Report for unit 1 of Lidl Exploring Business PDF

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Report for unit 1 of Lidl Exploring Business is an assignment coming in unit 1 which explores business enterprises....

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Report on the effects of the environment on a large business This report looks at Lidl, a large business with chains operating all around European Union, and evaluates the effects of the environment on that business.

Lidl opened its first moders store in 1973 in Ludwigshafen, Germany. With only the number o f three employees and five hundred products. This small store became the foundation of Lidl’ s far reaching expansion. In 1980 Lidl opens 300 stores across Germany with an avarage of s even people being employes in each store and a stocking of around 900 product lines. In 199 0 Lidl started opening stores outside of Germany, starting with France and within 4 years the y have opened their first UK store and a couple of years later they have had store all across E urope. In the 2000s they have firmly established themselves as a leading retailer within the U K and in 2017 Lidl open in the United States. Lidl is striving to provide hassle-free shopping th at gets you in anmd out with a product assortment and store layout that’s easy and simple, y et with lots of variety of products that you can discover shop. They have less complicated pro cess that is allowing them to deliver lower prices, high quality and the best shopping experie nce for their customers. The strategies they use to achieve all this are:

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They do not offer lots of brands within their stores but rather carefully selected topquality and best prices barnds/products. So you do not spend time wondering what b rand of the same product you should pick.

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All their stores have the same layout, making it easier for their customers to find wha t they need quicker.

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They’ve partnered with a local and regional farms and suppliers that meet their strict requirments. Every Lidl private label product you find their stores is a result of a preci se selection process, including quality testing. They are also continuing the Lidl traditi on of offering new favourites from all over the world, keeping their customers looking forward to what they’ll find next.

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Lidl has around 80% of the products they offer as their own brand meaning that they have especially developed these products to meet their own high standards and allo w them to offer those products to their customers.

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Every Wednesay their diversified product assortments changes offering new products in order to delight their customers with more and more new things.

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They have a “Bring your own bag” policy in order to eliminate any unnecessary costs, to save their customers time and it provides a greener solution.

External Environment: For external environment analysis I will use a PESTLE analysis. PESTLE stands for Political, Ec onomic, Social, Technological, Legal and Environmental which are all factors used to asses th e market for the business, in this case the market for Lidl. This type of analysis is useful tool f or understanding the business’s (Lidl) market growth or decline, and as such the position, pot ential and direction for the business. Political factors:

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Brexit - Since Brexit took place on January 31st 2020 at midnight, it is now affecting lots and lots of businesses across the UK. Lidl is one of them, as even though Lidl originated from Germany it has stores operating wit hin the UK. With Brexit taking place this means that Lidl will have to follow lots of reg ulations that the government has or will establish. Before leaving the EU, the UK and EU government have had agrred to a settled a trade deal called the Trade and Coorp oration Agreement (TCA), helping to determine the future of trading between the tw o markets. This outcome was received by many UK business owners as a favourable c ompared to a no-deal scenario, which would have led to UK-EU trading by default on World Trade Organisation (WTO) terms. Generally non-EU markets if in the absence of a trade deal are a subject to EU tarrifs – type of tax, ussualy paid on imported goo ds; if goods are subject to quotas it means that there will be a limit of how many can be traded over a given period of time, in correspondance with the WTO’s MostFavoured-Nation Clouse (MFN). With the trade deal that UK and EU have settled before UK leaving the EU this allows UK businesses to continu e tarrif-free trade with the Europen Union, that is if the products we export are qualifi ed for tarrif-free trading under the terms of TCA. To qualify for a tarrif-free trading un der the TCA you need to demostrate that the products you are exporting are ‘origina ting products’ meaning that they originate from either the UK or EU. The products ca n be considered originating in two ways:

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Whooly obtained meaning the goods that have been procured and produced within t he territory of the nation, without using material from another, mostly applying to ag ricultural and animal products grown from a nation’s soil.

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Substantially transformed meaning that the goods/products may be drawn from outs ide the UK or EU, but have been sufficiently altered so as to render a ‘originating’ new product.

With that being mentioned Lidl is a subject to paying standard tarrifs imposed by the UK (UK global tarrif) and the EU (Common customs tarrif). Businesses like Lidl and many others also must apply for an Econo mic Operator Registration and Identifications numebr (EORI) in order to continue trading wit hin the continent. A disruption of the flow of goods and services from the UK to the EU was l ong taking affect of Brexit and will continue troughout 2021. Because of this hapenning lots of businesses responded by stockpilling goods while tarrif-free trade between the UK and EU was still in place. This happening has affected both sides of the channel that is why if intendi ng to trade accross boarders, keeping up the good relationship with EU suppliers is importan t.

