Impact of Macro Environment on Business Strategy

This report discusses the impact of macro environment on an organisation's business strategy, focusing on Klarna, a Swedish bank. It explores the capabilities of the internal environment using frameworks like McKinsey's 7S model and VRIO framework. It also applies Porter's five force model to evaluate the competitive forces in the market sector.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Impact and influence of macro environment on an organisation and its business strategy1
TASK 2............................................................................................................................................5
P2 Capabilities of internal environment for an organisation by utilising appropriate
frameworks.............................................................................................................................5
TASK 3............................................................................................................................................8
P3. Applying porter's five force model to evaluate the competitive forces of a given market
sector of an organisation.........................................................................................................8
TASK 4............................................................................................................................................9
P4 Implement of new model, concepts and theories to develop strategic planning ..............9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy can be defined as the set of decisions as well as tactics that are
beneficial for individuals and persons to attain organisational goals and objectives. The main
motive of formulating business strategy is to generate an effective master plan that is
implemented by organisation to gain top position in market by understanding and analysing
market situations (Evans and et. al., 2017). This report is composed from point view of Klarna
which is operating their business in banking industry. It is a Swedish bank that provide online
financial services to customers such as direct payments, post purchase payment etc. Moreover,
this report highlights on impact of macro environment on company's strategy. Several
frameworks will be covered in this report to understand macro business environment (Amran and
et. al., 2016). Along with this, internal analysis is also included in this report to evaluate internal
strength and weakness of organisation. In the last, several model and concepts are included in
this report to make strategic directions.
TASK 1
P1 Impact and influence of macro environment on an organisation and its business strategy
The term strategy can be stated as an action that is taken by manager to attain Klorna
goals and objectives within specified time period. Moreover, strategy is defined as the general
direction that is followed by workforce of Klarna to perform their operations and functions in
effective manner (Drnevich and Croson, 2013). Also, with follow of right strategic decisions it is
easy for organisation to gain huge success in market at national as well as international level due
to which goodwill and profits of organisation both increased in appropriate manner.
Vision- Main vision of Klarna is to raise their work performance as per global standard to
perform work effectively at national and international level (Linder and Williander, 2017).
Mission- The mission of Klarna is to ensure safe online payments for business and
individuals to make online payments that attain high profits for organisation.
Objective-
 First objective of company is to expand their market area for performing their work at
international level.
 To increase their market area with 30% within a period of 90 days to increase company
profits.
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 The company offers fast banking services in order to manage all financial transaction
between the buyer and seller in a well organised way which helps in increasing the
profitability.
Several framework to analyse macro environment
Stakeholder analysis
In this, stakeholders are analysed and classified based on that level to which they take
interest and involved in project activities as well as can also influence activities which are related
to it (Hoejmose, Brammer and Millington, 2013). It includes mainly three steps that are as
follows:
Step 1: In this phase, Klarna's identified their participated stakeholders that are
influenced by the project. For the company customers, government and suppliers are their
stakeholders.
Step 2: At that level, all the listed stakeholders are prioritized on the basis of their
participation level, influences as well as impacts that can be discussed as follows:
(Source: Power / interest Grid of Stakeholder analysis, 2017) High power, high interest: At this phase, company should prioritise to keeping them
happy and satisfied and must focused on high engagement in the project so that it can be
completed effectively and successfully. Low power, high interest: These kind of stakeholders have more interest in project and
the company must keep them informed as well as check in with them on regular basis
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which ensures that they are not suffering issues on that project (Woerner and Wixom,
2015). High power, low interest: Company should focus on keeping their stakeholders satisfied
but because of their low interest in project, if firm over communicate with them it could
turn all of them off.
 Low power, low interest: These kind of people are neither interested nor have power to
influence project activities so company should just keep them informed regularly but do
not overdo it.
Step 3: After completion of all stages lastly company perform most significant step in
which effective strategy is communicating to all stakeholders so that company can able to
accomplished their project goals efficiently.
PESTLE analysis
PESTLE work as one of the most appropriate strategic tool that is utilised by business
houses to understand macro business environment. This can be considered as follows:
Political factors: These factors includes taxation, government policies, fiscal & monetary
policy, trade restrictions and so forth of a particular country which tends to have impact on
business strategies. As UK's political condition is stable that makes Klarna's business favourable
whereas, Brexit may cause uncertainty in the country so Klarna requires to formulate their
strategies in that mannner through which their operations are not affected. Although the
government of UK is facilitating support to the banks by intervening within the economic crises
world that can be an opportunity for Klarna. On other side, international customers are impacted
because of political changes that directly impacts on goals of organisation due to unfavourable
decision towards international buyers (Köseoglu and et. al., 2013).
