With Lidl looking to expand into international markets, it will be forced to compete with more rival firms for market share. In order to be the leading firm in the grocer market, Lidl must have competitive advantage for greater profitability instead of just the industry attractiveness (Barney, 2014).
If a company has distinctive capabilities, it usually performs better than companies with less unique capabilities (Johnson, et al., 2014). These capabilities can be strategic or dynamic, where strategic includes resources and competences. Better described as a firms physical, financial and human assets and how they make use of them.
Table 1 looks at Lidl’s strategic capabilities in terms of physical resources and competences and human resources and competences, as explained by (Johnson, et al., 2014).
Physical Resources / Physical Competences
- Warehouses for storage
- Lidl’s brand products and national brands
- Own stores in over 26 European countries
- Utilize recycling depots
- Plants are powered through solar panels found on the roofs of warehouses
- Stores are energy efficient
- Stores recycle Polyethylene terephthalate bottles creating more energy
- offer cheap prices while maintaining good quality
Human Resources / Human Competences
- more than 315,000 employees
- good relationships with suppliers and partners
- Customers in over 26 countries- Lidl has an experienced team in place to ensure its brand fits in with new markets explored.
- Hourly pay rates which are higher than the minimum wage
- Recruiting and adequate staff training
Table 1. Lidl’s strategic capabilities
Lidl’s cheap pricing can be viewed as limit capabilities of the firm (Johnson, et al., 2014), as they are of late essential for organizations who wish to contend in the discount market and will change with new contestants or existing contenders who attempt to undermine the product costs offered by Lidl. On the other hand, business strategies which are exclusively focused on low costs can be dangerous, resulting in a short term competitive advantage as it makes the market more defenceless against new participants (Lorenco, 2013). Stores, employees and in addition warehouses could likewise be viewed as starting point resources, as they are required for every discount retailer.
On the other hand, what makes Lidl stand out are its distinctive capabilities which includes:
- Finding new ways to utilise energy efficiency in stores and warehouses
- Market positioning in terms of cheap prices and employee performance
- Being socially, economically and environmentally aware, in terms of:
- Cutting-edge recycling
- Lidl brands including Fresh Meadow (Organic) and Fairglobe (Fairtrade)
- Stocking of mostly locally sourced and eco-friendly products
For factors which set Lidl apart to continue to ensure the continual competitive advantage of the firm, it needs to operate within the VRIO framework (Johnson, et al., 2014) .
Capability / Value / Rarity / Imitability / Organisation
Market positioning in terms of low cost and employee performance
- Helps to increase the firms market share
- Middle class consumers do not usually shop in discount stores
- Difficult to provide cheaper prices while delivering on quality. Therefore short-term advantage
- The firm has experience in the discount market
Ensures its stores and warehouse utilise energy efficiently
- Helps reduce the firms overall costs
- Solar panels are not generally used in the grocer market
- This can be seen as a long term advantage as competitors will require time to redesign premises
- Lidl is organised with the implementation of technology
Socially aware, as well as being economically and environmentally aware
- Gives Lidl a positive brand image. Being aware of the environment can be quite profitable for the firm
- In terms of the level of the firms awareness
- Long term advantage, as competitors will require some time to build up the same reputation
- The firm is organised and also has vast experience in ensuring its brand is in line with this strategy
Table 2. VRIO Framework for Lidl
Lidl’s principle competitive advantages include being very creative in terms of ensuring efficient energy use and environmental awareness as well as being able to position itself in the market by having the right mix of price and quality. However, Lidl can be at a disadvantage as the firm lacks experience in operation out of Europe.
Lidl will also need to develop its human competences, in order to further narrow the cultural differences in Canada. Successful retailers will need to understand the cultural differences between consumers and investors in different countries (De Mooij & Hofstede, 2002). The following table shows some behavioural differences between the German discounter Lidl and the Canadian market, according to the Hofstede centre.
Dimension / Canada / Germany
Power distance Score: 39
- Interdependence on inhabitants with a high value placed on egalitarianism.
- Hierarchy in Canadian organisations is established for convenience, superiors are easily accessible while managers share information freely with staff members who are relied on for their expertise. Score:35
- Highly decentralised, with a strong middle class
- Direct and participative communication
- Control is disliked and leadership is challenged to show expertise.
Individualism Score: 80
- Considered to have an individualist culture/ loosely-knit society where the expectation is that people take care of themselves,
- Hiring and promotions are based on merit Score: 67
- Individualist society
- Loyalty is based on personal preferences as well as a sense of duty
Masculinity Score: 52
- Moderately ‘masculine’ society
- Canadians tend to have a work-life balance, however strive to attain high standards of performance.
Score: 66 - Masculine society
- People ‘live in order to work’
- Managers are expected to be assertive and decisive
Uncertainty Avoidance Score: 48
- Easily accept new ideas and innovative products as well as being open to try new things
- Canadian culture is not rules-oriented
- Canadians tend to be less emotionally expressive Score: 65
- Strong preference for deductive rather than inductive approaches
- Compensate for high uncertainty by relying on expertise.
- Slight preference for uncertainty avoidance
Long Term Orientation Score: 36
- Normative society, concerned in establishing the absolute truth
- Exhibit respect for tradition and have little desire to save for the future.
- Focus on achieving quick results Score: 83
- Pragmatic society, who believe truth depends on situation, context and time.
- Ability to adapt traditions easily to changed conditions
- Strong propensity to save and invest
- Perseverance in achieving results.
Indulgence Score: 68
- Culture is indulgent which translates to Canadians exhibiting a willingness to act on impulses
- Positive attitude and tendency towards optimism. Score: 40
- Culture is restrained which translates to cynicism and pessimism.
Table 3. Hofstede’s Culture Model applied to Canada
The table indicates that in order to guarantee Lidl’s success in Canada, Canadian management may be implemented as the cultural behaviours are similar and store employees could be recruited from the country, and trained to successfully work with the firm’s standards.
References
- Barney, J. B., 2014. Gaining and sustaining competitive advantage. 4th ed. Essex: Pearson.
- De Mooij, M. & Hofstede, G., 2002. Convergence and Divergence in consumer behaviour: implications for international retailing.. journal of Retailing , 78(1), pp. 61- 69.
- Johnson, G. et al., 2014. Exploring strategy: text & cases. Harlow: Pearson.
- Lorenco, C. G. E., 2013. The impact of national brand introductions on hard-discounter image and share-of-wallet. International Journal of Research in Marketing , 30(4), pp. 368- 382.