world’s population (World meter, 2023). Additionally, the needs of customers are drastically changing in recent times which is pushing the retail industry to increase focus on creating omnichannel routes, personalised retailing, serving immediate needs, embracing digital payments, and others (India Retailer Bureau, 2021). The impact of social factors on the retail industry can be said to be high.
Technological
The retail and e-commerce industries are some of the fastest-growing industries in the world. Technology can be defined to be at the heart of this evolutionary growth of the industry. With the assistance of the digitalization landscape, the retail industry trade has gone up from 14% in 2019 to 17% in 2020 (Jaitly, 2021). Technological innovations with virtual shopping, AI-powered recommendation engines, in-store stylists, and others have drastically altered the shape of the retail industry (Jaitly, 2021). Furthermore, logistics is one of the most integral parts of the retail industry. The logistics sector is also noticed to be at $250 billion and is further estimated to grow to $380 billion in 2025 (Sun, 2022). Hence, the opportunities for retail industry expansion are determined.
Legal
The legal structure is quite strengthened in India with different regulatory frameworks for safeguarding the consumers and the buyers. Primarily, the Sales of Good Act 1930 is present that assists with agreements between the buyers and the sellers (India Code, 2023). Additionally, Consumer Protection Act 2019 is present that protects the interests of consumers in the retail industry (India Code, 2023). Retail companies are restricted to operate following these legal obligations in order to operate in the market efficiently.
Environmental
The concentration of the Indian retailing industry is noticed to be increasing towards sustainability with a vision to contribute towards reducing the impact on the environment through eco-friendly practices (India Retailer Bureau, 2022). Due to the increasing plastic waste with 3.6 million tonnes and only 50% being recycled, sustainability is becoming a crucial aspect of the retail industry (Mint, 2022). Thus, environmental aspects are posing a high impact on the industry due to the sustainability factor.
PORTERS
| Forces | Implication | Justification |
| Bargaining power of buyers | High | The alternatives present to the buyers are vast, and due to that the bargaining power of buyers is high in the retail industry. Buyers are an integral part of the retail industry impacting the sales aspect (Alé-Chilet and Moshary, 2022). With a vast number of alternatives to the buyers, they have the capability to move to other stores as per their needs and wants of products and prices. |
| Bargaining power of suppliers | Low | The list of suppliers in the Indian retail industry is extensive that impacts in bringing down the bargaining power of suppliers affecting the price of goods. With a lower number of suppliers, monopolistic behaviour can rise (Xie et al. 2021). Although with an increased number of suppliers, the impact of bargaining is sufficiently less. |
| Competitive rivalry | High | The competitive rivalry in India is high. A vast number of competitors are present such as Amazon Pantry, Blinkit, Big Basket, Spencer, Jio Mart, and others (Walk Through India, 2021). Due to the presence of such a vast number of competitors, the competition in the retail industry is extensive. |
| Threat of new entrants | High | The setting up cost of retail companies varies from $200 to $2000 depending upon the size and location of setting up a company (Live About, 2021). Thus, with a low level of investment required for setting up a company, the threat of entrants can be determined as high. |
| Threat of substitutes | High | Different products are presented by different companies at a competitive price range that results in a high threat of substitutes. Customers are presented with a wide range of choices to choose from as per their affordability that impact in sales of organisations (Gupta et al. 2021). |
Table 2: Porter’s five forces
Microenvironmental factors
SWOT analysis
| Strengths
● Lidl has achieved a record market share of 7.4% in 2022 (Grocery Gazette, 2022). ● The company uses “rock-bottom prices making” for providing low price to the products (Grocery Gazette, 2022). ● Company has focused on the aspect of customer satisfaction |
Weakness
● Lidl has focused on the less-impressive traits, such as long queues (Grocery Gazette, 2022). ● The “penetration pricing” strategy creates more problems in the company |
| Opportunities
● Food and grocery retail market size in Europe is “EUR1,790 billion” in 2021 and it is expected to grow 4% more within 2022 to 2026 (Munbodh, 2020). ● Retail sector in Europe invests more than $30 billion in e-commerce business every year. Hence, Lidl has the opportunity to expands its business global market ● The size of retail sector is “3.55 trillion euros in 2023” (Munbodh, 2020). |
Threats
● 96% of the retail company spends in e-commerce in the EU and 65% also uses both the traditional and online sources of marketing. Hence high competition is one of the major threats in the retail sector. (Munbodh, 2020). |
Table 3: SWOT analysis of Lidl
The primary reason for the success of the company is to provide low-price products. The company uses “rock-bottom prices making” for providing low prices for the products. Hence, this aspect highly increases the success rate of the company. Lidl has achieved a record market share of 7.4% in 2022, which is one of the most positive responses to build its business in the Indian market (Grocery Gazette, 2022). The strategic goal of the company is to maintain customer satisfaction. Hence, it can be said that company has enough strength to establish its operation outside of the Europe market.
