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Global Marketing Assignment

Introduction to the Company

Lidl Stiftung & Co. KG was founded in the year 1930 by the Schwarz family. Lidl operates as a retail supermarket chain. The company is known for its discount stores. The headquarter of Lidl is located in Neckarsulm, Germany. The company is owned by Dieter Schwarz, who is a German entrepreneur. Lidl claims to offer the highest quality products at a lower price compared to other retailers. It provides various products such as grocery, home furnishing, apparel, and electrical items, among others. Lidl mostly sources the products locally, and the majority of products are from Britain. Besides, Lidl has more than 800 stores globally, and it employs approximately 22,000 people (Lidl Co. UK, 2021). In recent years, the supermarket chain has experienced significant growth. In the financial year 2019-2020, the total revenue of the company was £6.9billion, which was a new record.

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Additionally, during the period, the overall sales of Lidl increased by approximately 11%. By the end of 2019-2020, Lidl had gained a competitive position in the UK market. However, due to the Covid-19 pandemic, Lidl sales were affected. Despite the fact, Lidl hired 8,000 new staff and contributed £100million from its business to Government relief (Denton, 20221).

Macro factors need to be considered for Lidl in the UK over the next 12 month

The retail and supermarket industry is experiencing continuous challenge from the rival companies that makes it difficult to gain market shares. Thus, in the highly competitive market, it becomes vital to differentiate to achieve maximum customers and retain competitiveness in the marketplace. Figure 1 presented below is the comparison of the market value of grocery retail in the UK in 2020.

Market Value Grocery Retail in the UK (2020& 2022 forecast)

It was apparent from the graph above that in 2020, the total market value of grocery retail was highest for a supermarket that was approximately 90.2 billion British pounds (GBP) in the UK. This indicates that supermarket is the largest sales channel of grocery retail. These statistics highlight the importance of the supermarket retail sector and its continuous growth opportunity in the UK (Statista, 2020). To study the macro environment of the UK in detail, the PESTLE framework has been used in this study.

Political Factors

  • The Brexit issue and the impact on price and tariffs
  • Change in government policies and income of people
  • Source: Campbell, 2017

Economic Factor

  • The high rate of inflation
  • Increased product price
  • Source: Statista, 2019; Quinn, 2019

Social Factors

  • Change in spending attitudes of the consumers
  • Lidl focuses on the relationship with consumers that adds value to its reputation and brand image
  • Source: Statista Research Department; The Guardian, 2012

Technological Factors

  • The impact of e-commerce and growth of online grocery shopping
  • Lack of investment in in-store technology
  • Source: Sabanoglu, 2020

Legal Factors

  • Fast response to laws and regulations to avoid any negative impact
  • Source: Bolton, 2019

Environmental Factors

  • Environmental consciousness and awareness of the company
  • Greater emphasis on sourcing materials from the local suppliers
  • Source: Bolton, 2019

Analysis of the macro-environmental factors revealed the fact that political factors would have the most crucial impact on the business operation of Lidl in the UK over the next 12 months. In the UK, one of the recent events has been the Brexit that has result rise in the price of the products. In this regard, it can be highlighted that the fall pound value is the reason behind the increase in price. Lidl sources the majority of its products from local suppliers, and the rise in price makes it expensive for the company to continue after Brexit. Lidl is known for the discount value it offers to its customers, and in case of price rise, it becomes difficult for the company to continue at in same price (Campbell, 2017). Another vital macro-environmental issue that has the potential to impact the performance of the company is the rate of inflation. From the graphical representation below figure 2, it has been clear that the quality of inflation is increasing since 2015 and project to grow 2% by 2025 (Statista, 2019). In this regard, it can be highlighted that a high rate of inflation results rise in the price of products across the whole grocery industry. In this case, it would be difficult for Lidl to offer products at a lower rate to the consumers, affecting their business significantly in the UK (Quinn, 2019).

From the above macro analysis, another factor that can significantly impact Lidl over the next 12 months is the technological factor. According to Sabanoglu (2020), the growth of online retail in the UK is 50% faster than the in-store offline retail growth. Additionally, due to the increase in online shopping massive number of offline stores are closing in Britain. With the development of e-commerce, online retail has greater scope in the UK. However, significant improvement in in-store retail shopping is achievable with the effective use of technological innovations (Sabanoglu, 2020). The survey conducted by Statista Research Department (2016) regarding consumer shopping attitudes reflected that approximately 55% of consumers spend carefully on foods that have reduced wastage and are environmentally friendly. In this regard, Lidl, to meet customers' needs, has put more effort into delivering healthy products. This is turn, would help the company to maintain its relationship with the customers and developing brand reputation and image (The Guardian, 2012).

Micro factors need to be considered for Lidl in the UK over the next 12 months

Apart from the macro factors, it is also vital for Lidl to evaluate the micro (internal) factors that can have a significant impact on the performance of the company in the long-run period. IIn this regard, for the microanalysis of the environment, the factors considered are customers, competitors, suppliers, and distributors.

