Table of Contents
Reasons for International Expansion...............................................................................................4
Possible strategic choices available to the parent company............................................................5
Reasons for choosing the target market...........................................................................................6
Strategic Methods of entry and possible consequences...................................................................8
Potential Organizational and Managerial Problems faced by Subsidiaries.....................................9
Recommendations for overcoming these problems.......................................................................10
The aim of this paper to show the strategic global development of a United Kingdom MNC. Lidl
of the UK is the company selected for study. The firm is involved in a retail business and was
selected to perform the retail business of different consumer products as the most lucrative target
market. In the first few sections, a short description of the business and its worldwide growth is
provided. The following part presents the company's potential worldwide target markets and the
rationale for the selection of the target market. Potential difficulties linked to subsidiaries'
operating conditions in the selected markets are described in the two final sections and
appropriate recommendations based on the discovered issues are suggested. At the end, there
would be a concluding statement.
Lidl is the largest food retailer in the world. It started in Ludwigshafen, Germany, in 1973. its
first shop[ CITATION LId21 l 1033 ]. It had just 3 people in the initial place and only 500 food
items. Lidl intended to leave Germany after 1990 but opened its shops throughout Europe. After
1990, This business made the greatest stride in many years and established its shop in the United
Kingdom. By the year 2000, its market had been firmly established in the UK. Lidl did not have
to look back after that. The company was popular throughout Europe and the United Kingdom.
The first shop was established by Lidl in the United States in 2017 with the slogan "High quality,
With growth increasing by 12.5% and market share up to 6.1%, Lidl remained the top
performing discounter. One of Lidl's major problems is its competitive market[ CITATION
Maz11 l 1033 ]. There are other businesses worldwide that also operate as food retailers. Aldi,
Walmart, Careefour are some of Lidl's economic market food shops comprtitors. Lidl has
recently extended its operations into the United States. But in this industry, owing to inadequate
strategic planning, it already faces many difficulties. Lidl operates 53 stores in the US but has not
reached its objective since the capacity for execution has not improved. Lidl can only develop if
it reflects on its business strategy and methods for dealing with its competition. Lidl will
encounter difficulties with political and environmental problems in developing his company in
Pakistan. It may overcome such difficulties by adopting appropriate strategic management
Figure: Lidl Top Competitors in UK
Reasons for International Expansion
Currently, in the UK, there are local participants in the retail sector. Compared with other
industries, international actors are much less prevalent in the retail business. Based on this,
businesses should choose different advantages for worldwide development in new and profitable
o The first benefit of international expansion may be that new markets are exposed to
different business variables. In order to grow its company, Lidl has the potential to
establish a new consumer base overseas[ CITATION Xia171 l 1033 ]. Accessing new
markets would assist businesses in their particular sector to increase their worldwide
market share. In addition, businesses can rapidly access open borders in undisputed
o Another major benefit of global expansion is that local talent is available in the target
market. The business may not discover in its own nation skilled and specialized
employees who may easily be accessible in the target markets[ CITATION Yon20 l
1033 ]. These employees may offer the company with extra advantages and assist in
achieving a competitive edge in the market.
o The second benefit of company expansion beyond national frontiers is that business is
growing and growing. The business may expand its worldwide impact to new consumers
by entering the foreign market[ CITATION Hor16 l 1033 ]. This will improve the
company's brand name and appeal on a worldwide platform. Goodwill is an essential
immaterial asset that business may readily gain through worldwide growth.
o Competition in the same sector may remain in front of us, another cause for worldwide
growth. Research has shown that retail players involved in the manufacture and
distribution of home appliances in the international market did not grow
tremendously[ CITATION Muk18 l 1033 ]. Under these conditions, via its worldwide
growth, Lidl would be able to achieve a top place in the market.
o The provision of dependable and convenient service to foreign customers may be another
significant cause for international expansion. The establishment of a company in a
foreign nation will enable operating expenses to be reduced. This is because the target
market will provide inexpensive labor, infrastructure and resources.
Possible strategic choices available to the parent company
A business may examine two key elements in the target markets throughout the expansion
process before selecting its target growth market. These two requirements, as suggested by
Bartlett and Ghoshal in their developed theories, may include global integration and local
response. According to this matrix, companies with strong global integration seek to save costs
through economies of scale[ CITATION Nur20 l 1033 ]. In all operating nations, these
companies provide a uniform product. On the other hand, local companies adapt their goods and
services in accordance with local tastes and consumer preferences. In view of the worldwide
development of Lidl, four types of strategies may be pursued, namely multi-international, global,
transnational and international.