Economical factor- It includes GDP, inflation rate, unemployment, interest and saving
rates and so on that determines the economic performance of company and impacts on business
strategies. UK economy is not at boom period in present scenario due to Brexit. As economic
uncertainties adversely impacts on Klarna and on the confidence of consumer so they need to
focus on formulating marketing strategies for balancing economic movements and market trends.
Also, company face difficulty in getting more deposits because of the low rate of interest on
investment and slow economic procedure.
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Social factor- It is compulsory for an organisation and its management to perform their
work as per society needs and wants. In simple terms social aspect include aspect such as
behaviour, value and belief that are followed by society. For Klarna it is a positive factor for
organisation as it leads management to perform their work as per society needs due to which sale
of products is increased with rapid speed. Due to the favourable aspects company can offers
flexible plan of pension investment in order to sustain in the market but make sure that this plan
is not complicated and implement at a low cost as well (Maté, Trujillo and Mylopoulos, 2012).
Technological factor- Most of current business and industries are performing their work
at global level with help of technology. So it is most important aspect for Klarna to engage
technology in its operations. Along with this, bank is performing their business at global level so
to provide fast and effective services to its customers. So, the company focus on creating a
corporate websites in order to directed their visitors to address and telephone number which
creates an opportunity for Klarna to get long term sustainability. Employees are mostly impacted
due to technological aspect as it enhance work performance and also consume less time to
complete task due to which it influence with positive aspect on organisation.
Environmental factor- It includes climate conditions, weather, water availability,
environmental laws, terrain etc. As the environmental regulations of UK are based on specific
principles, which may provide businesses that sets some standards which can't be exceeded. As
Klarna recognise present trends in the government as well as consumer demanding organisations
to minimise carbon footprints. The company committed to reduce their carbon footprint by using
renewable electricity as well as minimise the use of paper in regards for online statements while
communicating with their customers.
Legal factor- Laws and regulations are developed by government of country to ensure
the interest of local and international companies in a country by performing all work in ethical
manner. Financial conduct authority (FCA) is operating and monitoring financial transactions but
due to Brexit it is complex to manage international customers for performing monetary related
decisions. So in present scenario it is a negative aspect for organisation and impacts on supplier
and employees of a company (Scholes, 2015).
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TASK 2
P2 Capabilities of internal environment for an organisation by utilising appropriate frameworks
McKinsey's 7S model
Mckinsey's framework work as an effective tool that helps to analyse organisation
function and design by identifying different internal components. Within the context of Klarna,
this model can be represented as follows:
 Strategy- It emphasises on various range of goods and services as it is to be innovative
as well as excellent in serving to the customers. This will enable Klarna to improve their
influences on economy, make loyal customers as well as increase market shares.
 Structure- Klarna has well organised and managed in order to divide their working in a
systematic way through the classifying level like top, middle and lower (Yoffie and
Cusumano, 2015).
 Systems- It refers to the process that leads organisation to complete their work as per
daily activities and decisions. The system of Klarna is smooth and simple which helps in
efficient functioning of banking activities.
 Skills- This includes capabilities, competency and skills that are followed by Klarna to
perform their work for dealing with complex situations of business environment. As
company have skilled and qualified employees for doing banking activities and
operations.
 Style- It refers to those methods which are managed by an organisation to complete their
task as per top level for interacting with employees in effective manner that leads to gain
top position in market. Klarna is able to attract best and talent staff members and they are
very demanding of them for performing tasks which shows company's management as
effective and efficient.
 Staff- Huge number of employees is required in banking sector which are highly
professional. Klarna employed their workers by giving training and interviews as well as
company consider employees opinions as a best regards that results in motivated workers
which gives better productivity.
 Shared values- Specific oriented goals are termed as a shared values of Klarna that assist
in performing activities in ethical manner and it is very important for the entire world
because country's economy is depend on this.
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VRIO framework
This analysis is used by the Klarna in order to analyse their internal capabilities as well as
resources. It will help in analysing that whether its resources can facilitate them leading
competitive market position or benefits or not. Some of the capabilities of Klarna includes
financial resources, workforce, patent, system and techniques.
