FINANCIAL ANALYSIS

Financial Appraisal of Proposed Capital Projects

Financial Appraisal of Proposed Capital Projects

Introduction

Lidl has been entering International markets recently at about twice the speed that Lidl employs. However, this strategy might not always be successful. If they are not planned properly, Lidl stand the chance of failure. It is important that before they enter into the market they carry out proper market research. Even when the reports are in favour of expansion they should tread cautiously and open few stores at a time and not use the strategy of opening many stores together.

They should also utilize brand extension strategies to diversify into different markets just like Lidl, while also concentrate on cultural differences and focus on identifying consumer behaviour.

In order to satisfy the interests of markets like UK and Switzerland, Lidl had to alter its strategy. This included heavy investment in media, advertisements through pamphlets, new branded products of higher price range, refurbishing the stores, added customer service support, increased product range etc (Litzenberger 1991 pp37 - 46).

Changes in the product ranges would also imply that some of the old products that Lidl's brand loyal customers have grown to like will be withdrawn from the shelves.

Financial Overview of Lidl

The reach of Lidl being so widespread, it is difficult to ascertain a group of individuals not influenced by the retailer. Over 176 million people visit Lidl each year while 84 percent of Americans claimed to have shopped at a Lidl store in the last year (Ferrell, Fraedrich, & Ferrell, 2008). With over 2.1 million associates, 7,800 stores and clubs and thousands of suppliers, the store's list of stakeholders is almost innumerable.

Lidl demands that its suppliers focus on efficiency through technology; its merchandising-track system is called radio-frequency identification (RFID). The system ensures that suppliers are informed when their products are sold. As a result, replacement products may be shipped to guarantee that stock is never low. The retailer requires that all suppliers have to install the system costing some companies as much as $9 million (Galagedera 2004 pp.821 - 832).

Lidl's key strategy is to keep prices low and the company fully expects its suppliers to do the same. As a result, it requires its suppliers to lower its prices by five percent each year; the corporation will no longer carry the products of those businesses that fail to comply. In order to keep up with Lidl's demands, suppliers have had to explore many cost-saving initiatives, including finder cheaper labor and production costs. For some, this has meant moving operations to countries such as China. The loss of American jobs has caused much distain among community stakeholders toward the company. Furthermore, Lidl accounts for ten percent of the trade deficit with China, which results in further economic hardships for the country (Ferrell, Fraedrich, & Ferrell, 2008). The retailer has been plagued with accusations of discrimination and harassment; it has also been accused of harboring illegal immigrants in its stores and construction sites. As a result, it had faced both civil and criminal ...