Impact and Influence of Macro Environment on Organization and its Strategies

This document discusses the impact and influence of macro environment on organizations and their strategies. It explores the use of analytical tools such as PESTLE analysis and Ansoff's growth vector matrix to analyze external factors. The document also includes a case study of ASDA, a British supermarket retailer, to understand the role of business strategy within the firm.

BUSINESS STRATEGY

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
LO 1.................................................................................................................................................3
Impact and influence of macro environment on organization and it’s strategies........................3
LO 2.................................................................................................................................................6
Internal environment and capabilities of ASDA.........................................................................6
LO 3.................................................................................................................................................9
Porter’s five forces.......................................................................................................................9
LO 4...............................................................................................................................................11
Models, theories and concepts...................................................................................................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
Business strategy is the combination of all actions and decisions that undertakes by
corporations to access it’s goals and objectives in it’s sector in which they operate. A effective
business strategy helps organization to be competitive in the business market and generates high
revenue within company. With good business strategy management of the organization define
needs of business to accomplish it’s objectives which supports to direct decision-making process
and allocates resources in efficient manner. There has an example of ASDA company to
understand role of business strategy within firm. It is a British supermarket retailer which is
headquartered in Leeds, UK. It posses’ wide product line such as grocery, general merchandise
and financial services and offers it’s products in multiple countries. It offers two type services
such as products services and other services like ASDA mobile, ASDA money etc. to the
customer and in return generates high revenue. The main objective of the report is to provide
high understanding about business strategy which is undertaken by organization to meet it’s
objectives.
LO 1
Impact and influence of macro environment on organization and it’s strategies
There is some analytical tools such as pestle analysis and Ansoff’s growth vector matrix,
use to analyze external environment and it’s impact on business strategy.
Pestle Analysis
It is a analytical tool use to determine the external environmental factors which impacts
on business performance, productivity and operations. it is basically comprised five type factors
i.e. political, economic, social, legal and environmental factors which impacts on organization’s
business strategy and decision-making process as well (Achinas and et.al., 2019). This
framework is used for ASDA plc as analytical tool to analyse impact on organization’s business
strategy process. The model is described as follows:
Political factors
From past few years UK has political stability that gives beneficial advantage to all
MNC’s corporations like ASDA because they do not have to change it’s policies related to
employment, retailing and products etc. which improves revenue of the businesses. ASDA has
wide product line and services that causes it offers it’s products and services to the customer

effectively and in returns generates high financial benefits within retail sector. But it has
impacted negatively due to Brexit because it has led some change in the product policies and
employment policies which creates uncertainly in business operations. In addition, organization
unable to retail it’s products in nearby country as well because according to Brexit, if MNCs
trade it’s business in multiple country in that situation they have pay additional tax. This law
reduces profit margin on products that impacts on ASDA’s business decision-making negatively.
Economical factors
Economic factors are competitive pressure, pay level and unemployment rate impacts on
ASDA’s business strategy and profitability as well. In the UK market has high availability of
suppliers that reduces bargaining power of suppliers. It gives positive impact on recruitment
strategy of ASDA because it gets high number of skilful suppliers who are willing to work on
low wages due to does not have any alternate options (Gürel and Tat, 2017). In addition, this
strategy influences by UK’s government as well because according to government, ASDA is
trying to eradicate poverty in the country by recruiting large number of peoples.
Socio-cultural factors
Heathy lifestyle, celebrating following, disposable income and others impacts on ASDA
plc business strategy. Organization has used segmentation strategy to target it’s specific market
and customers so that in return generate high revenue and improves customer experience by
offering value-added services. But Brexit improves high unemployment rate in UK that impacts
disposable income of people negatively. it leads change in customer’s trends and starts to buy
those products which posses’ good quality and has lower cost (Holotiuk and Beimborn, 2017).
Due to this trend, organization is not enabled to generate high profit margin on products even it
sells it’s products on lower cost. Overall organization gets negative impact on it’s profit revenue.
Technological factors
Superfast broadband and mobile apps with click & collect delivery services etc. are
technological factors which influences organization’s strategy processes. For example, UK’s
people are highly updated for e-commerce market so they prefer to do online shopping instead of
traditional shopping. So, management of ASDA made decision to introduce RFID technology
and mobile app services for the customer. As resultant this technology has influenced selling
revenue of the products because it retails it’s products on lower cost. Thus new technology has
improved profitability of company in the supermarket effectively.

