How Lidl Adjusted to the Finnish Grocery Retail Market (Research Paper Sample)

How Lidl Adjusted to the Finnish Grocery Retail Market Student’s Name Institutional Affiliation Course Instructor Date Executive Summary This report focuses on Lidl, a German retail store that ventured into Finland in 2002 and, in about ten years, had gained a 7% market share. This success is commendable considering that the firm ventured into the new market at a time the Finns had many stereotypes against Germans and their corporates. The organisation had to modify various operational aspects along the way as it learned that operating like the parent company would not work in Finland. Specifically, the organisation changed various aspects related to price, product, place, and promotion. A SWOT analysis of the institution also reveals some of the factors that helped it gain and maintain this level of success, as well as the weaknesses and threats present. Contents TOC \o "1-3" \h \z \u 1.Introduction PAGEREF _Toc122627943 \h 32.SWOT Analysis PAGEREF _Toc122627944 \h 32.1 Strengths PAGEREF _Toc122627945 \h 32.1.1 Having its Own Deposit-Refund System PAGEREF _Toc122627946 \h 32.1.2 Lidl’s Low Commodity Prices PAGEREF _Toc122627947 \h 42.1.3 Ability to Adapt to the Finnish Social Life PAGEREF _Toc122627948 \h 42.2 Weaknesses PAGEREF _Toc122627949 \h 52.2.1 Slow Response by the Management of Crucial Decisions PAGEREF _Toc122627950 \h 52.2.2 Small Size of the Outlets PAGEREF _Toc122627951 \h 52.3 Threats PAGEREF _Toc122627952 \h 62.3.1 The Competitive Rivalry is High PAGEREF _Toc122627953 \h 62.2.1 Political Intereference PAGEREF _Toc122627954 \h 62.4 Opportunities PAGEREF _Toc122627955 \h 72.4.1 Venturing into the Apparel Industry Through E-commerce PAGEREF _Toc122627956 \h 72.4.2The threat of new entry is low PAGEREF _Toc122627957 \h 73.The EPRG Approach Adopted by Lidl PAGEREF _Toc122627958 \h 84.Application and Adaptation of the Marketing Mix PAGEREF _Toc122627959 \h 104.1 Product PAGEREF _Toc122627960 \h 104.2 Price PAGEREF _Toc122627961 \h 114.3 Place PAGEREF _Toc122627962 \h 114.4 Promotion PAGEREF _Toc122627963 \h 115.Balance between ‘Global’ and ‘Local’ When Designing an Effective Marketing Strategy PAGEREF _Toc122627964 \h 126.Conclusion PAGEREF _Toc122627965 \h 14References PAGEREF _Toc122627966 \h 16 1 Introduction Lidl, a German retail store, ventured into the Finnish market in 2002. However, these two regions have different cultures, which resulted in the organisation making some modifications to adapt effectively. This report critically examines Lidl using global marketing concepts and frameworks. The report examines Lidl’s marketing environment through SWOT analysis and uses the EPRG framework to explore the company’s international marketing approach when entering the Finnish market. It also assesses whether Lidl applied or adapted the existing marketing mix to suit the Finland market and explores how the retail firm can balance between ‘global’ and ‘local’ when crafting an effective marketing strategy. The report also contains a summary that concludes the entire report. 2 SWOT Analysis 2.1 Strengths 2.1.1 Having its Own Deposit-Refund System Before Lidl entered the Finnish retail market, many players had enjoyed the monopoly of bottle recycling. With time, the country’s Ministry of Environment allowed Lidl to have its own deposit-refund system. This move meant that bottles purchased at Lidl could only be returned to any of its subsidiaries, unlike the other retailers who accepted bottles purchased from other supermarkets. Accepting bottles only purchased from its outlets allowed Lidl to control the entire sales process (Wentland, 2017). Furthermore, it was seen as a gimmick to ensure that customers always returned to its establishments. When returning a beer bottle, there is a high likelihood that the customer will purchase other items from the establishment. Therefore, this move has been crucial in the firm’s success story. 2.1.2 Lidl’s Low Commodity Prices Finland is known for its high commodity prices, especially beverages and food. In 2014, Finland was ranked as the fifth most expensive country in Europe after Switzerland, Norway, Denmark, and Sweden. In 2012, the annual grocery bill of a household in Finland was estimated at 5,373 euros, while in Germany, it was 3,444 euros (Wentland, 2017). These figures indicate the high cost of living experienced in Finland. Thus, Lidl was easily accepted as it established itself as a hard discounter, meaning that its prices were relatively lower compared to other players. For instance, the price of its private-label beer is 30 cents lower compared to other retailers. The organisation’s low prices were felt almost immediately after the firm entered the market. In 2004, the overall retail prices had gone down by 10%, courtesy of Lidl’s competition (Wentland, 2017). Other than beer, Lidl had a relative price advantage in the sale of juice, soft drinks, and confectionaries. In response, the other players lowered the prices of fruit, vegetables, meat, and bread. 