Business Strategy: Analysis of Macro and Internal Environment of Aviva Plc

This project focuses on the analysis of macro and internal environment of Aviva Plc using various tools such as PESTLE analysis, VRIO analysis, McKinsey's 7s Framework and Porter's Five Forces Model. It includes the analysis of political, economic, social, technological, legal and environmental factors that can influence the profitability and growth of the company. The project also highlights the strength, weakness, opportunities and threats of Aviva Plc.

Business Strategy

INTRODUCTION
Business Strategy is a form of decision and action which is taken to achieve the goals and
objectives of Organisation. It is a set of goals, plans and action that helps to determine how
business can compete in the competitive market. The main motive of business strategy is to
establish direction, measure success, avoid competitive convergence and increase the satisfaction
level of business (Yuan and et. al., 2020). Business strategy is important for company as it helps
in creating vision and provides direction in order to accomplish the goals and objectives of
business. There are mainly three types of business strategy such as cost leadership strategy,
differentiation, focused cost leadership strategy, focused differentiation strategy and integrated
cost leadership (Ghemawat, 2016). The project is based on business strategy in which analysis of
macro and internal environment is conducted by applying various models. It also includes the
porter’s five forces models in order to evaluate the competitive forces and various other models
are also applied for interpretating and devising the strategic planning of company. For
accomplishing this project the chosen organisation is Aviva Plc, it is a British multinational
company which provides various services including life insurance, general insurance and
pension. Headquarter of Organisation is in London, England and was founded in 2000. Aviva Plc
was formed by merger of two British insurance companies, CGU plc and Norwich Union.
P1
Macro Environment can influence the profitability and growth of company, it is important
for the organisation to identify the factors that could affect the business operation and
productivity. In order to identify the macro environmental factors, pestle analysis is the suitable
tool that helps in determining the factors and shapes the macro business environment.
Political Factors:
Political factor affects the profitability and long term sustainability of Organisation.
Aviva Plc must identify the political environment of country in which they are operating
business. There are various political factors that influence the operational activities of business
such as political stability, changing policies, governance system, trade restriction and many
others (Um and et. al., 2018). The high political stability in country determines the friendly and
stable business environment that helps in predicating market growth trends. Aviva Plc has
located its business in different countries due to which they have to face political tension. It is

necessary to identify the political issues of different countries as it can influence the growth
opportunities available to Aviva Plc.
Economical Factors:
Through understanding the economic factors of country, Aviva Plc can assess the growth
trajectory of industry and business. There are various economic factors to understand such as
inflation, labor market conditions, financial market efficiency and many others. Economic
development of UK directly influences the performance and productivity of business. When the
economies are growing it offers wide range of growth opportunities which help in increasing the
profitability and productivity of Aviva Plc. By understanding the GDP growth rate of Country,
Aviva plc can determine its ability to pursue long term growth strategies.
Social Factors:
The culture of organisation has a strong influence through societal norms, values and
trends. Social factors generally include demographic trends, societal norms, consumer spending
patterns and income equality (Dahlberg, Hokkanen and Newman, 2016). It is essential for Aviva
Plc to understand the changing demographic trends of UK including migration trends, socio-
economic variables and agile population. Aviva Plc must understand the demographic
characteristics of country in order to identify the right market with high growth potential. Culture
plays an important role in country, each society has different norms and values which can shape
the behaviour of consumer. Through developing local teams and local partnership, Aviva can
understand the societal norms and attitudes.
Technological Factors:
Organisation must understand the technological factors due to rapid technological
advancement and diffusion. Aviva must identify the technological factors that could help during
strategic decision making process. Through understanding the technological environment, Aviva
can capture the technological trends of country in order to achieve various advantages such as
increasing operational efficiency, increasing profitability and boosting innovation. Aviva must
keep close eyes on analysing 5G technology in order to deliver positive business outcomes by
increasing speed, user experience and expanding access.
Legal Factors:
It is essential for Aviva plc to understand the legal factors of country in order to stay
away from any legal conflicts and disputes. Without understanding the legal environment and

regulatory structure of country Aviva cannot enter into new market. There are various laws
which must be considered by Aviva Plc in order to run the business in smooth and effective
manner such as employee protection laws, consumer protection laws and intellectual property
laws (Chuang, 2019).
Environmental Factor:
Organisation must understand environmental factors due to changing climatic conditions
and environmental consciousness. The environmental factor that influences the growth of Aviva
plc are renewable technologies, waste management, climatic conditions, environmental
regulations to avoid resource depletion and attitude towards eco-friendly products. Organisation
must follow the environmental practices in order to sustain in market for long run and attract
more and more customers towards the brand.
M1
Organisation must focus on identifying the macro environmental factors that can affect the
profitability and growth of business. For assessing the macro environmental factors, pestle
analysis is effective tools that helps in determining the influence of political, social, economical,
technological, legal and environmental factors on Organisation. Aviva Plc must focus on
conducting macro environmental analysis by identifying the trends within each segment and
understanding how the trends are related to each other. The new trends can create a huge impact
on the performance of business and also forecast the future direction. Pestle analysis helps in
tracking the external factors that can impact the performance and efficiency of Organisation. It is
mainly used for strategic business planning, Marketing planning, Workforce planning, product
development and Organisational change (Pramanik, Maiti and Maiti, 2018). Pestle analysis is
simple to understand and conduct and also helps in developing strategic and external thinking. It
helps Aviva Plc to spot an opportunity and capitalize on them. But the analysis also have several
disadvantages such as it works on assumption and also there is a chances to get wrong
information. Pestle analysis is also easy to get lost due to enormous amount of data and also
there is a risk of capturing too much data.
P2
Internal environment can influence the profitability and productivity of business, it is
necessary to identify the internal environment factors that could affect the business operation.
For analysing the internal environment the best tool is VRIO and McKinsey ‘s frameworks.

VRIO Analysis
Valuable:
The financial resources of Aviva plc are highly valuable as it helps to invest in bigger
opportunities. Employees of Aviva is also valuable resource for organisation as they give their
best performance in accomplishing the task and make business successful. The local food
product of Aviva is considered as valuable as they are highly differentiated due to which its
perceived value is high among customers.
Rare:
Aviva plc has strong financial resources which are considered as rare as it can be
possessed by few companies only. The local food products of brand are not so rare as the food
items can be provided by the competitors. Employees of Aviva are rare as they are highly trained
and skilled due to which they give their productive result.
Imitable:
The financial resources of brand are costly to imitate as it is acquired by them through
prolonged profit. Food products of Aviva plc can be easily imitate as it can be acquired by
competitors by investing more in research and development (Jain and et. al., 2018). The
employees of company can also imitate as competitors also provide training opportunity to their
staff.
Organised:
The financial resources of company is organised as they use resources to invest in right
place by combating threat and making opportunity. The food items of Aviva plc is not organised
as the product get changed due to season of customer demand. Employees of brand is also not
organised as they get hire or fired on the basis of their performance and abilities.
Mckinsey 7’s frameworks
Strategy:
The strategy of Aviva plc is to improve the business performance by focusing on
consistent change. Manager focuses on defining the strategy and communicating to all
employees so that they can focus on contributing their best performance in accomplishing
business goals and objectives.
Structure:

The structure of Aviva plc is flatter organisational structure as it is supported by learning
and progressive companies. There is a high coordination between the departments of Aviva due
to which they collectively work together and achieve the common goal.
System:
The organisation has well defined system which helps in managing business activities in
effective and efficient manner. Aviva mainly focus on evaluating its system by designing
controls so that they can monitor the performance of each department.
Shared values:
Aviva mainly focuses on encouraging inclusive culture that helps in celebrating diversity.
They ensure that their job task must be aligning with core values.
Style:
Aviva plc generally implement participative leadership style in which all employees have
right to participate and share their opinions and thoughts in front of seniors.
Staff:
Aviva have highly skilled staff with sufficient number, they all focus on achieving the
goals and objective of business.
Skills:
The brand has commendable workforce with high capacities and skills. They also focus on
improving the skills and knowledge of staff so that they can better output.
M2
Through conducting Internal analysis, company can find out the competency of
Organisation, competitive viability and cost position in Market. By conducting internal analysis,
company can know about its strength, weakness, opportunity and threat. There are various tools
that can be used by Aviva Plc while conducting internal analysis such as SWOT analysis,
McKinsey's 7s Framework, Gap analysis, VRIO analysis, etc. The suitable tool which is used by
Aviva Plc is SWOT analysis as it helps in identifying the strength, weakness, opportunities and
threat of Organisation in effective manner. The one of the strength of company is its strong
product and services portfolio. SWOT analysis is a simple framework that helps in understanding
the strength and weakness of company and also encourages the development of strategic
thinking. Through SWOT analysis, Aviva Plc can anticipate future business threats and take
action in order to avoid and minimise the negative impact. There are also disadvantage of SWOT

analysis as sometimes it lacks detailed structure due to which the key elements get missed.
Through SWOT analysis, Aviva Plc can oversimplify the amount of data being used for decision.
P3
Porter’s five forces model is one of the strategic management tools that focus on
determining the competitive landscape of industry. The five forces of model includes bargaining
power of buyers, bargaining power of suppliers, threats of new entrant, threats of substitute
products and rivalry among existing firms. It is used to analyse the industry’s attractiveness by
ascertaining profit potential (Carlier and et. al., 2019). Through this information, the strategic
planners of Aviva Plc can make strategic decision in effective and efficient manner.
Threat of New Entrant:
The new entrant in this industry is difficult to enter and establish the business successfully
as it requires huge investment and ability to attract large number of customers and develop
strong customer base due to which the threat is low for Aviva. In this industry, the government
policies require legal requirements and strict licensing in order to sell the insurance services to
customers. The new entrant in insurance sectors brings new ideas and innovation to run the
Illustration 1: Porter's Five Force Model

business which can be threat for Aviva Plc and also they have to reduce the costs, provide new
value proposition and lower the price strategy. It is important for the company to overcome the
issues and develop effective barriers to safeguard its competitive position. Company can tackle
the threat of new entrant by producing new services that helps in attracting more and more
customers towards the insurance policies. The new services attract new customers as well as
existing customers to buy the policies and plans.
Bargaining power of Suppliers:
In this industry, the number of suppliers is more than number of firms offering the
services which mean that buyer have few firms to choose and even they don’t have much control
over prices. Aviva face low force of bargaining power of buyers as there is no significant threat
to customers to integrate backwards. It is important to overcome the issues which are associated
with bargaining power of buyers by creating larger customer base as it helps in reducing the
bargaining power of buyers and also provide opportunity to Aviva Plc to streamline its
production and sale process (Grefen, 2018). Organisation must focus on innovating new services
by providing discounts and offerings on services so that it can limit the bargaining power of
buyers. The new services can also reduce the defection of existing customers to its competitors.
Bargaining power of Suppliers:
In insurance industry there are a lot of suppliers as comparison to buyers which means that
suppliers have less control over the prices and also they are considered as weak force. The
suppliers generally provide fair standardised, low switching cost and less differentiated services.
It becomes easier for the buyers to switch suppliers which also make barraging power of
suppliers as a weaker force for Aviva. If suppliers are in dominant position, they can decrease the
margins of Aviva plc earn in market. The bargaining power of suppliers can be overcome by
building efficient supply chain with multiple suppliers and developing close relationship with
suppliers so that both of them get benefit.
Threat of Substitute products:
The insurance sector mainly have few substitute available due to which consumers have
no opportunity to switch the brand and purchase the policies and plans of other companies.
When similar services fulfil the needs and wants of customers it can affect the profitability and
growth of company. There are few substitutes that offer high quality services to their customers
but at high rate. In order to tackle with this issue, Aviva Plc must provide greater quality services

to their customers at lower price which attracts large number of people. They must also focus on
differentiating its services in order to remain competitive in market and gain. It is important to
conduct market research and identify the needs and wants of customers so that company can
provide better services according to their desire.
Rivalry among existing firms:
There are few competitors in insurance industry which are large in size and engage
together in competitive actions for gaining position and becoming market leaders. The high
rivalry can affect the price and reduce the profitability of business. In order to deal with the
rivalry among existing firms it is necessary to focus on differentiating services so the actions of
competitors don’t affect the profit margin of company (de Sousa Jabbour, 2019). Aviva must
also focus on attracting new customers by winning them from existing companies.
M3
Competitive strategy includes long term marketing plan which is used by organisation in
order to defend their marketing position. It is a favourable position which company wants to seek
for gaining more profitability and achieving competitive advantage over its competitors. There
are two models through which company can determines its competitive strategies such as porter's
generic and porter's five forces (de Oliveira and et. al., 2017). The porter's five forces model
mainly includes five competitive strategies such as supplier power, buyer power, competitive
rivalry, threat of substitute product and threat of new entrant whereas porter's generic
competitive strategies includes cost leadership, focus and differentiation. Aviva Plc can gain
competitive advantage by creating a corporate culture that attracts highly expertise talent,
understand foot print of ideal customers, clarify company's strength, reward employees that
supports corporate mission and value, establish unique value proposition and define niche that
are under serviced. Through implementing cost leadership strategy, Aviva plc have to focus on
reducing the price of its services in order to attract more and more customer towards the
company. The other strategy which must be implemented by Aviva Plc is Differentiation
leadership. By following this strategy company have to produce the services that are different
from its competitors so that customer can receive quality and innovative services (Drucker,
2020). The strategy which helps in gaining competitive advantage is cost focus and
differentiation focus strategy. If Aviva Plc implements Cost focus strategy they have to target
niche market based on price and in differentiation focus, Aviva Plc must provide products and

services to niche market by offering unique or different services. The suitable strategy which
must be implemented by Aviva Plc in order to improve the performance and growth of company
is Cost leadership strategy as it helps in attracting maximum number of customers by offering
services at low price.
P4
Bowman’s Strategy Clock Model
The suitable model which helps in devising and interpreting the strategic planning of
Aviva Plc is Bowman's Strategy Clock Model. It was developed by David Faulkner and Cliff
Bowman, the main motive of this model is to aware the companies about their market position as
compared to competitors. Through this model, organisation can analyse their position and gain
competitive advantage. By implementing this model, Aviva Plc can highlight how they can
position their products and services in market. There are two dimension through which
organisation can position their product and service offerings such as price and perceived value.
The management of Aviva Plc can choose its position from this model that helps in gaining most
competitive advantage in market. For Aviva, it is important to analyse and evaluate the market
position in order to improve the performance and growth of business. The model contains Eight
Strategic positions they are highlighted below-
Low price and Low added value
The Strategy position determines that for gaining competitive position in market, it is
necessary to keep the price relatively low. By implementing this strategy, Aviva Plc has to offer
their services at low price as compare to its competitors. The service which is provided by Aviva
Plc is not distinguished and also the customers perceive low value. Through low price, company
can compete with their competitors and also attract more and more customer towards the brand.
Low price
If Aviva Plc follows this strategy, they have to produce their products and services at large
quantities and also their services are valued in target market. The services of Aviva Plc is sold at
low price which leads to low profit margin. But due to high output volume, Aviva can generate
high profit (Ritter and Lettl, 2018). The low price strategy mainly focus on cheaper market
leaders that lays emphasis on fast and low priced production, cost minimisation and employing
economies of scale.
Hybrid