Legal factors
UK government is highly strict for all rules and legislation associated with employment
policy, minimum wages act, consumer’s health and protection policy and others and takes
punitive actions if any organization or individuals breach rules and legislation. So, ASDA takes
all business decision accordingly governmental policies so that can sustain in the business
market effectively. But wages act has impacted on organization’s productivity negatively
because it cannot recruit large number of staff within workplace due to high salary.
Environmental factors
UK’s government has formulated policy for environmental safety and imposed on all
MNCs which are affiliated from manufacturing and product retailing and has pressurised them to
operate in environmentally friendly manners (Yuliansyah, Gurd and Mohamed, 2017). So,
ASDA takes decision to introduce organic foods for the people which abide government policy
and fulfil customer’s needs. Whereas UK’s government influences ASDA’s new products
decision-making process positively.
Ansoff’s Growth Vector Matrix
It is a marketing planning process that used to determine appropriate business strategy
and tactic which leads success in the business market (Leonidou and et.al., 2017). It is also an
analytical tool that supports organizations to determine business strategy which improves it’s
productivity and operations effectively. This model is applied for ASDA to analyse impact of
business strategy on it’s profitability and decision-making process. it comprises four type
strategies that are explained below:
Market penetration strategy
According to the strategy, organization focuses on achieving growth with the existing
products in the current market to keep goal to influence market share of the product. ASDA has
followed market penetration strategy for the UK market. This strategy has proved effective for
the organization because it enables to generate high profit in the company on it’s existing
products. in addition it captures large market share on it’s certain existing products which has
awarded as 2nd largest supermarket chain in the Britain.
Market development

The business focuses on growth by targeting it’s current product into new segment,
aiming to expand business in multiple countries successfully. With this strategy ASDA has
successfully expanded it’s business only in some fewer countries like UK and US. But it unable
to expand it’s business in other countries like Tesco and M&S which denotes that organization
gets negative impact on it’s market development strategy.
Product development
Corporation targets existing market segment by developing new products in the business
market. This strategy helps organization to differentiate itself from other brand through it’s
products and generates competitive advantage from the competitors. Product development
strategy has impacted on organization’s performance and profitability positively. With the
strategy organization introduces number of new products times to time in the UK and US market
as result has received effective outcomes in term of good market share in the Britain market. It
express that ASDA gets positive impact on it’s business strategy processes.
Diversification
The company grows it’s business by expanding it’s franchises into new market segment
with new products. it is quite risky process because here product and market both are new, so it
requires deep research of new market and strong brand power. ASDA has implemented this
business strategy in the organization and sets all objectives and goal based on it. But this strategy
has proved negative for the company because it’s management did not do deep research of new
markets like japan, china and others which led huge financial loss within company. Therefore,
diversification strategy impacts on organization’s economical scale and it’s product growth
negatively. New product launching strategy has impacted on organization’s productivity
negatively because it did not use good advertising strategy that caused people in new country
unaware about new products and it’s services (Lieder and et.al., 2017). These were major
mistake of the ASDA which has led failure in business expansion strategy.
LO 2
Internal environment and capabilities of ASDA
To analyse internal environment and resources of ASDA has two analytical frameworks i.e.
VRIO analysis and Swot analysis.
SWOT Analysis

Strengths
 Extensive distribution: It has more than 25 distribution centres around the UK and offers
it’s product availability across the network of retail stores. These stores are basically
stored chilled foods, clothing and other readymade foods like cereals and carbonated
drinks.
 Excellent marketing campaign: ASDA has highly popularized in the UK market for it’s
marketing campaigns which are framed for it’s services and customer delights. Due to
this strategy enables to establish good brand image in customers’ mind (Lyneis, 2020).
 Sustainability: It is major strength of the company whereas it has goal to decrease
environmental impacts of it’s operations, products and services which it’s employee
retails to the customer. Such kind sustainable practices enable to abide all UK’s
government policy and improves demand of sustainable products in customers and puts
pressure on it’s competitors.
Weaknesses
 Limited global presence: ASDA comes in 2nd largest supermarket chain in the Britain
market but after that it has limited presence in the global market rather than it’s
competitors like Tesco, M&S etc. which is major weakness of the ASDA.
 False advertising: In 2010 organization was announced that it will sales all it’s products
on lower cost through popular press in UK but it’s management was declared that they
sell their products on lower prices than other supermarkets. Two type statement of the
company was portrayed negative image in the customer’s mind (Razak and et.al., 2016).
Opportunities
 Expanding into other countries: ASDA plc has opportunity to expand it’s business
operations into other countries like China, India and others. These countries can support
organization to improve brand presence effectively.
 Presence in online market: Currently, people shopping trends has changed because they
have become highly updated for e-commerce marketing. So it is golden opportunity for
the organization to expand it’s busines operations online.
Threats

