Lidl's External Factors

Lidl's External Factors

1. Suppliers

   • Lidl supply chain begins with the producers who are the British farmers that supply Lidl's fresh food, from there the food goes through the processing centre, and then through quality control until its distributed out to Lidl's branches. From there, the goods are then purchased by the customers. This is also referred to as VCM. This encourages communication and cooperation between all of the chain participants. This is especially important for a company like Lidl to use because they only buy a small variety of product brands from their suppliers. This means they have fewer suppliers which can allow them to focus on creating a stronger relationship. Armstrong claims that because of this, Lidl and Aldi will increase the number of their branches in the future which gives them more potential to overtake the 'big four' one day.

2. Social

   • LIDL also promote the charity FAIRGLOBE, they do this by selling their products which goes towards helping out poor countries such as Ethiopia. See Appendix 5. This is one of the ways to help customers feel more inclined to shop with Lidl

3. Economical

   • The main economical factor for a business is the overall state of it. From this the owners can decide whether its financially better to expand or downsize their branches in that country. This is because a country with a poor economy can lead to an unsuccessful business. One of the reasons for this is that unemployment would increase therefore the average household disposable income would decrease and then could lead to a poor circular flow of income.
   • Inflation is where the value of the currency increases. This is a factor for LIDL to consider because inflation leads to many customers saving rather then spending their money, this can lead to LIDL concentrating more on the need products they sell rather than the want products. For example Lidl may see a massive drop in sales for coca cola due to a poor economy. This would be a sign that customers are not buying luxury items. This could lead to an opportunity for Lidl to take advantage of the more needed products like milk and bread.

4. Environment

   • The Daily Express have claimed that Lidl's have been awarded for installing eco friendly fridges in their branches. This helps build their reputation to their customers and even though this would have been costly for Lidl, it will help them save money in the long term. They also support and sponsor charities that raise money for the environment.
   • One of the many ways a customer will choose where to shop is by seeing how a company affects or helps the environment. This is important especially with the growing concern of global warming.

5. Community

   • Another external factor for LIDL to consider is the community. It is within a company's interest to give customers a togetherness feel especially when there is a lot of competition, and a way LIDL do this is by setting up online chat forums and groups on their website. This bespoke idea has been created in order to encourage retuning customers and attract potential new customers.

6. Political

   • The Owners of LIDL have to keep in mind any changes to the national minimum wage, one of the reasons is that an increase in the minimum wage would increase the overall overheads of a branch which would then be less profitable. However the BBC have claimed that Lidl will become the first UK supermarket to offer its employees the recommended standard living wage. Also if you look at appendix 4 you will see how well Lidl pays its employees in comparison to their rivals.
   • In a report on the Suns website, Felix Allen explains how supermarkets like ALDI and LIDL are only going to benefit from the Brexit decision. This is a political factor to consider.

7. Legal

   • Supermarkets such as LIDL must comply with the national health and safety laws. An example of this is by giving employees a safe working environment. Although this costs the company money to do, an accident may occur which could even end up taking the business to court. Also by doing this can keep employees happy which can lead to them feeling more motivated for work. This would come under as a basic need for the employee when using Maslow's hierarchy of needs.
   • LIDL must also follow the rules of the FSA (Food standard agency). This is a company run by the government to ensure all companies that sell food and drink to the government are going through the correct protocol. In order to comply Lidl must use quality control to a high standard. Although this means customers receive better quality goods, it will make an increase in COP.

8. Demographic changes

   • Supermarkets like to use the statistics gained from the national census to change or adjust their aims and objectives. For example if there was an increase in pregnancies and births then a supermarket like Lidl's would increase their range of children's products.
   • Another example on how demographic changes can affect a supermarket like lidl is by looking at the age range population. If the most common age is between 30 and 40 then this can allow a company like Lidl's to prioritise that age range for their products. To do this they would use primary market research to find what are the favourite brands among people within that age.

9. Ethical

   • One ethic that LIDL currently have is that they wont increase the prices even if there is an opportunity to. Blake explains in her report Lidl claims their wine is to be as good as some wines which a priced up to £199, also that these companies are ripping off their customers, this is called discriminative pricing.
   • Many consumers today tend to judge a company based on its ethical behaviour. Unethical behaviour can be viewed as mistreating staff or by having a negative affect on the environment. It is important for LIDL to consider this as it could make or break their reputation with their customers. For example Lidl might not be disposing their waste accordingly which then leads to build up of rubbish in the community. This would be a turn off for customers and then would most likely buy from another supermarket.

10. Competition

    • LIDL are in a fierce competition with the 'big four' (Morrisons, Sainsbury, Tescos and ASDA) and they have been seeing a massive loss in their profits ever since the discount stores have arrived (LIDL and ALDI). When looking at Appendix 3 you will find a graph that displays the change in market share for supermarkets in the UK. The chart shows us that only Aldi and Lidl have increased their market share within that year.
    • All of the big supermarkets are currently in a price cutting war at the moment. This is from the result in the reduced profits the bigger companies such as Tesco earned in recent years. From this Tesco, Morrisons, ASDA and Sainsbury's have all massively reduced their prices, in order to increase the demand for their products. This has led to the discount stores like Aldi and Lidl to do the same and so on. However Blake claims that the 'big four' stores are using pricing promotions on their customers to make them, feel as if they were getting a better deal than they actually are. This is also known as market penetration which is one of the strategies used in Ansoff's Matrix to help grow market share.