Lidl has focused on less-impressive traits, such as long queues which increases unsatisfied customers. On the other hand, the “penetration pricing” strategy creates more problems for the company as there are several competitors in the market (Grocery Gazette, 2022). The unethical pricing strategy of the company for maintaining competitiveness increases several risk factors. It is observed that the company has forced the suppliers to cut down the price of the products to maintain competitive advantages.
There is a huge opportunity for the company due to its large market share. It is observed that the food and grocery retail market size in Europe is EUR1,790 billion in 2021 and it is expected to grow 4% more between 2022 to 2026 (Munbodh, 2020). Moreover, the large amount of investment in the retail sector has also increased the chances to establish its business outside of the EU, especially in the Indian market.
In case of threat, 96% of retail sectors have uses e-commers in their business and some others use both the traditional and online marketing approaches (Munbodh, 2020). Hence, the high competition in the retail industry creates more challenges for enlarging the business in the global market.
External and internal capabilities of the organisation
In order to discuss the internal as well as external capabilities of Lidl photos value chain analysis model can be utilised. The use of this model is helpful to analyse different activities of an organisation as it allows analysing of business activities by segmenting them into support activities and primary activities, which cover every aspect of a business (Anthony Jnr, 2019).
Primary activities
Considering the inbound logistics of Lidl, it is observed that the organisation has a complex supply chain, which involves sourcing different products from its global suppliers. The organisation is providing a significant focus on efficiently managing its supply chain by using updated technologies in order to track its inventory management and consolidate shipments. In terms of logistics management businesses always provide a great focus on maintaining positive relations with their suppliers to fulfil consumer demand (Anthony Jnr, 2019). In this regard, it is observed that the organisation is placing significant importance on partnering with suppliers who have the ability to share its commitments in terms of providing high-quality products (Lidl, 2023).
In terms of outbound logistics, the organisation has stores in different convenient locations. Most of the stores of the company are located in places that are near residential areas. It is evident that due to the maintenance of positive relations with suppliers, the organisation is achieving success to fulfil consumer demands. In addition, with its international headquarters and warehouses, the organisation is managing its stores in convenient locations with strong teams that ensures the delivery of customer value (Lidl, 2023).
In terms of operations management, the organisation has been focusing on designing its stores in a cost-effective way. Specifically, the company has been observed to utilise lean principles in terms optimising its operational process and minimising waste (Lidl, 2023). Lidl is also focusing on carbon emissions in areas in which it has direct control with initiatives such as moving toward using green electricity and introducing PV solar panels to store specifications. Moreover, the company is determined to send zero waste to landfill, which is impacting its value chain in a significant manner (Lidl, 2023).
Marketing strategy of Lidl is extremely concerned with influencing customers’ behaviour by reflecting its mission of providing high-quality products at low cost. In order to increase sales through marketing, the organisation utilises promotions, word-of-mouth, and advertising. Relating to this, it is observed that Lidl is the leading retailer in Germany based on its advertising expenditure, as of 2022. In 2022, the company’s expenditure on advertisement was approximately 459.2 million Euros (Statista, 2023). Despite that, it is observed that the online traffic and engagement at the organisational website of Lidl has been reduced, as it was approximately 9.5 million in December 2022 and became approximately 7.7 million in February 2023 (Similarweb, 2023). This should be considered by the company and take initiative to deal with this while trying to increase its market presence and operate in completing a new market.