 High competition: From past few years rises competition in retail sector due to highly
availability of retail stores which causes ASDA gets negative impact on it’s profit
margin.
 Brexit: Brexit keeps constant changing in governmental policies which become big threat
for the retailers like ASDA.
VRIO analysis
It is a analytical technique that is used to evaluate organization’s resources and
capabilities and generates sustainable competitive advantage. VRIO analysis model is used for
ASDA plc to analyse it’s internal environment. The model is described below:
Valuable: ASDA has valuable resources such as local food products, employees, patents,
distribution networks etc. which are specifically differentiated and it can achieve highly
competitive advantage over these resources in the business market. There are other resources like
R&D and Cost structure which are not valuable but assists organization to improve profitability
of valuable resources (Tsatsoula, 2018).
Rare resources: The rare resources of ASDA are financial resources, local food products,
employees, patents and distribution network etc. helps company take competitive advantage
from the competitors as well as improves capabilities of the company. These resources are highly
expensive so no one can imitate these resources.
Imitable resources: Financial resources, local food products, distribution networks and
patents are important resources of ASDA plc which are quite difficult to imitate by competitors.
The reason behind is that it requires huge investment and good business strategy which is not
possible for new entrants or existing competitors. But employees of ASDA are not enough costly
to imitate so other firms can easily imitate it’s staff by offering best training class to them within
workplace.
Organization resources: Financial resources and distribution networks are well organized
resources of ASDA which helps to improve demand of products in the UK market (Vargas-
Hernandez and Medrano., 2020). While patents are not well organized in ASDA which causes it
unable to use these patents for it’s full potential. If organization sell it’s patented products before
expiration then can create sustainable competitive advantage in the business market.
Resources Valuable Rare Imitable Organization
Financial ✔ ✔ ✔

resources
distribution
networks ✔ ✔ ✔
Local food
products ✔
Employees ✔ ✔
Patents ✔ ✔
LO 3
Porter’s five forces
To understand the market effectively this model is used so that there is a better
profitability in the market so that the company can improve the functioning and operations which
are taking place in the market. There are a lot of decisions which the manager and the leaders
have to make so that there is an effective functioning (Dahlberg, Hokkanen and Newman, 2016).
The competition in the market is also rising which has to be analysed and then the decisions have
to be made for the benefit of the growth in the market.
 Threat of new entrants (Low)
There is a requirement of a lot of investment which the company will have to make so that
there is a better functioning of the organization. There are big companies which have established
and gained the trust of the customers which is why it is not possible for other organizations to be
able to function and make a place for themselves in the market. There is a requirement of the
right skills and developed employees as well in the company so that the organization will be able
to make a place for them in the market (Neugebauer, Figge and Hahn, 2016). There is a lot of
investment which is required in the company to be able to make new products and services
which is going to help the company to get higher profit margins.
 Bargaining power of buyers (Medium)
The trends in the market are changing which have to be followed by ASDA so that the
company can make the customers get what they need. ASDA has a lot of skilled and experienced
employees which are adapting to the changes effectively and that are a great factor for the
company (Idemudia, 2017). There are discounts and offers which are being given by ASDA to
the customers so that the customers get loyal to the company and there are a lot of stores which
the organization expanded so that the customers can find it easy to get their products. The

environment for the services and products is also good for the customers which is why the buyers
do not having a lot of say in the products and services of ASDA because the company maintains
themselves in the market.
 Bargaining power of suppliers (Low)
ASDA has been in this industry from 71 years which is a great factor because the
organization has been able to make a place for them in the market. The company has loyal
suppliers in the organization which helps the company to be able to get in their raw material
which can make the company have a better functioning. The amount which the suppliers ask,
when high then ASDA shifts from one supplier to the other so that they can have a cost friendly
method of doing things their way so that the company can have a better functioning (Bromiley
and Rau, 2018). There is already a lot of investment which the company has made in the
company and is still making in technological aspect of the company which is a great factor for
the organization.
 Degree of Rivalry (High)
There are a lot of competitors in the market which are in competition with ASDA like Tesco,
Sainsbury’s, etc which can make the organization have lesser sales. ASDA is focusing on the
functioning and the organization has to make sure that the company has to have a better
functioning so that the company can get higher profits. The reputation of the organization can get
affected which is why the company has to maintain their productivity in the market so that the
demands of the customers and the expectations of them can be fulfilled.
 Threat of Substitutes (High)
The competition is high which is why there is a substitute of all the products in the market
which can make the company have a lot of sales. There has to be a well trained workforce in the
organization and development for the employees so that the company can have a better
functioning (Saviano and et al., 2019). There are a lot of ways which ASDA is aware of so that
they can attract the right customers and the company will be able to have higher profit margins.
The products are copied but the quality and trust of the customers make the organization have a
stable profit and sales in the market which is a very essential factor.