1. Multidomestic: This type of approach works effectively when the business chooses
minimal integration and reactivity. They respond to local consumers' wants and demands
and adapt their goods appropriately[ CITATION Whe18 l 1033 ] . The demand for these
businesses to standardize their goods is low since their subsidiaries operate independently
and have full authority. The Nestle business, with a distinct marketing and sales strategy
in each country, is an excellent example of multi-domestic growth. The business has
loosely linked subsidiary structures that operate globally and, by adopting this approach,
it has achieved great success on the international stage.
2. Global: This approach is applicable to businesses which need strong global integration
and minimal local market response. In all operating nations, these businesses provide a
uniform product. All of the businesses' subsidiaries are merged in order to accomplish a
shared purpose[ CITATION Whe18 l 1033 ]. The activities and functions of each
subsidiary are all very centralized and linked. The parent company is the central entity in
which the subsidiaries' activities are controlled. Pfizer, a pharmaceutical firm, is a
common example of this kind of approach.
3. Transnational: Businesses aim to be highly integrated and responsive in this kind of
approach. A transnational business is a fusion of a global and multi-domestic enterprise
[ CITATION Whe18 l 1033 ]. These businesses generate flexible value chains and
adaptable marketing and sales techniques locally. The Unilever Company is a typical
4. International: This approach works when businesses choose to export a market capture
strategy. The businesses manufacture goods and export them to target consumers in their
native nations. In general, subsidiaries serve as local channels where the goods are sold to
In any of the aforementioned possibilities, Mexico, Pakistan, the United States, Norway, the
Netherlands, and Chile may be the potential target markets for the business. Due to their
favorable business characteristics, all those nations have encountered international retail firms
from other corporations. These nations are very profitable and profitable for retail companies,
particularly in the consumer goods and other comparable products sector[ CITATION LKe21 l
1033 ]. The strategic decision of market entry will vary depending on unique variables from
nation to country. The most lucrative target market of all these may be Pakistan, owing to the
existence of favorable business variables, according to current market research.
The company will choice multidomestic strategies for expanding into Pakistani grocery market
where it will manufacture products local preferences. As a result firm can compete more
effectively in Pakistani local market and increase local market share.
Reasons for choosing the target market
Pakistan is the market that has been chosen to expand Lidl. Pakistan's retail industry was one of
the fastest-expanding sectors, contributing nearly 20% to Pakistan's national GDP. It is the
country's third biggest industry and the second largest employer and employs 15% of the
population. Pakistan has about 2 million merchants, 0.8 million of which are FMCG modern
channels of trade and general commerce, including kiryana shops, general stores, medical stores,
supermarkets, hypermarkets, etc. The market has enormous potential, with the fifth largest
population in the world at 220 million, since consumption is always growing. In the past ten
years, sales in Pakistan's retail industry have almost doubled. This continuous development
makes Pakistan an attractive opportunity for foreign investors and brands, with the purchase of
Engro Foods by Dutch powerhouse Royal Friesland Campina in 2016 providing stakeholders
with more trust[ CITATION LKe21 l 1033 ].
The country's youth bulge is one of the main drivers of retail development in Pakistan. With an
estimated 35% below 15 years of age, Pakistan has one of the youngest populations worldwide.
The economy is well positioned for development with its recent inflow of technology and
internet adoption. Pakistan is, however, with Internet users at 27.5% of the population and
overall broadband subscriptions at 46.4%-one of the lowest levels of penetration in South Asia.
However, the current base has large, untapped potential, and the increased penetration of
smartphones has guaranteed that the economy continues to move along a favorable development
path. The figures indicated that the production of mobile phones in the first two months of 2021
was 1.2 million, compared with 2.1 million and 119,639 devices manufactured in both 2020 and
2019[ CITATION LKe21 l 1033 ].
Pakistan's political status is unstable[ CITATION BBC19 l 1033 ]. Pakistan is a nation in which
there are a lot of terrorist organizations. So, for the Lidl company, where terrorist organizations
are operating, it will be extremely dangerous. Pakistan's foreign commercial policy is flexible.
This may thus be a chance for Lidl to operate in Pakistan.
