ANALYSIS
A detailed analysis of the relevant Porters Five Forces is explained below to critically analyse the industry attractiveness for LIDL in Norway
· The Extend of Rivalry between Competitors
· The Threat of New Entrants
· The Threat of Substitutes
· The Bargaining Power of Buyers
· The Bargaining Power of Suppliers
1. THE EXTEND OF RIVALRY BETWEEN COMPETITORS
The Norwegian grocery retail market is forecast to have an increase of 4.2% since 2014. A 0.8% compound annual growth rate is predicted for the industry in the period 2014–19 (MarketLine, 2015).
Looking at the overall retail sector market size in Norway (figure 1) we can witness that supermarkets/hypermarkets dominate quite 84% share of the entire trade value (Mintel, 2017). It's inevitable why competitors can fight thus hard to get the larger slice of the pie in this sector therefore LIDL should assess this element critically.
Figure 1: Norway: Food retailers’ sales as % of all retail sales, 2010-14
Source: Statistics Norway/Mintel
Hence the extent of rivalry between the competition is very high. Figure 2 below illustrates the major key food retail players currently in the Norwegian market while Figure 3 shows their respective share of the total food retailer’s sales. NorgesGruppen is the market leader in the country with five main concepts: Joker, Spar/Eurospar, Meny, Kiwi, and Nærbutikken. Among these, Kiwi is the largest with a market share of about 20 percent as of 2016, constituting almost half of NorgesGruppen’s revenues from its grocery retail activities (Nielsen, 2017).
Figure 2: Descriptive Statistics for the Norwegian Grocery Retail Market 2011-2016 (Source: Nielsen, 2015, 2016a, 2017)
Figure 3: Market Shares in the Norwegian Grocery Retail Market, 2014-2016 (Source: Nielsen, 2015, 2016a, 2017)
The competition was intensified by low product differentiation retailers. Therefore, consumers should be switching costs low and the lowest buying price for the same product, forcing retailers to compete on price. (MarketLine, 2015).
Figure 4 below also provides a forecast of food retail industry up to 2019. This indicator is a good potential market volume LIDL steadily increasing and is expected to be achieved, and thus a pleasant investment in Norway. Rivalry is assessed as strong overall in this industry.
Figure 4: Norway food retail industry value forecast: $ billion, 2014–19
Source: (MarketLine, 2015)
2. THE THREAT OF NEW ENTRANTS
As the retail sector is dominated by retail have well established retail stores, as already mentioned, the inputs threat LIDL in this case is limited. The small retailers can be difficult to enter the large retail supermarket because it has a great advantage of economies of scale and the ability to use their aggressive pricing scheme.
Strong branded training and quick acceleration deepens this market control. However, there is a large shop immune to the risk of the new participant. Potential entrants might also be influenced by the quite low entry ...