LO 4
Models, theories and concepts
Mission
The organization wants loyal customers, increase the brand value in the market and the
value of the customers in the organization is the mission of ASDA.
Vision
The organization is having a vision for having a value of colleagues, customers,
community and the stakeholders of the organization in the industry the organization is serving
within. The loyalty and commitment of the customers and the employees towards the
organization is present which is making the organization be able to have a vision like this which
can be achieved for a long run in the market.
Core value
The organization is taking measures so that they can provide the customers with the best
of products which can make the value of the organization increase. Satisfaction of the customers
is very important and focused upon by the organization so that the organization can compete in
the market where the competition is just increasing (Cagnin, 2018). The right decisions will be
taken by the company which is a very important factor.
Objectives
 To increase sales of new product of ASDA by 30% till the end of year 2023.
 To increase the market, share by 40% till the end of year 2024.
 To enhance consumer experience by 20% in upcoming 11 months.
Ansoff Matrix Market Development
ASDA has been in this industry from 71 years which is a great factor for the organization’s
portfolio and the company has gained a lot of experience and confidence in the market so that
there organization can have a better functioning. It is going to be on the brand value that the
company will be able to get a competitive advantage. There has to be a proper understanding and
analysis of the new market so that the right measures and decisions can be taken for the
organization. ASDA has experience which is why the company is being able to take the right
decisions. Diversification

There is a lot of risk which is involved in diversification which has to be monitored so that
there is a better functioning. ASDA is an established organization in this industry which is a lot
more experienced as well therefore the company can take a lot of risks and be successful with it
as well (Mohelska and Sokolova, 2016). This is good for the portfolio because it adds more
strength to the organization in the market. To have a better functioning there have to be a lot of
changes so that the company can have better functioning. Market penetration
Existing products have to be sold in the existing market that is a market development which
is not a risky move which the organization is taking and will help the company to expand
themselves in the market. The product will get loyalty in the market which is going to be very
helpful for a long run and the organization will be able to function effectively. ASDA used this
method before they started expanded themselves in the industry so that they can have a strong
base in the market for themselves (Goode and Negoro, 2018). Product Development
There have to be a set of loyal customers in the organization which are even going to take the
new products. This is a very good stage for the organization so that they can take feedbacks and
improve the products according to the customers so that the product can be expanded into the
competitive market later (Iamratanakul, 2018). All the products cannot be a success in the market
which is why taking feedbacks and improving the products is important so that the company can
have a better reputation in the market. The portfolio and the brand image are not going to be
affected negatively but only positively which is good for the further expansion of the company.
Market Tactics Product
There are a lot of innovations which are taking place in ASDA all the time because of the
competition in the market. All the companies in the market want a unique feather in the market
so that they can get a larger market share and higher profit margins which is good for the
organization (O’Riordan, 2017). There is a lot of investment which is being done in the research
and development department of ASDA so that there are new products and services which rise
and make the company have better functioning. Price

The pricing which ASDA was following is the skimming method but now it is using
competitive pricing strategy which is making the company have more sales. This is making the
customers get loyal to the organization which is a good factor since there is more investment
which the company is being able to do (Zakaria, Hashim and Ahmad, 2016). The quality of the
products is also good which is why it is very important for the company to price their products
accordingly so that the organization does not have a loss. This is done by maintaining the
workforce in the organization so that the organization can have a better functioning which is a
great factor for the company. Place
The company is very dependent on the retailers in the market and the outlets are increasing in
number so that the organization can reach out to the customers easily. To get the trust of the
customers the customers ease has to be thought about so that the company can have a better
functioning and the organization will be able to have a better functioning. The demands of the
customers are increasing which has to be maintained by the organization so that they can get a
profit from it (Braun, Latham and Cannatelli, 2019). There has to be a trust which the company
has to gain of the customers so that the sales of the company increase so that there is a better
operations and productivity increases. There have to be motivation in the organization of the
employees because the sales are going to increasing which can affect the functioning of the
organization because the demand of the customers will not be able to be met and the standards of
the company will not be maintained as well. Promotions
Promotions are a great advantage which ASDA has but is not being used effectively in the
market which is a great drawback for the company. The organization has also made itself
available online which is a great advantage for the organization and there is a larger base which
the company is being able to cover (Farren, Kinney and Crotty, 2017). There is digitalization
which is being used by the company so that the organization can have a base for them in the
market which is going to be very useful.
CONCLUSION
From the above report it can be concluded that there has to be an effective functioning so
that the company can have a better functioning which is a very important factor for the

organization. There are a lot of decisions which have to be taken by the company so that the
organization can get brand recognition and the organization will be able to get a larger customer
share for them. There have to be a lot of innovations and new products which have to be created
for the customers so that the satisfaction level can be increased of the customers. The
competition in the market is rising which is why the company will have to have make the right
decisions which is going to help the organization in getting competitive advantage. The changes
should be fast and effective which do not affect the productivity and operations.

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