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Covid19 - COVID 19 has forced lots of businesses to close down and along with that lots of employees t o stay home or work from home, luckily with food stores though this didn’t happen. Stores like Lidl are still open and operate in order to provide people with their daily pr oducts needed at home. In every store however there are strict Health & Safety regulations issued by the government in order to keep the spread of the virus u nder control. Strict hygiene and social distancing has played a big role into the stores layout as they had to come up with the idea how to arrange their stores layout in ord er to be up to date with the government regulations. Such as labelling 2 metres apart from each other, placing hand sanitiser at the front of the store to be used by people i n order to be safe for themselves and others. Store employees had to make sure everyone comes into the store with face masks an d wearing them correctly in order everyone to be safe. The UK government also issue d the ‘track and trace’ scheme and stores and other places still operating needed to d isplay a code that could be scanned and people to answer the questions on the websi te in order to make sure whoever gets the virus and has been in contact with other pe ople from the same place are contacted and are self isolating in order to stop the spr ead of the virus continuing. With the negative that the food industry is facing there is positive things happening too such as increase in customers, increase in revenue etc. The latest news show that consumers are starting to trust in all parts of the food indu stry and with it their confidence in food products. The consumers are mostly trusting f armers, retailers next. Lidl decided to partnership with delivery services and launched click and collect service trying to comply with their ‘low-cost operating model’ but stil l aiming to grow by opened stores and winning over more shoppers going within the stores as wages are squeezed and the unemployment rate rises. Lidl is committed to being the cheapest in the sector and it might be a subject to cutting prices further as t he likelihood of renews price ‘war’m between their UK-listed rival increases. Here are

some statistics on how well is Lidl doing during the pandemic:

We can see that over the year Lidl has increased their sales growth by at least 5% at times even more.

Here we can see that Lidl has increased its market share by more than 3% during the pande mic meaning that Covid 19 has a positive impact on Lidl too.

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Government support - Currently with Covid 19 happening there is lots of support for the businesses during that time for example, there is the Coronavirus Job Retention Scheme where if you had to ask your employees to stop working or work fewer working hours than usual you can put them on ‘furlough’ so you can get support on paying them their wages for the hours they do not work. The government will pay 80% of the employees’ usual wages for hours they do not work up to a maximum of 2500£ per month. The scheme is open until 30th of April 2021. There is the Differing VAT which means that if you are a UK VAT registered business and had a VAT payment due between 20th of March 2020 and 30th of June 2020 you can delay the payment up to 31st March 2021. There is also government support for pubs, business rates holiday for retail, hospitality and leisure stating that business will not have to pay business rates for the 2020 to 2021 tax year if your

business is in retail, hospitality or leisure, if eligible your local council tax will apply the discount automatically, there is support for businesses paying tax and are unable to pay it on time they will be able to pay it with a delay without paying penalty for it. For large businesses like Lidl there is the Coronavirus Large Business Interruption Loan Scheme allowing businesses an access of up to 200 million pounds loans from commercial lenders, giving 80% government guarantee on those loans. You can apply if the business is UK based, has an annual turnover of at least 45 million pounds, has not received support under the Bank of England’s coronavirus financing facility. The scheme is open until 31st January 2021. There is Support to create job placements: Kickstart Scheme providing help for young people who are receiving Universal Credit and are at risk of long-term unemployment. Grants are also provided by your local councils and how much you get is based on the rateable value of your property.

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Membership of trading communities such as the European Union – ask Malik and check google - Lidl’s community involves NSPCC Northern Ireland, which is a charitable foundation helping children with crucial services, support, and advice on how to stay safe from abuse. This charity is fighting to put an end to child abuse and aiming to raise enough vital funds for programmes like Speak Out, Stay Safe school programme and those funds will help the charity to reach every primary school across Northern Ireland with its programme of interactive assemblies and workshops giving children the knowledge and understanding that they need to stay safe from abuse and neglect. Autism Aware Stores, in Norther Ireland there is more than 1 in 49 people that live with Autism. For people with Autism, it can be quite tricky with all those bright lights, crowded spaces, noise, and sensory overload to their shopping. That is why the store is offering “Autism Aware Quite Evenings” which take place every week on Tuesday from 6pm to 8pm. Food Redistribution, globally 1.3 billion tons of food fit for human consumption are wasted each year. In effort to fight food poverty Lidl has partnered up with FoodCloud to develop their own food distribution programme helping more than 320 charity and community groups. Up until now Lidl has donated more than 615 tonnes of food which otherwise would have gone to waste. Voucher Donation Fund is Lidl’s way to help out local communities by providing them with Lidl voucher that can be used for lots of different things such as science projects, school healthy eating week etc. and finally Lidl Community Works Sport for Good, which is intended to help young people struggling with their mental health, it has been proven that physical activity benefits both physically and mentally for children, that’s why Lidl has launched this programme to help young people struggling with their mental health by making event for sports taking place.