Customers

  • The buying behavior of the customers is vital for the success of the company
  • Customers can switch from one supermarket to other
  • Consumers are sensitive to the price of products
  • Lidl provides the highest quality at a lower price
  • MyLidl- The online platform for the consumers to give feedback/review about the products
  • Source: (Lidl Co.UK., 2021; Wyman, 2018)

Competition

  • Grocery retail faces enormous competition in the UK market
  • Innovation is needed to face the competition
  • The strong competitors of Lidl are Morrisons, Sainsbury's, Tesco, Waitrose, M&S, ALDI, Iceland Foods, ASDA, Ocado Group PLC, Kroger
  • Source: Owler Inc, 2021; Harris & Ogbonna, 2001

Suppliers

  • The local suppliers provide the majority of products of Lidl
  • The relationship with the suppliers is vital for the successful operation of Lidl
  • Lidl shifts its focus towards quality and price of products
  • Lidl trying to focus more on British products that mean developing long-term relationships with the local suppliers of the UK
  • Source: Vizard, 2017
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Distributors

  • The company has organized a distribution channel
  • Lidl directly deals in the local market in the UK
  • Lidl has set up its Regional Distribution Centre (RDC) to procure as well as distribute its products to the outlet stores
  • A new RDC opened in Peterborough in August 2020 is the part of £1.45 billion investment in UK Great Britain
  • The company plans to open more than 100 distribution channels in 2021 and 2022 in Great Britain
  • Source: Andrews, 2020; Bhasin, 2019

The customers are vital for ensuring business success. In 2019, Lidl experienced growth of sales by approximately 6% in the British market. This indicates that Lidl has a fair market share in the UK market (Coppola, 2020). The availability of different supermarkets in the UK poses a threat to the growth of Lidl as customers can switch to another brand also. The customers are sensitive to the price of products. In this regard, the online MyLidl platform has been developed by the company to gain feedback regarding the products purchased by the customers. Thus, it becomes vital for Lidl to continue offering quality products at a lower price to retain the customers for the long run period (Lidl Co.UK., 2021).

Another micro factor that would have a potential impact on Lidl in the next 12 months is that Grocery retail faces enormous competition in the UK market due to many similar companies in the market. In this regard, it can be highlighted that innovation is the most vital need as this helps the company to differentiate it from the other competing firms and gain a competitive advantage in the marketplace (Harris & Ogbonna, 2001). The strong competitors of Lidl in the UK market are Iceland Foods, ASDA, Ocado Group PLC, Kroger, Tesco, Waitrose, M&S, ALDI, Morrisons, and Sainsbury's, among others (Owler Inc, 2021).

The local suppliers of the UK provide the majority of product requirements of Lidl; this is another factor that may impact the operations of the company in the coming months. Thus, in this context, it is crucial for Lidl to maintain a mutual relationship with the local suppliers to retain its position in the marketplace in the long run. Lidl focuses more on the price of products rather than brand. However, in recent times the company has started to focus on offering quality local products at affordable prices. Additionally, Lidl has started emphasizing more on the local British products that would help the company maintain a relationship with the local suppliers of the UK (Vizard, 2017).

Lastly, the distributing channel that plays a vital role in the success of a business is another factor that would impact Lidl in the next 12 months. According to Andrews (2020), Lidl has organized distribution channels. It directly deals in the local UK market; thus, it has a positive impact on the business as there is no intermediary. Furthermore, Lidl has set up its RDC for the proper distribution and procurement of its products. The company also plans to open 100 more distribution stores in Great Britain that would be an effective strategy for making the distribution channel stronger (Bhasin, 2019).

Recommendations to Lidl regarding whether or not should remain in the UK

Lidl is operating globally; thus, identifying the future opportunities and threats is essential to understand the possibility of successful business operation. In this regard, considering the above analysis of macro and micro environmental factors, the following are the projected threats and opportunities that Lidl would face shortly.

Opportunities of Lidl

  • Opening of new segments- e-commerce and the growth of online grocery shopping opens a new market for retailers globally
  • The market value of supermarket retail is the highest indicating that consumers prefer to buy grocery from the supermarkets rather than other channels in the UK that shows future growth prospect
  • Source: Sabanoglu, 2020; Statista, 2020

Threats of Lidl

  • Competition- The company faces intense competition from Aldi, Asda, Sainsbury’s, and Morrisons. Also, online stores are a threat to offline stores.
  • Quality products- Lidl mainly focuses on offering discounted products to the customers. However, the quality of products should not be ignored as it can be a barrier to the long-run success of the company.
  • Source: Owler Inc, 2021; Vizard, 2017; Harris & Ogbonna, 2001

Based on the above analysis, it can be stated that Lidl undoubtedly has a prospect in the UK market. Considering the marketing strategy, it is vital for the company to change the existing brand perception among the customers. It is suggested that both the loyal and prospective customers need to understand that Lidl not only offers low-priced products but also focuses on providing quality products (Lidl Co.UK., 2021; Wyman, 2018). In this regard, brand repositioning is recommended that would help in improving the overall image of the company, and it would continue in the UK market. Additionally, in the present scenario, consumer spending is mostly influenced by technological factors. In this regard, it can be highlighted that in the UK, online retail shopping is gaining momentum. This factor has to be considered as an opportunity, and Lidl should develop its online platform for offering shopping service at customer’s convenience so that it can continue in the UK market (Sabanoglu, 2020). Besides, the online platform would be useful in promoting the brand image and raising awareness about the company's products. The recommendations provided for Lidl would be helpful in exploring the opportunities and minimizing the risks associated with threats. Therefore, it is concluded that Lidl should remain in the UK market.