In[ CITATION Eco20 l 1033 ], the World Bank claims that Pakistan's GDP was at EUR 320
billion in 2019. Pakistan aims to become one of the top 25 economies in the world by 2025 and
one of the top 10 countries with large revenues by 2047. Although it needs to go a long way
towards achieving its goals, it should be mentioned that throughout the years, Pakistan has
achieved considerable economic development. Too many nations are in debt (Saudi Arabia,
USA). Thus, Pakistan's economic situation is not going to support Lidl. However, Pakistan is a
chance country. The total rate of the tariff imposed is 10.09%. The Pakistani government
encourages international firms to operate in Pakistan by lowering the tariff rate. Therefore, Lidl
has a chance to begin her company there.
Pakistan is the world's fifth largest nation by population. The population total amounted to about
219 million as of March 2020. The main religion is Islam, while Christianity and Hinduism
follow a small proportion of the people. English, Urdu, Punjabi, Sindhi, Pashto, and Balochi are
the main languages[ CITATION BBC19 l 1033 ]. Anything that conflicts with Pakistan's Islamic
culture won't stand on the market. Before adopting any strategy, the Lidl strategic manager must
examine it. The people of Pakistan should not accept alcoholic goods and beverages such as beer.
Everything produced by pigs is likewise rejected by Pakistani Muslims. Therefore, Lidl should
only sell non-alcoholic goods.
Pakistan is extremely rapid technologically. In the IT industry, it is well developed. Nearly 70%
of Pakistani citizens use smartphones[ CITATION Sta20 l 1033 ]. This is a chance for Lidl to
keep an automated supply chain in Pakistan. By building a distinct Pakistan website, Lidl may
conduct its online operations.
In Pakistan, there are a few desert regions. These places are business unfriendly. Furthermore,
Pakistan has a lack of clean drinking water[ CITATION Gór16 l 1033 ]. This will impact the
company Lidl. In Pakistan, there aren't any major natural catastrophes. This is thus a chance for
Lidl to operate in Pakistan without any dangerous circumstances. Managers should take this
aspect into consideration when making decisions.
Customer protection and labor laws in Pakistan are extremely stringent[ CITATION Gór16 l
1033 ]. However, it's somewhat less stringent than Great Britain. Therefore, Lidl will not
encounter any legal difficulties. Pakistan's government is a corporate-friendly administration.
The customs duties and tariff levels in Pakistan have been constantly lowered to encourage
Strategic Methods of entry and possible consequences
In light of the particular economic circumstances, businesses may use two approaches to expand
the Pakistani market. Direct export is the first method and partnership/joint venture are the
1. Direct exporting: By these means, Lidl may exportation of the goods through
manufacturer or agents of the nation straight to the Pakistani customers. This is helpful if
the business needs minimal integration worldwide and low buyer reaction[ CITATION
Kar19 l 1033 ]. In this way, the companies would serve as a distribution channel for the
parent business and would sell the products to the end consumers via retail channels. This
approach calls the exporters the manufacturers exporters, and direct exports are termed
the products delivered in the consignments. This approach would provide the parent firm
numerous benefits because the risk would be much lower. In addition, for the use of this
technique the business would not have to undergo law procedures. For the effective use
of this method, the business must contact an agent.
2. Joint Venture/Partnering: A Partnership is the procedure in which a corporation may
partner with a local retail company that has comparable operations in Pakistan.
Partnerships, for example, a sophisticated strategic or co-marketing partnership, may be
carried out in various ways. In this scenario, the business may create an advanced
strategic alliance where local and international companies share manufacturing
operations (Ahmed, 2019). This approach may be helpful for Lidl's growth since British
and Pakistani culture are substantially different. The business can understand Pakistani
consumers' likes and preferences and produce tailor-made goods on a multi-domestic
basis. The business may concentrate more on local responsiveness and bring forth the
independence of its subsidiaries in accordance with this plan.
The Lidl will choose direct exporting, because Exporting is a strategic low risk, which
companies feel appealing for a number of reasons. First, in a local market mature goods may
discover fresh possibilities for development abroad. Second, in place of creating new goods,
some companies consider exporting current products less risky and more lucrative.
Potential Organizational and Managerial Problems faced by Subsidiaries
The following may be summarized of the various difficulties facing the subsidiaries.
Talent acquisition: For companies that operate in the worldwide arena, this may be a difficult
job. Talented employees would be hired by subsidiaries with autonomy in operations for the
rapidly expanding business sector. It may be extremely difficult to start up a company while at
the same time recruiting skills. This increases stress and strain on the subsidiary recruiting
team[ CITATION Sch19 l 1033 ]. Before the process can be completed, the hiring process may
not be the same as in the country and the hiring crew should learn properly.
