Global Strategy Assignment Sample
Section 1: Introduction
1.1. Background of the company
Lidl is considered to be a German International retail chain that mainly operates in more than 11000 stores across the domain of the United States and Europe (Lidl, 2022). The company belongs to the retail chain industry and is headquartered in Neckarsulm, Baden-Württemberg. The company was founded 49 years ago in 1973 by Josef Schwarz and is currently having strength of 315000 employees within the organization (Lidl, 2022). The mission of the company deals with offering the customers with the highest quality fresh products such as fresh baked goods, household products and others at relatively low prices. In this respect, the company mainly offers fresh fruits and vegetables, wines, spirits, farmers’ supplies, household essentials, baby care products, health and beauty and many others (Lidl, 2022). Moreover, the company seems to be having a growth of 9.9% in 2020 that resulted in £96.3 billion that further reflected a turnover of 33.7% in the same year (Schwarz Gruppe, 2021). Currently, the company seems to be having revenue of £28,300 million and thus seems to be operating successfully (Smith, 2022).
Figure 1: Revenue of Lidl
1.2. Market share of the company
Market share of Lidl is observed to be increasing between the financial year of 2012 and 2021 at a slow but steady rate. In 2012 the market share of Lidl was 7.5% while it increased to 9% in the next year. In addition to this, the market share of Lidl in 2021 increased to 10.7% that reflected high development of the number of stores of the company alongside its operations within the targeted regions (Gelder, 2022).
Figure 2: Market share of Lidl
1.3. Country for expansion and its reasons
From the current scenario it can be observed that Lidl is having a steady growth in its market share that can be impactful in its operation in the future. In this respect, expanding within international markets can be effective for the company to boost their growth and also accomplish high targets within the market scenario. In this respect, expanding within the domain of South Korea will be effective for the company in several aspects such as appetising incentives, effective geographical locations, smart customers, brilliant framework for proper investment targeting customers and others (Pearsonkorea, 2022). In addition to this, South Korea has been ranked in the fourth position in terms of providing high ease in business while the US seems to be ranking in the sixth position. Other than that, South Korea is also considered to be among the 10 exporters in the global scenario and is also having an increasing GDP rate within the domain (Zhu and Santacreu, 2020). In this respect it can be stated that expanding within the domain of South Korea can be effective for Lidl to expand their business operations [Refer to Appendix 1].
1.4. Competitor analysis
Competitors of a company are effective in impacting business operations and can be analysed effectively through Porter’s Diamond model [Refer to Appendix 2]. This model consists of mainly four factors that are interrelated to each other including factor conditions, firms strategy and rivalry, supporting industries and demand conditions (Fang et al. 2018). The aspect of factor condition mainly reflects the availability of unskilled labour alongside useful natural resources that supports the current operations of the company. In addition to this, the demand for the household products, basic necessities and other services that are provided by Lidl are high within the domain of Germany; however the country seems to be having several competitors that affects its business operations. It mainly includes Dollar General, Casa Ley, SuperValu and Walmart among which Walmart seems to be a major threat to the current company in terms of financial and employee strength (Craft, 2021). Henceforth, the potential competitors of the company are effective in creating disturbances in the operations of Lidl.
Section 2: Internationalisation strategy
2.1. Strategies of internationalization
Strategies of internationalization are effective to provide the company with proper direction in order to gain success from expansion. There are four basic internationalization strategies adopted by MNCs to expand within international markets. These include international strategy, multidomestic strategy, Global strategy and transnational strategy. According to Tsai et al. (2021), international strategy mainly deals with the attempt of selling products and services internationally with a low amount of changes. This strategy is not concerned with the adaptation of local culture or cost and solely deals with the motive of selling their original products to the international domain. On the other hand, as stated by Purwaningsih et al. (2021), the multi domestic strategy is highly focused on adapting to local requirements of the targeted market. This strategy is not involved with its focus on efficiency or cost but is highly concerned on adapting to local culture [Refer to Appendix 3].
Other than that, as per Constantin et al. (2022), global strategy is highly focused on meeting local requirements within the targeted markets and also emphasises on better efficiencies and lower cost. Besides, this is considered to be just the opposite of multi-domestic strategy. This strategy is focused on implementing minor changes to the products and services in response to the local requirements. Lastly, transnational strategy deals with minor adjustments within product efficiency and cost in order to adjust to local preferences of the customers (Vlados, 2019). Based on the stated strategies it can be stated that Lidl will be applying transnational strategy to expand within the domain of South Korea in order to fit the requirements of the customers and the market.
2.2. Justifications
The transnational strategy has been selected for the current company in terms of internationalisation as it will be effective for the current company to adjust the product and its cost as per the local preferences. It is because as per Wonglimpiyarat (2018), transnational strategy is highly focused on implementing minor changes to products and cost based on the local requirements of customers. As a result of this, customers within the domain of South Korea can be highly satisfied regarding the products and services of Lidl that further will be increasing the demand and sales of products in the new market. As per the Bartlett and Ghoshal model (BAG), managing business in the international domain mainly deals with two factors.
