Analyzing Macro Environment and Internal Capabilities of Klarna
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This report analyzes the macro environment and internal capabilities of Klarna, a Swedish bank, to gain a competitive position in the UK market. It includes a PESTEL analysis, stakeholder analysis, VRIO analysis, and Porter's model evaluation.
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Table of Contents Introduction......................................................................................................................................3 P1 Apply the framework analyse and influence of macro environment within an organisation context.........................................................................................................................................3 P2 Analyse the internal environment and capabilities within organisation context...................7 P3 Apply Porter's model to evaluate the competitive force........................................................9 P4 Discuss the range of theories and models and develop a strategic management plan.........10 CONCLUSION..............................................................................................................................12 REFRENCES.................................................................................................................................14 2
Introduction Business strategy is defined as the course of action to be achieved among the various alternative available and provide proper direction of action for accomplishing the task in a timely manner(Cagnin, 2018). In other words, it is a set of competitive moves and actions that provide strength for improving the overall performance of an organisation. Klarna is a Swedish bank that provides wide range of online services such as payment solutions, post purchase payments and many more. This firm aims to provide new and innovative technology in order to gain large access of customers within the confines of UK. This report is based on framework analyse and and influence of macro environment through PESTEL analysis and stakeholder analysis. This report also comprises of internal analysis and Porter's five force model to assess the resources and competitive advantage within the banking sector. P1 Apply the framework analyse and influence of macro environment within an organisation context Macro environment is described as the process of aggregate of whole economy which consistofvariousaspectssuchasnationalincome,GDP,percapitaincome,levelof employment, competition, monetary and fiscal policy and so on(HunTer, 2016). The macro environment is connected to the business cycle that directly affect the decision making such as borrowing, investing and spending. This involve the PESTEL analysis that help to scan the environment and help in strategic planning for determining the market growth and business operations in order to gain a competitive position within the market. In the context of Klarna, the PESTEL analysis is presented as follows: Politicalfactors:Thisencompassesvariouselementssuchastraderestrictions, corruption, political stability, tax policy, labour laws and so on. UK has powerful political system and it has multi-party system that consist of two parties such as conservative party and labour party(Johnson, 2016). The exit of Britain from European Union, namely Brexit has caused lot of uncertainties and this affect the political system of the country. In UK, there is a constant ruling party since 1920 that provide benefit to both local and outside platform to expand their business operations. Thus, it is essential for the manager of Klarna to study all these factors and has to be updated towards all the current affairs that provide vast growth opportunities and growth of an organisation. Due to this, it increases the profitability and productivity and also help in achieving task in a respective time period. 3
Economic factors:These aspects include elements such as exchange rates, inflation rates, unemployment rates, interest rates etc(Lai, Melloni and Stacchezzini, 2016). UK is considered as the fifth largest economy in the world in terms of GDP and also there is reduction in corporate tax that is 18%. UK has been considered as the popular destination for Foreign Direct Investment which results an increase in investment opportunities in different parts of the country. Klarna has capture large market share in UK due to promotion of FDI and is considered as the leading operator of digital transactions. It is necessary for the manager of Klarna to study the economic aspects so as to grab the opportunities and to sustain in UK for a long period of time.As this aspect help in promoting the growth and thus gain a positive reputation in an around the world. Social factors:These comprises of various elements such as population growth, cultural barriers, lifestyle, diet conscious, safety emphasis and so on(Linder and Williander, 2017). The population of UK is considered as the multicultural and provided them with world class facilities. It is the most important component which is required to be examined by the senior authority of Klarna to acquire knowledge of emerging trends and preferences of customers. The Manager of respective firm fulfil the requirement of customers by promoting digital transactions and providing effective payment solution in order to gain popularity and to generate large number of customers across the globe.The concerned firm emphasises on delivering excellent services to their clients which promote future growth opportunities and ensure a great path. Technological factors:These includes various elements such as level of innovation, technological incentives, automation, research and development activity and many more. UK is considered as the technologically advanced country in the world. Klarna is a well-known Swedishbankthatprovidenewandinnovativetechnologytoensurefastandefficient transactions among the customers that saves time and cost. This also help the firm to gain a competitive position over the rival firms and thus provide an ease of convenience among the customers.In a digital economy, the respective firm provide various facilities such as online payments at a quicker speed which provide an ease to their clients. Environmental factors:These includes various aspects such as climate, weather and various environmental policies and so on(Maniora,2018). By looking among the growing awarenessofpeopletowardstheenvironment,themanagerofKlarnaundertakethe environmentally friendly initiatives by adopting the strategy of 3R's namely, reduce, recycle and 4