Valuable: All these capabilities are considered as a valuable resources for an
organisation. As company has strong financial position which can help in managing their
operational activities so it creates value for them. The company have skilled and trained
employees as well as professionals that can help in performing activities in an effective manner.
Also, company's patent are termed as valuable resource as it allows Klarna to sell their products
without any competitive interference (Akter and et. al., 2016) . The company has latest
technologies and systems to perform work with full of efficiency and accuracy so it is also
valuable for them.
Rare: For the Klarna, their financial resources are found to be rare because they have
strong financial resource which are rarely possessed by all businesses. Workforce of company is
also rare because they facilitates positive culture at their workplace along with the better
compensation plan and training so company's employees do not leave their jobs for others. The
patent of company is not possessed by their competitors easily so it is also rare to be found by
others.
Difficult to imitate: As the finance of Klarna have been gained by the profits of last
years and their competitors should needs same profit for getting competitive advantages so their
financial resources are very difficult to intimated. Patent of company are difficult to intimate
because it is not legally possible to intimated patented products and services and it is costly as
well to use.
Organised: The financial resources are well organised and managed which are used to
invest in right places with appropriate strategies and take competitive advantages.
Resource/
Capability
Valuable Rare Difficult to
imitate
Is it organised
Systems and
techniques
Yes
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Workforce Yes Yes No
Patent Yes Yes Yes No
Financial
resources
Yes Yes Yes Yes
TASK 3
P3. Applying porter's five force model to evaluate the competitive forces of a given market
sector of an organisation.
The Porter's five force model is defined as a most effective tool that is used by the
businesses in order to know about the degree of competitiveness within the market (Langabeer
and Champagne, 2016). Basically, this framework is created in 1979 by M. Porter which helps
in planning and executing all business strategies in order to improve their potentiality. It includes
five force which can be analysed by Klarna to identify competitive position in the marketplace
that are considered as follows:
Rivalry among existing competitors: This force is examined by existence of rivals in the
market of online financial services against Klarna like Stripe or Wepay etc. The presence of huge
market competition in the market place creates rivalry among all the competitors which affects
company's sales as well as profitability. It also refers that the approach for existing competition
in market is high that impacts on organisational goals. The company Klarna can deal with this
forces by enabling the sustainable product differentiation as well as create effective strategies
and plan in order to compete with their rivals.
Bargaining power of suppliers: This force is determine the extent of control kept by
suppliers of Klarna. Suppliers are the person or group of persons which give inputs to company
in the form of resources, capital and material. In banking industry there are four major
contributor of capital to the company; deposits of the customer, loans and mortgage, mortgaged
securities, loan from other financial institution. In the context of Klarna, this force is high
because supplier holds power in banking industry, if supplier do not provide capital to Klarna
they will not be able to meet borrowing needs of customers (Chen and et. al., 2018). Klarna is
required to generate trust among its suppliers i.e. customers, as in banking industry customer acts
as supplier as well as buyer. So that Klarna don't loose their resources which are coming from
customers.
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Bargaining power of buyer: This force represents the ability to adapt change in prices or
quality by the customers which are introduced by Klarna. This force is high in context of Klarna
because switching cost for customer is low and internet acts as catalyst for customers to hold
more power. For customers, it is very convenient to compare numerous banking sector
companies at null cost so that the best option can be selected. Klarna is required to give best
product with superior quality and technology in their services to attain maximum customers to
lower the power of customers.
Threat of substitute products: This force depicts the number of possible substitute
present in the market and distinctiveness possessed by them. Klarna have high threat of
substitution which are not from their rivals but from the non-financial rivals because there is not
only a threat of deposits or withdrawal, some of the other banking services like insurance, mutual
fund etc. posses big threat (Chen and et. al., 2018). the company should direct their supply to the
customers demand rather than buying aspects and by accelerating switching roadblock for their
present clients.
Threat of new entrants: Klarna is experiencing moderate threat of new entry as to enter
in a business of online financial services because low investment is required for entering into that
kind of business. The threats for organisation for compleiting projects is high because of low
investment to enter in market. Further, there are many restrictions and regulations which are
imposed by government to run a financial service business and it is not easier to keep business
adhered to that rules. Usually customers believes big brands when it is the concern of money and
investments (Langabeer and Champagne, 2016). To control this force, Klarna can invest more in
promotion so that they can capture more attention of public which can get transformed into
targeted customers.