It includes costs of the products and services based on local requirements and pressure in order to respond to local conditions of the market (Tucci, 2022). As per this model, cost and local preferences are the key factors that can impact the operations of a company in an international market scenario. In this respect selecting minimum changes regarding cost and implementing minor changes within the products and services based on the local taste and preferences can also be effective for gaining a high customer base in the international market. Based on the notion provided by the BAG model it can be stated that selecting transnational strategy is highly justified for Lidl in its current international expansion.
Section 3: Country environment analysis
3.1. Pestle analysis
| Factors | Analysis |
| Political factor | ● The country follows a presidential system of the government
● It has high political stability that can benefit the company in terms of fruitful relationships with neighbour countries ● Issues of bribery and corruption and power are highly common within the political system of South Korea |
| Economical factor | ● Economic aspects of South Korea reflects a consistent growth
● GDP of the country is among the 10th was highest GDP rate with a rate of 1.2% increase as of first quarter of 2022 (Trading Economics, 2022) [Refer to Appendix 4] ● The country is having positive trade alliance with Singapore India, Canada, Australia, New Zealand, Columbia, China and others ● Inflation rate of South Korea as of 2022 reflects 3.7% that is higher than the normal rate of inflation (Trading Economics, 2022) [Refer to Appendix 5] ● Employment rate of the country reflects 59.85% as of 2022 further stating high skilled workers within the domain (Trading Economics, 2022) [Refer to Appendix 6] |
| Social factor | ● South Korea is a developed country with over 51 millions of populations (Worldometer, 2022)
● Literacy rate of the country reflects 97.97% that further depicts highly educated people that further can benefit the current company with skilled workforce (Macrotrends, 2022) |
| Technological factor | ● South Korea is considered to be a digitally advanced country
● It aims at bringing artificial intelligence robots, facial recognition, walk through tunnel security and other technologically developed aspects by the end of 2023 ● 80% of the population tends to use social media within the country and further reflect cyber security as a major concern within the domain (International Trade Administration, 2022) |
| Legal factor | ● Legal system of South Korea is highly influenced by Anglo American and Japanese culture
● The judiciary system of the country is considered to be fairly independent and is free from political influences ● The country consists of several business and employment laws that can protect a new business and can also provide several advantages to the employees within the domain |
| Environmental factor | ● The country consists of several tourist spots and heritage sites
● 70% of the Koreans tends to deal with the mitigation of environmental issues such as air pollution ● Besides waste management, future energy resources, global warming, water pollution, emissions and others are considered in order to protect the environment |
Table 1: PESTLE analysis
3.2. Porter’s five forces analysis
| Factors | Impact |
| Competitive rivalry | High |
| New entrants threats | Low |
| Substitute product threats | High |
| Suppliers bargaining power | Medium |
| Buyers bargaining power | High |
Table 2: Porter’s five forces
From the table above it can be analysed that competitive rivalry of Lidl is considered to be high due to the availability of several competitors such as Walmart, Dollar General and others. In addition to this the company seems to be 7th largest grocer within the market and thus seems to be having low threats of new entrants. Other than that, threats of substitution products seem to be high as the company has a high number of competitors and there are similar products available within the market. Due to high availability of similar products within the market, bargaining power of the customers also rises as they have several options. Lastly, suppliers bargaining power is relatively low because the company is having a high position within the market and there are high chances for the company to bargain with the suppliers.
3.3. Attractiveness of the chosen country
South Korea tends to provide several business opportunities and can be effective for Lidl to operate within the market effectively. South Korea is highly known for its rapidly growing economy that can be beneficial for the current company to to develop its business (Reddal, 2022). In addition to this, the country also involves low cost labour that further can provide the current company with the opportunity of retaining skilled and useful labour and increasing the strength of the organisation. However, the GDP rate of South Korea also seems to be rapidly increasing and thus can be providing benefits to the company in increasing its business operation and gaining a high success rate. Henceforth considering the political, economic and other aspects of South Korea it can be stated that expansion of Lidl within the domain of South Korea is highly justified.
Section 4: Mode of entry
4.1. Selection of proper model of entry
Mode of entry is considered to be one of the important aspects while expanding business into international markets. According to Schellenberg et al. (2018), selecting proper mode of entry helps a company to operate successfully within the target market. It also helps in proper management of market conditions and risks within the target market. In the current scenario the mode of Foreign Direct Investment (FDI) will be used by Lidl to expand within the markets of South Korea. According to Spangher et al. (2019), FDI indicates direct investment within facilities in foreign markets. In this respect, FDI mainly requires a high amount of capital in order to cover different costs such as staff, technology and premises. As FDI can be executed both by establishment of a new venture or acquiring existing company, therefore, the current company will be physically moving to South Korea and will establish a new venture within the market.
