Porter's five forces - Lidl

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Porter's five forces - Lidl

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Themes

LIDL, supermarket, Europe, USA, meat, groceries, vegetables, quality, discount, Michael Porter, 5 Porter forces, competitive rivalry, competition, leadership, industry, customers, products, suppliers, partners, buyers, clients, profit, substitution, companies, new entry

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Abstract

Lidl is a supermarket chain based in Germany. It has most of its operations in some European countries. The UK, Germany and France are the main countries where the company is based. Outside Europe, Lidl is also present in the USA. The German brand was created by Dieter Schwarz in 1973. The company offers a variety of products in its stores. Among them, it sells meat, wine, groceries, vegetables, etc.
The slogan of the company is “where the quality is cheaper”. Lidl has been in the industry for years now and today, the brand has more than 10 000 discount stores in the world and around 315 000 workers. If we had to consider only the UK, the workforce was of 22 000 people in the first months of 2021. Moreover, « The brand is operational in around 28 countries. The company's revenue in 2017 reached 24.33 billion Euros. » These figures show how big and important Lidl is in the sector where it operates.

Introduction
1. Presentation of LIDL
2. Presentation of PORTER'S 5 forces
PORTER'S 5 forces of LIDL
1. Competition
2. Supplier power
3. Buyer power
4. Threat of substitution
5. Threat of new entry
6. Synthesis
Conclusion

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[...] But, if there is only one, the company will abide by the rules of that one and only provider, which reduces considerably its power of negotiation. Buyer power They are the consumers of Lidl's products. In fact, « The users, consumers or buyers are the clients that purchase the brand's products. They determine whether the company will make profits or not. If they do not buy, there is no need of producing. » In other words, this is the negotiation power detained by the clients. The latest usually look for good quality products with affordable prices. [...]

[...] If they fail to do so, not only the market shares will be shared, but also the industry's profitability. « If the new entrants are very strong in the research and development department, the threat will be stronger. These new companies always come up with new strategies such as price's reductions, etc. » The threat of new entrants is weak in a way that becoming an actor of this industry is very complex. The brand must have stores, suppliers and enough stock that will enable the company to satisfy the customers. [...]

[...] Thus, even the profitability of Lidl for example, will reduce. When reverse is the case, the industry is very profitable with a weak competitiveness. » If the brand is what it is today, it is because the negotiation power of buyers has been reduced over the years. Products distributed by Lidl is of good quality, the reason why the company has acquired a good reputation over the years. Clients are getting health conscious by the day, reason why, it is indispensable for every company in general and Lidl in particular to work on the client's satisfaction. [...]

[...] Another aspect to mention is the fact that Lidl is a big brand in its sector and partnering with such a company can be beneficial for the suppliers. In fact, suppliers that provide their goods to Lidl can also benefit from the reputation and influence of Lidl in the business arena. Therefore, their power of negotiation is slow compared to Lidl's. Suppliers can lose their partnerships with companies that were dealing with them to only benefit from the image and influence of Lidl. [...]

[...] In the following lines, we will see what the 5 forces of Porter look like when analyzed based on the Lidl's reality. PORTER'S 5 forces of LIDL Competitive rivalry Competition in this case is about the companies that operate in the same sector with Lidl. Therefore, if the German brand wants to establish a better strategy, it must know how its competitors operate and everything that interfere within the company, whether in a good or bad way. Lidl must look into what is happening with companies like Aldi, Netto, etc. [...]

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