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reuse. Thus, this leads to increase in reputation of corporation at the global level as this step provide the protection towards the environment.This aspect helps the respective firm to achieve sustainable development and thus increase the positive image across the globe. Legal factors:These encompasses various elements such as patent laws, copyright laws, consumer protection and various other laws(Marx, 2016).It is mandatory for the manager of Klarna to abide all rules and regulations pertaining within the confines of UK. The management of concerned firm ensures obeying the rules and regulations in order to gain a significant market position in different parts of the country so that the goodwill at global scale does not hampered. Also, the respective firm provide protection of their transactions through intellectual rights so that it is not copied by others. Stakeholder analysis of Klarna: The stakeholder analysis is conducted to assign the work among the subordinates in according to their specialised skills so that they could work with greater efficiency and zeal (Mohelska and Sokolova, 2016). The main purpose of stakeholder analysis is to gain clear understanding of goals and objectives so as to achieve the task in a proper time. In the context of Klarna, the same is described as follows: 5
High power and high interest:The manager of Klarna consider the full involvement of peopleworkinginanorganisationandmakethegreatesteffortstosatisfytheirneeds (Ransbotham and et. al., 2017). This increases the productivity and profitability of a firm. High power but less interest:The Higher authority of Klarna divide the enough work among the subordinates so that they don't feel pressurized and boredom while working in a corporation. Thus, these people tend to be satisfied but not too much information is shared with them. Low power but high interest:In this category, the people working in a Klarna are completely informed about the projects so that they could work with greater efficiency(Remane and et. al., 2017). Also, they provide new and innovative ideas but their views and opinions are not taken much into consideration because of low power. Low power and less interest:The supervisor of respective firm continuously monitor the activities of employees and also does not bore them with excessive communication. This 6 Illustration1: Stakeholder Analysis (Source: Stakeholder Analysis, 2019)
ensure proper optimum utilisation of resources that help in completed the task in a proper time and thus saves time and money. P2 Analyse the internal environment and capabilities within organisation context The internal analysis of a company helps the firm to determine the positive and negative of a business enterprise that provide growth opportunities and expansion (Soltanizadeh, and et. al., 2016). Conducting an internal analysis of Klarna help the firm to determine the useful information that ensure sustainability and long-term growth of a company. Strategic planning provides the direction of action and help an entity to gain a brand reputation across the globe. Therefore, this help the management to take fast decision while carrying out the strategy formulation and implement it to achieve the task in a limited time. VRIO analysis of Klarna The manager of Klarna uses the four components of VRIO analysis that is valuable, resource, imitable and organisation that evaluates the resources and capabilities of a firm in order to gain a sustainable competitive position across the globe. With reference to Klarna, the same is presented as follows: ResourcesV Valuable R Rare I Inimitable O Organized FoodYesNoNoNo EmployeesYesYesNoNo PatentYesYesYesNo Financial resources YesYesYesYes Valuable:ThefinancialresourcesofKlarnaarehighlyvaluablethatprovide opportunities to the firm to invest their funds into external opportunities and thus ensure diversification and expansion(Zhu and Chertow, 2017). The firm provides local food products that are highly differentiated that provide an ease of convenience among the clients. Also, its employees are considered as the asset because they are highly trained and thus increase the output and retain them for a long period of time. The patent of a concerned firm is highly 7
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valuable that allow the firm to sell its products without the interference of competition within the market. Rare:With reference to Klarna, the financial resources are considered as rare as it is not easily possessed by its competitors such as Bread, Adyen, Skrill and so on. This boost the sale and improves the productivity of a firm. The employees are provided specialised training in order to increase their skills and knowledge base as it helps in increasing the output. The manager provides pleasant atmosphere so as to provide great sense of comfort among the employees and inculcate confidence and determination in them. Also, it is difficult to obtain patent by its competitors because of its costly procedure as it provides greater benefit to the Klarna. Imitable: In the context of Klarna, the financial resources are costly to imitate as these are acquired by the company through the profits earned in previous years(Soltanizadeh, and et. al., 2016). According to VRIO analysis, that patent is costly to imitate because there are severe government regulations that would not allow its rivalries to copy the product easily. Organisation:With reference to Klarna, the financial resources are properly organised as it allows the management to make sure that resources are used in the right place at right time by making use of opportunities and combatting the threats. This provide