In addition to this, there are different modes of entry that are being used by different companies such as exporting, joint venture, and licensing, franchising, piggybacking and wholly owned subsidiaries. According to Isa et al. (2020), exporting involves direct selling of goods and services within another country. It is considered to be one of the best methods of international business expansion with low amount of risk as it is cost effective and requires no investment. On the other hand as per Ardyan (2018), licensing indicates use of property in the targeted country that is normally intangible. This method requires very little investment and can provide high return on the aspects of investment. In addition to this, franchising is also similar to the aspects of licensing that mainly indicates selling of intellectual property to a franchise.
Moreover, another famous mode of entry used by several businesses includes joint ventures. As per the mentions of Islam et al. (2021), joint venture will indicate establishment of jointly owned business and consists of two companies. This method mainly provides the benefit of local knowledge to the foreign company and contributes to the ease of operations. On the other hand, wholly owned subsidiaries are similar to the aspects of FDI and piggybacking involves the working of two non competing companies together. Based on the above analysis it can be stated that apart from FDI the current company can also adopt the mode of joint venture in order to expand within the domain of South Korea [Refer to Appendix 7].
4.2. Justification
Based on the above section it can be observed that FDI will be adopted by the current company in order to expand within the markets of South Korea. According to Muna et al. (2022), FDI mainly involved a high amount of capital for building proper technology, premises and staff within the targeted nation. As a result of this, the company requires an advantage of advanced operations within the targeted market that further provides the benefit of higher sales and revenue within the domain. In addition to this, as per Srisakun and Intuluck (2019), FDI also helps in developing brand identity within the target market that further can be useful in increasing market position. Henceforth, through the selected strategy, Lidl can gain high market exposure and can successfully operate within the markets of South Korea.
Section 5: Three issues to be faced in the targeted locations
5.1. Issue 1: Cultural differences
One of the main issues that will be faced by Lidl in expanding within the domain of South Korea is the cultural differences. South Korea seems to be having a different culture than Germany in terms of power distance, individualism, masculinity and certainty avoidance, long-term orientation and indulgence as per Hofstede cultural dimensions (Hofstede Insight, 2022). Due to this the working pattern of the current company seems to be facing issues in South Korea and further can also face difficulty in meeting the local requirements of the customers.
5.2. Issue 2: Rules and regulations
South Korea also seems to be having a legal framework that represents a blend of complications alongside provisions. Besides, the regulations are often modified and further can create difficulty for the new business to adjust within the changing society. Other than that there is strict employment legislation within the domain that further creates high difficulty for the non productive workers to operate within the market. Henceforth, strict rules and regulations including language barriers and others can create difficulty in the operations of Lidl.
5.3. Issue 3: Intellectual property
Another issue of intellectual property can also be faced by the current company operating within the domain of South Korea. It is because companies within South Korea are observed to be strongly advised to get a trademark and patent registered within the Korean industrial property office (KIPO) before any important decisions within the business. In this respect if the current company is not registered with the KIPO, then it will create an issue for the current company to operate within the target market (Pearsonkorea, 2022).
Sections 6: Solutions of the issues
6.1. Solution 1: Adopting local culture
Culture is considered to be one of the most important barriers for the company expanding within new markets. It is because, as per Xia and Chong (2021), improper culture can create high operational barriers for the company’s expanding in new markets that further can prevent the company in gaining operational goals. In this respect it can be suggested that adaptation of local culture can be beneficial for Lidl to operate within the domain of South Korea. It is because, as illustrated by Ra (2020), through the adaptation of local culture the carbon company can be effective in recognising local trends and preferences and will also be effective in meeting the needs of the customers. Henceforth, adoption to local culture will mitigate cultural barriers and will create a proper environment for operations.
6.2. Solution 2: Thorough market research before entering the market
As rules and regulations are highly important to operate within the domain of South Korea, therefore, the current company must ensure thorough research of the market before entering within the targeted market. It is because, with proper research of the targeted market conditions the current company will be able to recognise the rules and regulations within the markets of South Korea that further will also be assisting the company in complying with the rules and regulations and operate without any barriers (Wu and Wang, 2021). Henceforth, proper market research and complying with the rules and regulations are effective for Lidl to mitigate this concern.
6.3. Solution 3: Ensuring proper registration with KIPO
In order to avoid the issue of intellectual property the current business must ensure proper registration with the KIPO before processing any business decisions (Pearsonkorea, 2022). This can also be effective for the company to mitigate any forthcoming conflicts over the intellectual property and can also gain proper legal services while operating within the market. Henceforth, proper registration with KIPO can mitigate the third issue.
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