Support activities
Considering the firm infrastructure, the organisation has been utilising updated technologies in its modern stores, transportation, and warehouses. Moreover, it is observed that the management team of the organisation ensures the maintenance of strong corporate culture. The human resource management of the organisation ensures providing proper training and development opportunities for its employees, along with providing positive working culture, fair payment, and benefits. According to a survey, approximately 76% of employees are satisfied with the benefits provided by Lidl (Comparably, 2023).
The procurement strategy of the company is focused on sourcing products from its suppliers directly, which in turn, ensures cost reduction (Lidl, 2023). Moreover, the company is also determined to closely work with its suppliers for improving existing products and developing new ones.
Conclusion
From the above analysis, it can be concluded that Lidl has sufficient resources to operate its business in the Indian market. The core strategic management aspect of this company is to deliver outstanding customer satisfaction. Moreover, Lidl has ensured to provide market-leading quality products and services to the customer and constantly implements innovation to develop their service more efficiently. On the other hand, Understanding the macro and micro environmental factors, it has come to know that the company has enough potential to establish its business operation in the Indian market. Understanding the internal and external capabilities of the company, it has been observed that the company has determined to closely work with its suppliers for improving existing products and developing new ones.
Recommendations
For improving the strategic management process, Lidl has to provide enough discounts and offers that enhance its business in the competitive market. Moreover, the company should focus on growth opportunities and on the needs of target customers, which would help them to generate more new customers. It is also important for the company to address the strategic issues, which would help the company to develop a strong focus on business operations. Lidl should improve its technology so that it can monitor its business from the warehouse to the end of the supply chain process. This will also them to cut down their operating cost and increase the amount of profit. Moreover, a strong e-commerce business needs to be developed by Lidl where they can take orders online and deliver at the door steps of the customers.
References
Anthony Jnr, B., (2019). Sustainable value chain practice adoption to improve strategic environmentalism in ICT-based industries. Journal of Global Operations and Strategic Sourcing, 12(3), pp.380-409.
Bedford, E., (2022). Estimated net sales of Lidl worldwide from 2016 to 2026. Statista. [Online]. Available at: https://www.statista.com/statistics/1263610/lidl-net-sales-worldwide/ [Accessed 12th March 2023]
Comparably, (2023). LIDL Happiness Score. [Online]. Available at: https://www.comparably.com/companies/lidl/happiness [Accessed 12th March 2023]
Grocery Gazette (2022). Lidl achieves ‘new record’ market share – Grocery Gazette – Latest Grocery Industry News. [Online] www.grocerygazette.co.uk. Available at: https://www.grocerygazette.co.uk/2022/12/06/lidl-market-share/ [Accessed 12th March 2023]
Gupta, V., Ivanov, D. and Choi, T.M., (2021). Competitive pricing of substitute products under supply disruption. Omega, 101, p.102279.
IBEF, (2023). Retail Industry in India. [Online]. Available at: https://www.ibef.org/industry/retail-india [Accessed 12th March 2023]
India Code, (2023). The Consumer Protection Act, 2019. [Online]. Available at: https://www.indiacode.nic.in/handle/123456789/15256?view_type=browse&sam_handle=123456789/1362 [Accessed 12th March 2023]
India Code, (2023). The Sale of Goods Act, 1930. [Online]. Available at: https://www.indiacode.nic.in/handle/123456789/2390?sam_handle=123456789/1362 [Accessed 12th March 2023]
India Retailer Bureau, (2021). How Retail and E-commerce Industry is Evolving. [Online]. Available at: vhttps://www.indianretailer.com/article/technology/digital-trends/how-retail-and-e-commerce-industry-is-evolving.a7620 [Accessed 12th March 2023]
India Retailer Bureau, (2022). Sustainability: The Way Forward. [Online]. Available at: https://www.indiaretailing.com/2022/08/10/sustainability-the-way-forward/ [Accessed 12th March 2023]
Jaitly, R., (2021). How Retail Sector is Using Modern-Age Tech to Revive the Indian Economy. [Online]. Available at: https://www.indianretailer.com/article/technology/digital-trends/how-retail-sector-is-using-mmodern-age-tech-to-revive-the-Indian-economy.a7566 [Accessed 12th March 2023]
Kabeyi, M., (2019). Organizational strategic planning, implementation and evaluation with analysis of challenges and benefits. International Journal of Applied Research and Studies, 5(6), pp.27-32.