growth opportunities to a firm and help in diversification and modernization and thus improves the overall performance of a company. Therefore, this aids the firm in achieving the significant position and maintain positive reputation at a global level. McKinsey's 7S model Mc Kinsey 7S Framework is a business management model that consist of various components such as structure, skill, style, shared values, strategy and so on to assess the resources and monitor changes takes place in the internal analysis of a company(Yuan, Cheng, and Ye 2016). Each element is interrelated to each other that ensure the impact of changes made in one area is taken into consideration. In the context of Klarna, the seven factors are prescribed below: Strategyof the manager of Klarna prepare an appropriate strategy to achieve competitive advantage across the globe. Long term planning is done by the management of a company to facilitate coordination and cooperation within the enterprise. 8
Structure represent the organisation framework in which the manager assign the task among the subordinates in according to their specialised skills. Systemimpliestheprocessandprocedureofacompanywhichrevealthedaily operations of a business to complete the task in a proper time (Mohelska and Sokolova,2016). Proper systematic procedure is followed in Klarna so as to facilitate the smooth operation. Skills are associated with abilities that concerned firm's employees have to perform well and to gain competitive position within the market. Staff inKlarna is well renowned huge company with 2,700 employees that provide specialised training to their subordinates in order to increase the efficiency. Style in Klarna, democratic style is followed as the leader consult the ideas and opinions of employees so they feel that their presence is important in decision making of firm. Shared values of the manager of respective firm guides the employees about the norms, culture and ethics so as to provide systematic working in an organisation. Therefore, these are considered as the foundation of every business entity. P3 Apply Porter's model to evaluate the competitive force In today's era, banking industry is regarded as hyper competitive sector which is composed of number of companies to gain an edge over the other (Dawes, 2018). Klarna is one of the leading Swedish banks in UK that provide wide range of services. Porter model is a business management tool that ascertain the strength and weakness of a company in terms of attractiveness and profitability. It also aids in assessing the resources that provide growth opportunities to a firm and thus gain a competitive position within the market. The manager of Klarna has used this model to determine the long-term profitability in shaping every market and industry. The same is presented as follows: Threat of new entrants:The magnitude of this factor in banking industry has to be low. The major reason behind is that the respective corporate sector needs a heavy investment in terms of capital. This in turn makes it difficult for the new entrants to gain access to a market. Further, banking sector is governed by number of laws which has to be followed by the company to ensure their long-term sustainability.Due to this, the management of Klarna has invested large sum of money in its business operations which is difficult for new entrants to gain such exposure. 9
Bargaining power of suppliers:The power of this force is usually low in case of banking industry. Being a large-scale organisation, Klarna has giant number of vendors as they have less control on their prices (REZAEI, and et.al., 2016). The products provided by these vendors are standardised and have low switching cost which makes a bargaining power of suppliers a weak force.The respective firm have huge number of suppliers that provide similar products and thus make it more competitive. Threat of substitutes:The degree of substitutes within the confines of banking sectors is acknowledged to be low. The main reason behind such cause is that Klarna is selling products at a low price but of standard quality within the market. The respective firm has the opportunity to provide more innovative service to gain large access of customers across the globe.This help the firm to gain positive reputation and brand name within the banking industry. Bargaining power of customers:The level of this factor with respect to banking sector is considered as low. Today, buyer is concerned more about the quality of products rather than to be price sensitive. In the context of Klarna, the product differentiation is regarded as high so buyer would not find competitors to produce a particular product which makes this factor a weak force within the banking industry.Thus, it increases the profit and productivity and also generate large number of customers from different parts of the country. Competitive rivalry:The extent of this force is regarded to be low. Although the competitors of Klarna are several such as Stripe, Wepay, Bread and so on but they incur high cost. In this relation, the respective firm provide an innovative technology which incur less cost and of high quality. The offerings produced within the banking industry are unique that win the hearts of customers to providesustainability growth and high prospective in future. Also, it provide instant solution to their clients by delivering best services. P4 Discuss the range of theories and models and develop a strategic management plan There are various theories and models that are applied by the top management to achieve the efficiency of a business. The ansoff matrix is a tool that help the firm to look into opportunities and enhance the revenue and profitability of a firm. A strategic management plan is prepared to identify the vision, mission and objectives of a business to gain a significant position across the globe. The manager of Klarna has used the four strategies of ansoff that are presented below: 10
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Market Penetration:This strategy emphasises on selling the existing product in the well-established market with an aim to increase the market share (Moreno-Izquierdo and et.al., 2016). The manager of Klarna could adopt this strategy by providing efficient services in order to gain large access of customers. The firm would come with special offers to boost the sale and enhance the profitability of a business.Also, this could increase the sales and thus improve the overall performance in the world. New product development:This emphasise on selling the new product in the existing market. The higher authority of Klarna could invest in research and development to develop new product in order to cater the needs of existing market. Thus, this aids the firm to satisfy customer needs in a dynamic environment.By considering the changes, the firm could adopt advanced technology so as to meet the requirements of customers. Marker development:This strategy focuses on entering a new market with the well- established products. In the context of Klarna, the firm could expand its operations into new geographies by catering the demands of different customer segment. This firm has expanded new market segments in Germany to cover the large market area and to generate large number of clients.By investing huge sum of money, it could develop new market in Australia to generate more clients. Diversification:This is a risk associated strategy which emphasises on new product in new market(Zhu and Chertow, 2017). In the context of Klarna, there is high chances of failure when the firm launches the new product in the unknown market of whether it fulfil the demand of customer and market within the confines of UK.This strategy consider a lot of risk because it is difficult to set new market with new products or services. It has been analysed that market penetration is considered as appropriate strategy by the manager of Klarna. As the company would focuses on advertising campaigns, market research in order to increase market share and to generate large number of customers from different parts of the country. Porter's generic strategy This is described as business model which help the firm to gain sustainable competitive position by offering customers greater benefits and services at a low price to contribute a significant position within the market. In the context of Klarna, the same is presented beneath: 11
Cost leadership:This strategy is associated with the firm to keep their cost as low as possible(Ransbotham and et. al., 2017). If the manager of Klarna adopt this method, then the firm could keep their prices low so as to gain large market share and to achieve higher level of customer satisfaction. This provide enormous growth opportunities to a firm and thus increase the revenue and sale within the banking sector. Differentiation:This strategy focuses on providing product differentiation to adapt changes quickly in a dynamic market(Remane and et. al., 2017). If the senior authority uses this, then it emphasises on rendering best and unique services to their customers in order to gain a competitive position within the confines of UK. Focus:It is the combination of both cost and differentiation strategy that focuses on providing best and efficient services to their customers at a lowest possible price. In the context of Klarna, the manager provides innovativeand digitalplatforms to provide an ease of convenience among the customers across the globe. It has been observed that focus strategy is considered as an appropriate by the Klarna because it focuses on both product differentiation and cost-effective services to their clients. This increase the productivity and efficiency of a firm and also enhance the profitability within the confines of banking sector. Strategic Plan It is described as the process of an organisation's process of defining the vision, mission and objectives of a business and also to make decisions by allocating the resources to gain an competitive position within the market (AYDIN, 2017). This also help the firm to control mechanism for guiding the implementation of the strategy by achieving the task in a proper time. The banking industry that is Klarna has planned to new business strategy and its management plan is devised as below: Aim:The aim is to expand its operations in different parts of the countries such as Germany to capture large number of customers. Vision:The vision is to provide innovative technology so as to make fast payment system among the clients. Mission:The mission of Klarna is to make payment system simple, smooth and safe to provide an assurance among the clients. 12
Goal:The goal of concerned firm is to deliver best services in an effective manner so as to gain large access of customers across the globe. Strategy:The manager of Klarna uses the market penetration strategy as the appropriate one through various promotional methods by capturing the large market share. Smart objectives:The manager of respective firm uses the SMART objectives that are given below: ï‚·To increase the sale by 10%within 12 months so that it could expand its operation internationally. ï‚·To gain additional profit of 5% in eighteen monthsso that could gain brand image across the globe. ï‚·To complete the task in a proper time by fulfilling the needs of the customers everydayso that it can achieve organisational objectives. ï‚·To increase the communication skills within 3 Months in order to avoid conflict and misunderstanding among management and subordinates. CONCLUSION From the above information, it can be summarised that the business environment in which company carry out its operation is regarded as dynamic. Business strategy play a necessary role in order to scan the environment analysis and to assess the resources in order to gain a competitive position within the market. It has been analysed that there is impact of macro environment on the decision making of a firm through VRIO analysis and stakeholder analysis. Also, the Porter's five force model is conducted to determine the level of competition and enhance the profitability within the banking industry. The manager has to adapt the changes in policies and procedures of a company in order to gain a competitive position within the market at a global level. 13
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