References

Andrews, P., 2020. Lidl operations begin at new distribution centre. [Online] Available at: https://familybusinessunited.com/2020/08/26/lidl-operations-begin-at-new-distribution-centre/ [Accessed on 09 March 2021].

Bhasin, H., 2019. Marketing mix of Lidl. [Online] Available at: https://www.marketing91.com/marketing-mix-of-lidl/ [Accessed on 09 March 2021].

Bolton, E., 2019. Spotlight: Lidl UK Strategy Considerations. [Online] Available at: https://getlucidity.com/strategy-resources/spotlight-lidl-uk-strategy-considerations/ [Accessed on 08 March 2021].

Campbell, 2017. Supermarkets 'will RAISE prices in wake of Brexit forcing shoppers to German discounters'. [Online] Available at: https://www.express.co.uk/news/uk/790745/Supermarkets-will-raise-food-prices-shoppers-Brexit-German-discounters-Aldi-Lidl-retail [Accessed on 08 March 2021].

Coppola, D., 2020. Lidl sales growth year on year in Great Britain. [Online] Available at: https://www.statista.com/statistics/386773/lidl-sales-percentage-change-great-britain-uk/ [Accessed on 08 March 2021].

Denton, J., 2021. Lidl says it slumped to a £25m loss in the year before the pandemic struck as it poured money into a hiring spree and flurry of store openings. [Online] Available at: https://www.thisismoney.co.uk/money/markets/article-9196401/Lidl-slumped-heavy-loss-year-pandemic.html [Accessed on 09 March 2021].

Harris, L. C., & Ogbonna, E., 2001. Competitive advantage in the UK food retailing sector: past, present and future. Journal of retailing and consumer services, Vol. 8, Iss. 3, pp. 157-173.

Lidl Co. UK, 2021. Our History. [Online] Available at: https://careers.lidl.co.uk/life-at-lidl/our-history [Accessed on 09 March 2021].

Lidl Co.UK., 2021. Our history. [Online] Available at: https://www.lidl.co.uk/about-us [Accessed on 08 March 2021].

Owler Inc, 2021. Competitors Lidl. [Online] Available at: https://www.owler.com/company/lidl#competitors [Accessed on 08 March 2021].

Quinn, E., 2019. Grocery price inflation at supermarkets rises to fastest since late 2014. [Online] Available at: https://www.irishexaminer.com/business/arid-30934100.html [Accessed on 08 March 2021].

Sabanoglu, T., 2020. Online and offline location growth rate of retail in the UK 2013-2023. [Online] Available at: https://www.statista.com/statistics/982502/online-and-offline-retail-location-growth-uk-united-kingdom/ [Accessed on 08 March 2021].

Statista, 2019. United Kingdom: Inflation rate from 1985 to 2025. [Online] Available at: https://www.statista.com/statistics/270384/inflation-rate-in-the-united-kingdom/ [Accessed on 08 March 2021].

Statista, 2020. Market value of grocery retail in the United Kingdom (UK) in 2020 with a forecast for 2022, by channel. [Online] Available at: https://www.statista.com/statistics/295656/grocery-retail-market-value-by-channel-in-the-united-kingdom-uk/#:~:text=In%202020%2C%20the%20total%20market,value%20with%2090.2%20billion%20pounds [Accessed on 08 March 2021].

tatista Research Department, 2016. Consumers' grocery shopping attitudes in the United Kingdom (UK) 2016. [Online] Available at: https://www.statista.com/statistics/534972/uk-consumer-grocery-shopping-attitudes-united-kingdom-survey/ [Accessed 08 March 2021].

The Guardian, 2012. Food industry and supermarkets back healthy eating drive. [Online] Available at: https://www.theguardian.com/money/2012/nov/15/food-industry-supermarkets-back-healthy-eating-drive [Accessed on 08 March 2021].

Vizard, S., 2017. Lidl reveals ‘Big on quality, Lidl on price’ strapline. [Online] Available at: https://www.marketingweek.com/lidl-reveals-new-big-quality-lidl-price-tagline/ [Accessed on 09 March 2021].

Wyman, O., 2018. LIDL IS WINNING OVER NEXT GENERATION OF CONSUMERS ACCORDING TO NEW OLIVER WYMAN SURVEY. [Online] Available at: https://www.oliverwyman.com/media-center/2018/june/lidl-is-winning-over-next-generation-of-consumers-according-to-n.html [Accessed on 08 March 2021].

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