Lidl, (2023). about us. [Online]. Available at: https://www.lidl.com/about-us [Accessed 12th March 2023]
Lidl, (2023). Protecting the Environment. [Online]. Available at: https://www.abettertomorrow-lidl-ni.co.uk/environment/#carbon-footprinting [Accessed 12th March 2023]
Lidl, (2023). We’re partnering with suppliers who share our commitment to the highest quality products. [Online]. Available at: https://www.lidl.com/suppliers [Accessed 12th March 2023]
Live About, (2021). How Much Does It Cost to Start a Retail Business? [Online]. Available at: https://www.liveabout.com/how-much-does-it-cost-to-start-a-retail-business-2890132 [Accessed 12th March 2023]
Mediratta, A., (2022). National Retail Policy, incentives, GST cut on retail sector’s mind before Budget 2022. [Online]. Available at: https://economictimes.indiatimes.com/industry/services/retail/national-retail-policy-incentives-gst-cut-on-retail-sectors-mind-before-budget-2022/articleshow/88994177.cms?from=mdr [Accessed 12th March 2023]
Mint, (2022). India generates 3.6 lakh million tonnes plastic waste, 50% of it is recycled. [Online]. Available at: https://www.livemint.com/news/india-generates-3-6-lakh-million-tonnes-plastic-waste-50-of-it-is-recycled-11660029497756.html [Accessed 12th March 2023]
Munbodh, E. (2020). Best and worst supermarkets for customer satisfaction and it’s not Aldi or Lidl. [online] mirror. Available at: https://www.mirror.co.uk/money/best-worst-supermarkets-customer-satisfaction-21539259?int_source=amp_continue_reading&int_medium=amp&int_campaign=continue_reading_button#amp-readmore-target [Accessed 12th March 2023]
O’Neill, A., (2022). India’s share of global gross domestic product (GDP) 2027. [Online]. Available at: https://www.statista.com/statistics/271328/indias-share-of-global-gross-domestic-product-gdp [Accessed 12th March 2023]/
O’Neill, A., (2022). Inflation rate in India 2027. [Online]. Available at: https://www.statista.com/statistics/271322/inflation-rate-in-india/ [Accessed 12th March 2023]
Similarweb, (2023). lidl.com. [Online]. Available at: https://www.similarweb.com/website/lidl.com/#traffic [Accessed 12th March 2023]
Sites, (2023). Investment In India. [Online]. Available at: https://sites.google.com/site/investmentsectors/ [Accessed 12th March 2023]
Statista, (2023). Leading retail companies based on advertising expenditure in Germany in 2022. [Online]. Available at: https://www.statista.com/statistics/515816/retail-and-trade-leading-companies-by-ad-spend-germany/#:~:text=Ranking%20of%20retail%20companies%20based%20on%20ad%20expenditure%20in%20Germany%202022&text=In%202021%2C%20Lidl%20had%20the,expenditure%20in%20Germany%20in%202022. [Accessed 12th March 2023]
Sun, S., (2022). Size of logistics market in India FY 2017-2025. [Online]. Available at: https://www.statista.com/statistics/1288177/india-size-of-logistics-market/ [Accessed 12th March 2023]
Walk Through India, (2021). 10 Most Popular Online Grocery Stores in India. [Online]. Available at: http://www.walkthroughindia.com/grocery/10-most-popular-online-grocery-stores-in-india/ [Accessed 12th March 2023]
World meter, (2023). India Population (LIVE). [Online]. Available at: https://www.worldometers.info/world-population/india-population/#:~:text=The%20current%20population%20of%20India,the%20latest%20United%20Nations%20data. [Accessed 12th March 2023]
Xie, X., Hu, P., Yu, J. and Dai, B., (2021). Impact of capacity on the supplier’s distribution channel selection in facing a retail platform. Naval Research Logistics (NRL), 68(6), pp.837-854.
Know more about UniqueSubmission’s other writing services:
