Impact of Macro Environment on Klarna and its Strategies

This report discusses the impact of macro environment on Klarna and its strategies. It examines the suitable framework to analyze the impact of macro environment on Klarna and its strategies. It also examines the internal environment and capabilities of Klarna using suitable methods.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
P1) Discuss suitable framework to examine impact of macro environment on Klarna and its
strategies......................................................................................................................................1
LO 2.................................................................................................................................................5
P2) Examine internal environment and capabilities of Klarna adopting suitable methods. .....5
LO 3.................................................................................................................................................7
P3) Discuss Porter's Five Force Model to examine competitive forces......................................7
LO 4.................................................................................................................................................9
P4) Use appropriate range of theories, concepts and models to devise strategic plan................9
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business core task is to frame strategies so to remain competitive in the market. Top level
management is able to cope up with the rivalry challenges with the help of effective tactics
which are designed by them (Amran and Hashim, 2016). Before formulating the strategies it is
very essential to study the external environment so that chances of failure is reduced to a large
extent. Klarna is undertaken to complete project in the specified time duration. It came into
existence in the year 2005 and this leading organization is located in Stockholm, Sweden. In
Europe it is the largest bank and is well known among customers for providing easy payment
solution to 80 million customers across 17 countries. On the other hand this successful company
is providing various services like, pay after delivery options, direct payments, instalment plans in
smooth one-click purchase experience which helps client to pay their amount at any time they
feel free. Here, this report covers, influence of macro environment on klarna and its strategies.
Porter's Five Force model is studied in order to understand competitive forces of a given market.
Numerous theories and concepts are determined in order to devise strategic planning for klarna.
LO 1
P1) Discuss suitable framework to examine impact of macro environment on Klarna and its
strategies.
Introduction of Klarna
Klarna was founded in the year 2005 in in Stockholm, Sweden. When organization
acquired SOFORT Klarna Group was formed. It is providing its payment services to 80 million
customers across the globe in around 17 countries (About company,2020). Along with this there
are 190, 000 merchants who are working hard day and night to meet the set goals and objectives
in the specified time duration (Anwar and Hasnu, 2016). The main vision of the organization is
to make payment mode simple, safe and smooth as much as possible. On the other hand their
objective is to make online shopping easier. This report is all about business strategy and how it
gets impacted by macro environment factors. Porter's five force are studied in-depth in order to
make improvements in the loop holes. Ansoff matrix is ascertained in order to select the best
strategies from the pool of tactics. Business strategy refers to as actions plan which business
associates adopts in order to attract large targeted customers base for the goods and services. It is
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a roadmap that leads in accomplishment of desired goals in the specified time duration
(Definition of Business Strategy, 2020).
Macro environment is explained as set of uncontrollable factors which influence business
day to day working either positively or negatively (Burlton, 2015). In the competitive era
organization can grow and flourish then they are able to cope with the external forces. Macro
factors includes, political factor, economical factor, Social factor, technological factor,
environmental factor and legal factor. All this uncontrollable factor are illustrated as under:
Political factor: Fiscal and monetary policies, taxation system, trade restrictions and
many more are involved in political factor. Klarna before expanding its services in other nation
need to better understand the political factor of that particular nation so that the service of easy
payment can be offered to the customers easily. UK political condition is stable in nature so as
well as general public welcomes are seeking for more innovation in the existing goods and
services. Moreover, Brexit cause many instability and uncertainty in UK so Klarna need to
design effective tactics in such a way that services easy payment mode services does not get
affected (Cubas‐Díaz and Martinez Sedano, 2018). Additionally, governing bodies are
supporting the companies dealing online so that safe and secure payment mode can be offered to
the customers.
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Illustration 1: Pestle analysis, 2018
Source: Pestle analysis, 2018
Economical factor: Inflation rate, unemployment rate, GDP trend, interest rate and so on
are examples of economic factor which are influencing the business to a large extent. However,
in UK cheap technologies are available that can be used by Klarna in their service so that more
safe and secure payment mode can be offered to the client. On the other hand, due to Brexit
there is deprecation in the value of pound that forced Klarna to upgrade their service.
Additionally, Brexit also resulted in quick trade deals among UK and US. It affected the tactics
of the organization in such a way that prices can be possessed.
Social factor: This macro factor involves, preferences, tastes, lifestyles, trends,
demographic, culture and many more. There is large customer base in UK with varied culture
and religion. Due to which preferences of customers using online service for payment changes
accordingly. Many problems are faced by the customers while paying the amount for their
purchased goods. They are looking for that payment mode which is easy to operate and is safe
and secure so that senior citizen and teenage can easily use it. Whereas, there is high income
inequality in UK as compare to other developed nation that impacted firm's pricing strategies of
its service (Eaton and Kilby, 2015).
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Technological factor: UK is the nation which is technologically strong and provide
numerous opportunities to companies to bring changes in their existing services and products in
order to gain competitiveness in the market. Klarna has huge growth opportunity to expand its
easy payment mode services in UK because the general public are illiterate and welcome
innovation. Organization is proving easy and safe payment mode to the customers who are
shopping goods online. Additionally, changes in technology results in obsolescence that raise
their cost of innovation in the payment service.
Environmental factor: Due to raising global warming climate is changing tremendous.
So, the step taken by Klarna to make online payment easy will help to go nation cash less. It is a
positive step taken by the organization because by making the online payment mode easy and
secure people will be interested to use it in their day to day life. By this less use of paper will be
done and environment will be saved from depletion (Grayson and Hodges, 2017).
Legal factor: In order to operate the business smoothly in the global market all the rules
and regulation related to online should be adopted by Klarna. By this customers can be assured
that they are using safe and secure payment mode while they are purchasing their desired product
through online sites. On the other hand organization need to look into the matter that they are
following specific nation norms regarding online payment mode so that effective payment
service is provided to them. On the other hand it is a prominent opportunity for the organization
because it can use strategy in relation to enhancing the benefits to environment by effective
creativity in payment mode.
However, the another framework which can be used to examine the impact of macro
environment on firm and its strategies is stakeholders analysis (Hamilton and Jack, 2017).
Below stakeholder analysis is properly illustrated as under:
INTEREST LEVEL
POWER LEVEL
HIGH LOW
HIGH Employees, Shareholders Government
LOW Customers Suppliers
From the above it can be understood that there are two variables. First variable depicts
power that reflect the authority while, second variable is associated with interest which show
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how from firm's strategies stakeholders could be influenced. Their analysis and impact on
company is done as follows:
Employees: This are included in stakeholders and in regards of Klarna the power is
intense because of companies culture. It is important for Klarna to use tactics that aid staff
members in fulfilling their personal goals. The stakeholder level of interest is more in Klarna.
Therefore, it reflect that firm should select a partway that influence employees in optimistic way
(Higgins and Phillips, 2015).
Shareholder: It also, have high power and interest in an organization. On the other hand
because of the reduction in the economic in the market like UK they have high impact on the
firm. This is because of acquiring more cash amount returns from Klarna. In order to deal with
this firm need to operate its payment service appropriately so that they can survive and sustain in
the market.
Customers: They are the one who will be using the online payment mode while
purchasing goods online. The interest level is low. Example: Easy and secure payment mode is
developed in the market by understanding the demand among customers. Yet, clients do not have
the authority to decide the tactics formulated by Klarna. Therefore, it can be concluded that they
have moderate influence on the company.
Government: Transfer of technology, balanced regional development and growth,
supply of information, providing monetary system etc. are some of the roles performed by
governing bodies in regards of Klarna. The above mentioned roles helps firm to enhance their
payment service online in the open market place (Johnson, 2016).
Management is preparing business tactics in order to reduce the influence of macro
environment. By doing so set goals and objectives can be attained easily in the set deadline.
Klarna need to modify its tactics according to the dynamic environment so that they can easily
deal with the political and economical conditions which emerged in UK because of Brexit.
Technological changes leads to obsolescence of services because rivalry come up with more easy
methods of online payment.
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LO 2
P2) Examine internal environment and capabilities of Klarna adopting suitable methods.
Business is not only affected by external factors but also by internal factor. Klarna
decision making process and strategies are directly impacted by internal factors. Internal
environment includes are controllable factors and can be altered accordingly so as to remain
competitive in the market. resources, technology, vision, mission, organisational structure,
corporal culture, value system etc. are included in internal factor. Klarna's capabilities can be
ascertained by the following ways:
According to the analysis, Klarna's stands effective in easy payment mode service. Staff
members are working day and night to meet the emerging needs of the customers (Leischnig and
Ivens, 2016). Apart from this, organization has numerous capabilities and abilities for that VRIO
model is used. It is the most suitable framework to examine the positive and negative aspects of
the firm. Below is the explanation of the framework which are as follows:
RESOURCES VALUABLE RARE INIMITABLE ORGANISABLE COMPETITIVE
ADVANTAGE
Brand
Image
Brand
Image - - -
Temporary
Competitive
Advantage
Manufacturi
ng Capacity
Manufacturi
ng Capacity
Manufacturi
ng Capacity - -
Temporary
Competitive
Advantage
Innovation
Capabilities
Innovation
Capability
Innovation
Capability
Innovation
Capability - -
Sustainable
Competitive
Advantage
Human
Resources
Human
Resources
Human
Resources
Human
Resources
Human
Resources
Potential
Competitive
Advantage
Valuable:
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Brand image: Klarna's brand image is good and valuable in the market. This aid the
business to improve its global presence as well as ensures smooth entry in the targeted market.