2.1.3 Ability to Adapt to the Finnish Social Life The success of multinational organisations depends on how quickly they adapt to the local people’s way of doing things. Sometimes, firms fail because they do not understand various cultural and social dimensions that have a strong bearing on how individuals view a company. In this case, Lidl quickly learned that the Finnish people preferred using cards as opposed to cash. In 2014, the organisation launched contactless Near Field Communications in all its subsidiaries, effectively allowing quick bank card payments (Wentland, 2017). Furthermore, the firm had to introduce longer counters as Finnish people were more used to packing their shopping directly at the check-out counter, unlike the German ones, who always scooped the shopping pack into their carts to sort it elsewhere. The firm also introduced a range of commodities to satisfy people’s requirements. For instance, the firm had introduced 13 types of fish by 2013 after a survey showed that 94% of Finns were lovers of fish. The firm’s ability to adapt to the social needs of its consumers is a key strength. Almost ten years since it ventured into the new market, it has gained a market share of about 9% and established about 150 outlets that offered employment to at least 5000 persons (Nordic Investment Bank, 2017). 2.2 Weaknesses 2.2.1 Slow Response by the Management of Crucial Decisions Lidl’s management is slow in effecting changes that have significant impact in the market. This challenge emanates from failure to understand the uniqueness of Finland’s market. The management believes that many of the structures that work in Germany can be effective in Finland. For instance, it took them almost five years to start replacing the shorter counters with the longer ones. The project began in 2007 and was completed in 2012, an indicator that even the implementation was slow. Finnish customers were annoyed by the shorter counters as it required them to pack commodities twice. Mr. Tiitola, Lidl Finland’s first CEO, admitted that convincing the managing board members to effect this change was more tedious and challenging than convincing them on the need for product assortment modifications. This statement indicates that the board has always been lax when it comes to the introduction of key changes. 2.2.2 Small Size of the Outlets Lidl’s outlets are too small, making it difficult to adequately stock a wide array of products. The current stores are approximately 2,000 square meters. The management contends that for better operations, each store should be about 2,500 square meters(Wentland, 2017). Thus, there is a need for floor expansion. A large floor space also ensures that customers have adequate area to shop without interrupting others. Notably, customers want to walk and shop inside the store freely without inconveniencing or being inconvenienced by anyone. As the organization increases its branches, it should seek to have larger outlets that allow it to stock more products and give customers a chance to move freely. Such a move would also ensure that it has space for longer counters that suit the Finnish clients’ specifications. 2.3 Threats 2.3.1 The Competitive Rivalry is High Since Lidl’s launch in Finland in 2002, it has experienced impressive growth by capturing an 8% market share by 2013. This figure is no small achievement for a foreign organisation that came into a relatively hostile environment. Despite this growth, the firm’s market share pales in comparison to that of its closest rivals. In 2013, S Group and K Group, Lidl’s closest rivals, had a market share of 46% and 34%, respectively. In fact, S Group had increased its share from 31% in 2002 to 46% in 2013 (Wentland, 2017). These percentages show that while Lidl is growing, other players are also moving at a faster pace. Thus, the firm has more work to do to bridge this gap. 2.2.1 Political Intereference Alko, a state-owned organisation, is the only establishment in the country allowed to sell drinks containing more than 4.7% alcoholic content (Alko, 2016). Alko establishments are known to boost the retail turnover of neighbouring supermarkets by 30%. With this background, Lidl is highly disadvantaged compared to its competitors. In 2012, one Alko outlet was opened next to a Lidl subsidiary (OECD Competition Committee, 2013). S Group and K Group, which are Lidl’s major competitors, had 95 Alko subsidiaries each. This shows that in terms of traffic, these two establishments are better positioned compared to Lidl (Wentland, 2017). Alko is a state-owned organisation, meaning that Lidl can only try to negotiate with the government for the situation to change. 2.4 Opportunities 2.4.1 Venturing into the Apparel Industry Through E-commerce Lidl has done significantly well as a retail grocery store in Finland. The organisation has managed to capture a signifi...