Employee management: The efficient management of employees via different training
methods is another problem facing the subsidiary. This is critical to productivity improvement
and risk reduction. Because the workers are Pakistani, the company's management should have a
positive feeling towards them[ CITATION Djø19 l 1033 ]. The business is challenged by a
uniform corporate culture in its workplace which favors both British and Pakistani workers.
Choosing the right partners: The parent company faces an extremely important challenge
while carrying out business abroad. Sometimes, businesses may select the incorrect business
partner and deal with business management problems[ CITATION Hof19 l 1033 ]. The partner
may take advantage of the subsidiary since the subsidiary is totally new to the market and is not
familiar with the basics of the business. It is therefore very important to choose the right partner
to carry on business abroad.
The Transaction Cost Idea is an essential theory which may be advanced with respect to
company internationalisation. This idea speaks about transactions in companies or outside
companies. This hypothesis suggests that the transactors must be rational and risk
neutral[ CITATION Par16 l 1033 ]. The characteristics, management structures, expenses and
skills of all major transactions performed in subsidiaries as well as in parent companies should
be linked. Sometimes a few characteristics of transactions may increase expenses, such as
accuracy, insecurity and transaction frequency. For market success, these factors should be
The idea of internationalisation, which is oriented towards strategic goals of the business, is
another significant theory relevant in this context. According to this hypothesis, companies
undergoing this process of internationalisation prefer to invest directly in intangible assets linked
to information. After the purchase of foreign companies, other businesses with lack of
information and expertise get zero or anomalous returns. First, a business must get internally
involved in its local market, namely gaining brand popularity in the local market before being
internationalized[ CITATION Rob19 l 1033 ]. After internalisation, the process of
internationalisation allows a business to enjoy cost reduction. This idea is often seen to be
hazardous and extensive in the internationalisation process. This method involves time
management and resource engagement. The idea of internationalisation applies to big businesses,
such as Lidl, that aim to access markets other than theirs.
Recommendations for overcoming these problems
Lidl has to find answers to the above-mentioned problems and challenges and to successfully
manage its international affairs through its subsidiaries. The business must locate the appropriate
personnel for its subsidiary in Pakistan. The firm must also address training and managerial
issues in the overseas subsidiary and select a good partner for the company. In this regard, some
suggested solutions may be seen below:
Pakistani businesses are following a strategy of employing university workers and different
vocational institutions. This method is called "new recruiting of graduates." The business, as a
subsidiary of Pakistan, may use this technology. The new pupils are willing to join a business
and may recruit them through special screening[ CITATION Kos19 l 1033 ]. The screening
procedure may involve stages such as a written test and a one-to-one examination. This
procedure may be helped by Pakistan's partner because he knows well about the recruiting efforts
in Pakistan. Before using the individual, the recruiting team must be able to understand the
The training and management of workers should be carried out progressively throughout stages
in order to address the doubts and questions of each individual. Certain staff may be ambitious or
fast learners. The duration of their instruction may be dull. Businesses should provide these
workers with on-the-job training[ CITATION Bow19 l 1033 ]. Pakistani enterprises have
another distinctive rotating culture where workers are often moved from one department to
another. This method is used by the subsidiary, which allows the workers to obtain a homey
For the operation of a subsidiary abroad, it is extremely essential to choose the appropriate
partner. The main factors are the partner's ability to offer the parent company complementary
resources and capacity. These resources may be technological expertise and other comparable
factors. The business should prepare a certain number of talents and then choose its
partner[ CITATION Din19 l 1033 ]. The business may analyse its skills and compare them to
those of the partner, according to the strategic goals of the organization. Local market knows
how, distribution channels, post-sales support networks, brand visibility and regulatory expertise
may be other significant considerations for selecting a partner.
Lidl is a renowned UK retailer. It took the UK's 6% market share. It may be inferred from this
debate that Lidl, in other words, can grow its market in Pakistan in order to get lucrative returns.
Since the firm is active in the retail sales of home equipment, Pakistan may be an enterprise-wide
profitable market. That is because consumers are eager to spend money on the purchase of highly
available consumer goods. The business will use multi-domestic expansion in Pakistan, where it
produces goods depending on local tastes. It will go direct exporting in the market through
exporters or agents of Pakistani market. Lidl strategic managers may thus decide positively to
develop their operations in Pakistan. The international market problems encountered by
subsidiaries may be addressed by means of the suggested remedies.
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