Servicing capacity: Firm's servicing capacity is valuable because Klarna offer easy and
secure payment mode to those customers are shopping online. It is possible because of research
and development activities and are in accordance with healing the gap of the market (Linder and
Williander, 2017).
Innovation Capabilities: Innovation in payment mode is valuable because it permits
Klarna to improving its competitive edge. Additionally, improvements should be done in their
payment services so that more customer base can be raised for it.
Rare:
Servicing capacity: The payment service division has joined hands with other software
companies in order to come up with more safe and secure online payment. Additionally, the
software needed for safe and secure online payment can be acquire from them easily that will
make it effectiveness and rare in nature.
Innovation capabilities: The skill, mindset and technology input in regards of making a
new, easy and sage online payment mode is very rare. It is difficult to present the creativity to
other competitors who are dealing in the same segment.
Inimitable:
Innovation Capabilities: The payment services provided by Klarna is patented.
Therefore enhancing the inimitableness in all the additional feature developed in payment service
Human resource: Klarna's workers are highly skilled and expert in their field and can
bot be copied by rivalry (Martinez-Simarro and Llopis-Albert, 2015). Therefore their talent,
skills and competences make them inimitable.
Organisable:
Human resource: Klarna's workforce is highly trained in explaining customers
regarding how to do online payment safely in simple way. It improves the scope of organizing
the workers of Klarna's in working in an organization . As well as helping them in developing
easy and secure payment services.
The another method which can be followed by Klarna is value chain it is illustrated as
follows:
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Value Chain analysis: It refers to as strategy tool adopted by business associates in order to
examine internal activities of the organization. With the help of value chain analysis which task
are on priority can be ascertained easily. Value chain analysis is discussed as under:
Klarna's inbound logistics: Klarna's payment service includes proper understanding
regarding the online payment mode to the ultimate customers. By this more loyal customers can
be build towards the services over the years (Meckling, 2015).
Services: The high integration of online payment methods with other payment process is
the effective source of value creation for Klarna in the open market place.
Outbound logistics: It refers to as spreading the knowledge regarding the additional
features of online payment mode among customers. It can be done through seminars, sessions
and many more.
Marketing and sales: Klarna's way of awaring customers regarding the service of safe,
secure and easy online payment mode is unconventional.
Services: Business administration has high-profile online payment customer services
feedbacks in the present year.
Analysis of Internal environment aid firm to identify strengths and weaknesses of
Klarna. By this firm's structure, skills and capabilities can be controlled in order to meet the set
standards. In order to remain competitive in the global market it is essential to capture the
opportunities prevailing in the open market. Along with this , value chain model and VRIO
framework is used to create value for customers. Additionally, it is difficult to copy the easy
payment method that assist business to create tough benchmark for others.
LO 3
P3) Discuss Porter's Five Force Model to examine competitive forces
In the year 1979 this model came into existence by M. Porter. This is the most effective
tool adopted by business administration in order to examine the level of competitiveness in the
international market (Peng, 2017). This is useful in executing the framed tactics in order to raise
potential capabilities of the organization. Below is the brief explantation of Porter's Five Force
Model which is illustrated as under:
Bargaining power of supplier: In this case, the suppliers are in dominant position
which can decrease the margins of Klarna. It lowers down the overall profitability of company
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due to which the management need to take decision to deal with such kind of complex situation. .
Here the suppliers are, companies providing network facility, server and many more. There are
few supplier who are able to provide full speed network all time. Here, high prices are charged
from the caponises and huge profit is maximized. The management of Klarna can tackle such
threat by building efficient supply chain with multiple suppliers and experimenting with product
designs using different materials.
Illustration 2: Porter's Five Firce Model,2018
Source: Porter's Five Force Model, 2018
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Bargaining power of buyer: Buyer always retain high power with themselves due to
having numerous options to whom they can transact. Thus, this creates pressure on Klarna to cut
profit margin and offer them discounts and other offers. This can affect their profitability. In
today's ear customers are more interested to transact their payment online. Customers are more
interested in making payment online so that bargaining power of buyer is high (Thompson and
Gamble, 2015). Klarna is providing safe and secure online payment mode due to which more
loyal customers can be build towards the payment services over the years. To deal with threat of
buyers, the management of Klarna need to bring innovation in their offering list and offering
discounts.