By implementing this strategy, Aviva can add value and offer their services at consistent
quality. The hybrid strategy focuses on combining low price and product differentiation. Aviva
Plc must provide different services from competitors in order to gain competitive advantage and
lead the market. When company provide different products and services to its customer as it
helps in serving high valued in market. Through following hybrid model, company can attract
maximum number of customer by offering services at low price with differentiation. It also helps
in increasing the profitability and improves the reputation and image of company.
Differentiation
The main motive of this strategic position is to offer maximum level of perceived value to
consumers. Aviva must offer different services as compare to its competitors in order to make
the value proposition higher. By implementing this strategy company can gain competitive
advantage by offering different services to its customer. Aviva must focus on improving their
brand image in order to retain loyal set of customers. Customers are also ready to pay high
amount if the quality of services is good.
Focused Differentiation
The strategy mainly focuses on exclusive products and services that are of high quality and
high price. The buyers generally purchase high quality products as it gives high perceived value.
Aviva Plc can achieve high profit margin through marketing, segmenting, distributing and
targeting promotions. If Aviva Plc implement this strategy successfully, they can gain utmost
profit margin and also survive in market for long run.
Risky High margins
The strategic position mainly focuses on offering products at high price without offering
anything extra in regards to perceived value. By implementing this strategy in Aviva Plc they can
charge high price without adding perceived value. If customer is ready to buy the insurance
services at high price, company can gain high returns (Shahri and Sarvestani, 2020). Risky High
Margins strategic position is considered as short term strategy that helps in exploiting temporary
market supply disequilibrium.
Monopoly Pricing
In this strategic position, company enjoys monopoly position and also pay less attention on
perceived customer value and pricing. By implementing this strategy, Aviva Plc must position
themselves as monopoly leader by offering specific types of services in market. While following

this strategy, customers left with two choices whether to buy the product or not as they are
dependent on services offered by monopolistic brand.
Loss of Market share
The strategic position is not desirable as company is not able to offer services to its customer
that they value. By following this strategy can affect the profitability and performance of Aviva
Plc in market. The Customers are not willing to purchase the products and services of Aviva Plc
due to high price.
Aviva Plc must focus on implementing differentiation strategic position as it helps in
increasing the growth and profitability of company and also they can gain competitive advantage
by offering unique services to customers.
M4
Executive Summary:
The report highlights the concept of business strategy by implementing some models and
tools that helps in evaluating the performance and strategic planning of company.
Company description
Aviva Plc is an insurance company which is known for life and pension provider. It is a
public limited company which offers financial services including general insurance, pension and
life insurance.
Mission and Vision
The Mission and Vision of Aviva Plc is to offer savings, insurance business and
retirement benefits to people by being with them for today and for better tomorrow.
Value Statements
The value system of Aviva Plc mainly focuses on four key aspects such as Care,
Commitment, Community and confidence.
Strategic analysis
It is being evaluated and analysed that Aviva Plc must focus on implementing
differentiation strategic position as it helps in increasing the profitability and growth of company.
Strategies and tactics
The main strategy of Aviva Plc is to attract maximum number of people and achieve the
target goals by implementing differentiation strategic position. There are various tools which are
implemented by organisation in order to identify the internal and macro environment.

Action Plan
Through action plan, Aviva Plc can focus on their day to day activities and also identify
what they need to done, when and by whom the work must be accomplished in order to achieve
the goals and objective of business (Lederer, Kurz and Lazarov, 2017).
Budget and operating plans
CONCLUSION
It is being concluded from the above information that business strategy plays an important
role in achieving the goals and objective of business. Through the business strategy, company
can plan and frame the policies in order to gain competitive advantage and survive in market for
long run. For running the business in effective and smooth manner, it is necessary to identify the
macro and internal environment factors that can influence the performance and efficiency of
business. Through identifying the factors that can affect the profitability of business, company
can take precautionary actions in order to overcome the challenges.

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