Aldi and Lidl Case Study

Aldi & Lidl Case Study

1. While Aldi and Lidl entered some foreign markets via acquisitions, they mostly opt for greenfield investments. Discuss the reasons why Aldi and Lidl are choosing greenfield investments as a primary market entry strategy.

1. Cost reduction

Greenfield market is a form of foreign direct investment, which would help them to compete with their competitors as they could reduce the costs of products because of low costs of production.

1. Agility

The two companies could master all aspects of the initiative, such as in the distribution of profits, marketing strategies so that they can adjust according to their own needs, which make the new business to a large extent.

1. Culture

Aldi and Lidl try to adapt to local needs to increase consumer acceptance. For instance, Lidl offers regional products in the UK and Aldi relabeled its products in Switzerland, which is switch consumer loyalty and defeat cultural gap.

1. Policy

Aldi and Lidl are not easily stuck to the legal and policy constraints of the host country by greenfield investment because the new business can bring a lot of local employment opportunities, and increase taxes, which were provided more support.

1. In an attempt to change its image of an ‘underclass-discounter’ in the UK and in Switzerland, Aldi enlarged its product range and offered a higher level of service to the customers. What could be the rationales behind such a strategy in the UK and in Switzerland? Do you also see problems and risks associated with this approach?

1. The rationales behind the strategy

In Germany, cheap equates to values. By contrast, in the UK low prices are not necessarily equated with value and are more often associated with poor quality, which led to poor impression by the citizens in the UK and in Switzerland. Since, Aldi launched advertisement campaigns that present the products of Aldi had the same standard as the other retailers and enlarged the range by relabeling and offered higher level of service.

1. Problems &risks

1. Cost increase

Aldi and Lidl propose ‘no-frills’ approach. However, in order to cater to the consumers in the UK and Switzerland, the two companies had to put part of budget in advertising and additional service.

1. Image change

The two companies met the clientele in the UK and Switzerland by providing regional products and pricing strategy, which is likely to lose those consumers who is price- sensitive and brand-loyal.

1. In some trade journals experts characterize the internationalization process of Lidl as ‘fast’ and ‘pushing’, whereas the internationalization of Aldi is described as a ‘slow’ and ‘well-considered’ process. DO you agree with the experts? Identify reasons for the ‘fast’ and ‘pushing’ internationalization of Lidl as well as for the ‘slow’ and ‘well-considered’ internationalization of Aldi.

       Yes. I agree.

1. Lidl’s ‘fast’ and ‘pushing’ internationalization process

In the period of 1989 to 2007, Lidl entered 21 foreign markets.

For instance, Lidl entered into Norway in 2008 with over 50 outlets. At that time, if Lidl waited a retail sector to mature, such a population density in Norway would become a barrier to Lidl because competitive advantages would lose if it spends too much time to establish its market.