Threat of new entrants: The threats of new entrants is high due to getting high
competition in terms of introducing innovation and new ways of doing things that makes easy for
customers to transact with them. Competitors are coming up with more easiest and secure way of
online payment with the advance software. It is a big threat to Klarna as it forces them to lower
the pricing strategy and providing new value proposition to the customers. Due to this, the
manager of Klarna need to update their current offerings list that gives reason to their loyal
clients to retain with them for future. Building economies of scale and spending amount on
research and development can also helps Klarna in dealing with their rivals in effective manner.
Threat of substitute: The threat of substitute is high due to having local vendors who
gives loan to the customers at lower rate of interest. This put pressure on Klarna to cut down the
rates of their interest to retain customers with them. In the global market there are many other
organization who are providing online payment services to their targeted customers. Potential
customers can be hold back when unique , safe and secure online payment services is provided to
the customers. Customers easily switch to other online payment services if customers are
unsatisfied with the transaction procedure and security. It result in high degree of threat of
substitute to the organization (Peng, 2017). This threat can be tackled by Klarna by increasing
switching cost for the customers as well as being service oriented instead of product oriented.
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Competitive rivalry: The threat of rivalry in banking sector is high due to having
presence of many companies such as Barclays, Lloyds banking group etc. Thus, these forces
Klarna to cut down their margin and offers services to their customers at lower prices so as to
sustain in market for longer duration. Klarna is running its online payment services between their
competitors that directly or indirectly influence the profit maximization ratio of the company.
The power of competitive rivalry is intense which resulted in deduction of productivity and
profitability ratio of the business administration. In the competitive era Klarna is able to deal
with the open challenges of the competitors because they are enabling more safe, secure and easy
to assess payment services to their targeted customers. On the other hand in order to raise the
market share management is joining hands with small rivalry. By this they can be in the larding
position among all its competitors prevailing in the international market. This threat can be
tackled by Klarna through building sustainable differentiation and making collaboration with
rivals to increase market share.
Business is able to take best decisions with the strategies because it provide roadmap . By
this set standards can be attained in the set deadline. Porter's five force model is examined to
better understand the external factors which are influencing the tactics of the company.
Additionally, positive and negative aspects is identified with the help of suitable strategies.
Along with this with the proper proactive actions firm is able to cope up with threats prevailing
in the global market.
LO 4
P4) Use appropriate range of theories, concepts and models to devise strategic plan
Ansoff Matrix refers to as strategic planning tool that was developed by Igor Ansof.
Management uses this particular framework because aid to devise strategies for future growth in
the international market. Klarna can use this tool in order to cope up with the rivalry prevailing
in the open market place. The four strategy of Ansoff are elaborated as under:
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Illustration 3: Ansoff Matrix,2020
Source: Ansoff Matrix, 20202 Market Penetration: Klarna is providing their existing online payment services in the
current market. By doing soi large number of customer base can be raised for the service
of payment because they are well aware about the customers demand for it. Organization
does not have to put any extra efforts to attract customers for the service.
 Product development: This strategy implies the development of new services to be sold
in the present markets (Woerner and Wixom, 2015). Klarna is providing their easy and
safe online payment mode to their targeted customers in the current market. By doing so
tough bench mark can be created for the competitors prevailing in the open market place.
Additionally loyal customers can be build easily over the years. Market development: This plan of action pertain offering present services in new and
fresh markets. Klarna is exploring their service of online payment mode in developing
nation where the literacy rate is low. It helps the organization to capture huge market
ratio as well as positive image for the organization service can be build easily. Diversification: It involves offering new payment services in new marketplaces. Klarna
is expanding its service of online payment in various nation so that customers who are
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shopping online products can being their dealing safely and smoothly (Torrent-Sellens,
2015).. By targeting new market with unique payment service competitive advantages
against rivalry can be gained easily. As well as huge profit can be maximized.
Vertical Integration:
This is explained as procedure when a organization take over any other company that are
operating on similar production path bit on distinguish stage. For example, vertical integration
would be the case where Klarna could adopt another smaller payment organisation in UK, like,
WePay and Stripe. Sith acquisitions will directly assist in improving the supply chain of the
company as well as helps in reduction of hackers and fraud taking place in while paying online
payment.
CONCLUSION
From the above it can be concluded that business strategy should be prepare by
examining the macro environment so that productive outcomes can be attained easily. Business
administration is able to gain competitive advantages when the strategies formulated by them are
effective in nature. VRIO model and value chain model are deeply studied in order to better
understand the internal environment factors and its impact on the business and its tactics. Ansoff
Matrix is ascertained in order to examine which aspect is suitable for company in making its
services effective in the market.
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