The UK grocery market is a highly competitive and saturated market with thousands of competitors. Demand is distinct for being price elastic such is the nature of the market. This makes it notoriously difficult to make any advances on market share (Burt and Sparks, 2003).
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Since entering this market in 1994, Lidl have become deeply entrenched with over 600 stores at its disposal which expresses the phenomenal success that they have achieved (Lidl 2012). They are now a formidable competitor feared by the other major supermarkets. The big four supermarkets in the UK such as Tesco and Asda have now endured a decrease to their market share, as the discount supermarket Lidl has made gains (Butler, 2015). Brinded (2015) outlined that as of May 2015, Lidl had accomplished a record market share of 3.9% with an 8.8% increase in sales. Such displays of growth are very much owed to the marketing strategy implemented by Lidl. Fifield (1998, p.27) defines marketing strategy as the “process by which the organisation translates its business objective and business strategy into market activity”. He also emphasises the importance of executing plans quickly in response to various market changes. Lidl as will be explained has executed this definition to great success. This essay will analyse the marketing strategies devised by Lidl and will also propose suitable recommendations to enhance the marketing strategy to sustain financial performance and UK expansion, with a brief insight into the enormous challenges encountered by Lidl.
With the price per majority of products being relatively small it is crucial that stores sell a high volume with great variety. Therefore a large and repeat buying consumer base is crucial for any long term success (Oliver, 1999). Such a rigid outline for success means that the barriers to entry are quite formidable. Stigler (1968, p.67) categorised barriers to entry as “a cost of producing that must be borne by firms seeking to enter an industry but is not borne by firms already”. Of course Lidl was and still is a massive supermarket in Germany from the 1980’s and was recognised throughout other European countries but it was completely diverse to the stores in the UK which made Lidl’s introduction a risk. It doesn’t seem cynical to suggest that there also exists a long established oligopoly whose economic dominance makes the market even more challenging to infiltrate (Blythman, 2008). BBC (2006) support this view by reporting in 2006 that Tesco, Asda, Sainsbury’s and Morrison’s controlled 74.4% of the market. This oligopoly means that there are higher barriers of entry, requiring significant capital to overcome. It has also fostered extreme levels of customer loyalty which is a complex obstacle in itself to overturn. Such dominance translates to quite high profit margins when compared to discount stores.
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