Economic policies: 

Economic, fiscal, monetary and other government policies - Lidl has lots of government policies that they follow and have disclosed them publicly on their website for anyone wondering what they are. They have sections labelled Human Right and Ethical Trade, Animal Welfare, Raw Materials and Healthy Eating each

disclosing lots of policies such as Human Rights & Environmental Due Diligence Policy, Suppliers Guidance Documents, Modern Slavery Statements, Animal Health & Welfare, Antibiotic Stewardship Policy and many more. They each can be downloaded and explored further on their website: https://corporate.lidl.co.uk/sustainability/policies

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Supply chain policy - Lidl has its own supply chain policy which is the strategic division of the operations side of the business, and it is split into two areas:

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Supply Chain and Layout Management where the departments have a strategic role focusing on optimising both availability and freshness of the products.

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Layout Management team supporting the store operations in determining the optimum placement of product groups and individual items.

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Economic growth, exchange rates - Lidl overall have had the strongest sales growth in the main supermarkets across the EU with an increase of 10.2% according to a report. It also said that visitors were spending 12.5% more too, stating that Lidl may have had the strongest sales growth. Despite its increase in sales Lidl still has the smallest market share but have gained 0.1% market share too, new shoppers were welcomed with an avatar spend of 12.5% per trip. Higher average prices, growing by 1.3% also contributed to its success. Shoppers were reaching more for cleaning products considering the times we are stand even though COVID had eased comfort food was still a priority, crisps and snacks have also grown by 19% of the market.

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Exchange rates

Social attitudes:

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Spending and debt – Many people nowadays choose to buy things by paying for them in instalments through direct debit or take loans and are repaying them that is why many people choose to save as much as they can out of their shopping. That is why Lidl is the perfect place for many people because on average people spend around 100£ per shopping but with 100£ you can buy different number of products in different stores for example, if I go to Sainsburys and spend 100£ I will not buy the same number of products as if I go to Lidl and spend the same amount of money, because of price differences. That is why people choose to save out from their shopping as much as they can by going to stores with cheap prices and good quality products like Lidl.

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Social responsibility requirements - There are 4 social responsibility requirements, and they are: Economic aspects meaning that companies need to maintain strong economic interest so they can stay within the business, being profitable and providing value for their shareholders is part of being socially responsible. Legal aspects meaning a company must follow the law and have legal obligations to do so, for example, Lidl must follow the government's latest safety regulations related to the corona virus in order not to get fined and be able to remain open. Ethical aspects meaning acting and going beyond the legal requirements and meeting the

expectations of society, for example, Lidl is not very good at that because they do not offer lots of choice when it comes to products, but they do offer the best ones picked by their standards for their customers and they stick to their high-quality products and cheap prices promise. Philanthropic aspects meaning the expectations that companies should give back to society usually under the form of charitable donations of time, money, and goods. Lidl is very good at that as they have lots of charitable donations going on and even making their own one in order to support young people.

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Change for example, to demographic trends, consumers’ tastes/preferences - Demographical trends is a popular term for any measurable change in the characteristics of a population over time for example increase or decrease in certain ethnic group, sex, age etc. This is important as this can have an effect over businesses for example now with Brexit taking place many non-UK citizens may choose to leave the UK meaning there will be a decrease in people coming from the EU, which may be a cause of decrease in clients if the customers of Lidl are mostly from the EU. People also have a change in taste and preferences nowadays many people choose to eat eco-friendly food and are careful of what they buy in shops meaning if there is not enough eco products in Lidl this may also lead to a decrease in clients and sales.

Technological factors:

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Technological change, for example automation - Lidl is no longer trending for its famous German brand, but rather they are aspirations and technology is one of them. Lidl have had some technological products launched such as kitchen machines, wireless headphones, smart watches etc. but they are trying to launch new range of oriented products for home automation. With this they are aiming to make our lives easier and allow us to deploy a home automation system through home. Lidl have launched connected sockets and lamps starting at the price of only 7.99£ each thanks to this it will be possible to control the ignition and extension of electrical device without having to physically go in contact with it. Lidl will also offer several connected lights, like a pack providing 3 bulbs, a gateway and a remote control, the system will be fully compatible with Google assistant which is not useful for the UK since much of the population uses iPhones. They are also launching Razer Seiren X USB microphone, which is a microphone perfect for streamers and video creators as it is designed to improve communications and withstand various shocks for example, absorbing vibrations without interrupting your broadcast or streaming and many more products on the way as technology makes a successful take in within the market.

Legal:

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Partnership legislation - Lidl has lots of partnerships in order to provide the best quality products at a low price and make sure their high standards are met, but what does a partnership mean? The Partnership Act 1890 defines a partnership “as the relation which exists between persons carrying on a business in common with a view

to profit” in other words two people working together aiming to achieve profit. The Partnership Act 1890 has several responsibilities/terms for both parties such as:

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Assuming equality of capital contributions and sharing of profits and loses

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Assuming that all of the partnership’s assets have been contributed by and belong to the partners equally

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Containing a number of provisions concerning the running of the partnership that will be implied in the absence of express provision to the contrary

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Have limited scope and treats all partners equally Is outdated and therefore does not meet the needs of modern business practices up to date therefore it allows the partnership to be dissolved at any time, allowing significant and unwanted liabilities and tax consequences for both the partners and the business.

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Companies act - The Companies Act 2006 is the main piece of legislatio...