With the monitor of all above points the judgements which is analysed by evaluating Porter's five
force model. It is assess that the power of all aspects is high and it directly impacts on goals and
objectives of company. Therefore, it is mandatory for Klarna to consider all points of model
which directly increases strength of organisation effectively. This results it is easy for company
to formulate right strategy which increases performance of all operations and generate positive or
desired outcomes for management.
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TASK 4
P4 Implement of new model, concepts and theories to develop strategic planning
Porter's generic strategies
Porter generic strategy offers various benefits to an organisation by identifying those
ways that leads an organisation to gain competitive edge in market. Some aspects of strategy in
context of Klarna is as follow:
 Cost leadership- In this strategy, company can focused on leading cost minimisation
and in which that type of customers can be targeted who are highly influenced by the
product prices. As Klarna can provides their services at low prices or can provide offers
and discounts in order to increase their sales and profitability.
 Differentiation- Through this strategy, company tries to facilitate new and innovative
offerings or features in their goods and services so as they can able to attract large
number of customers. As Klarna can facilitate unique services and features in selling of
financial services so that more customers can be attracted.
 Focus- It includes the cost focus as well as differentiation focus strategies (Yoffie and
Cusumano, 2015). As company can emphasise on costs aspect so that customers can be
facilitated products and services at high prices. Klarna can emphasise on differentiation
focus and facilitate online financial services along with the advanced features so that
customers can be easily attracted at large scale.
From the above discussion it can be analysed that cost leadership can be considered as a
most effective strategy for Klarna in order to gain competitive edge within the market. This will
help in minimising the cost of products and services and sell them at low prices along with the
attractive offers which results in increasing customer base as well.
Bowman's strategic clock
Model of Bowman's strategic clock refers to a model that leads companies to explore
various strategies that leads management to gain top position in market. All aspects that are
related with this organisational framework are mention as follow:
 Low price and low value added- The price of company's offerings is relatively low and
products and services are not differentiate so that customer realise little value.
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 Low price- Products and services are offered at low prices which leads low profit margin
on single offerings and high profit can be generated by selling high volume of outputs
(Scholes, 2015).
 Hybrid- In this, company focus on product or service differentiation that creates high
value in the marketplace and in the views of customers.
 Differentiation- This strategy focused on offering best quality of products and services
on an average price so that customer perceived high value added on that offerings.
 Focused differentiation- It focuses on selling better quality of goods and services at high
prices and for which company use several strategies such as promotional, distribution,
segmentation etc. and get huge amount of profits.
 Risky high margins- It is termed as a riskiest strategy because in which customer
demands better quality at low or same prices of low quality offerings.
 Monopoly pricing- In this, only one offering of goods and services and no fear of
competition as well as price determination (Köseoglu, M. A. and et. al., 2013).
 Loss of market shares- Here, company is unable to offer products and services which
creates value for customers that leads towards the decrement in market shares due to the
high prices.
From the above strategies, differentiation is best for Klarna because it helps in increasing
the service quality at a low or average prices so as customers get high value added.
Strategic management plan:
This plan assist in creating a clear vision and mission for the business organisation by
considering the influences of internal as well as external environment that impacts on
organisational functions. It aids in developing long term objectives and evaluate the performance
of company. A strategic plan for Klarna is considered as follows:
Vision: The vision statement of Klarna is to make customer interaction seamless across
the entire world.
Mission: The mission statement of Klarna is to evolve new technologies and quick to
adopt new changes towards the online financial services.
Objectives: The main objective of Klarna is to increase their customer base by 20%
within the 6 months respectively in order to lead with the cost advantage.
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Strategies: Cost leadership is the best strategy for the Klarna as it helps in facilitating
services at low cost and attract large numbers of customers.
Tactics: The company offers their services directly to the customers instead of any agent
or third party.
Resource allocation or budget approximation:
It is necessary for Klarna to make appropriate plan for the allocation of resources so that
the wastages can be properly reduced. As the management of Klarna formulates budget and
allocate to the all departments of organisation in order to manage their expenses and cost
effectively.
Monitoring and controlling: In order to mange the whole strategic management plan the
Klarna is used key performance indicator and benchmarking as a most appropriate tools which
helps in analysing the organisation performance at all stages so that deviations if any, will be
examined at the end of plan and corrective measures should be make accordingly.
CONCLUSION
As per the above discussion, it is concluded that businesses requires to analyse
environmental factors such as internal and external that directly impacts on business operations
and sustainability. Several strategies can be developed by the company in order to deal with
different situations so that all the objectives can be accomplished within the certain period of
time. Along with this, numerous methods and techniques can be adopted in order to facilitate
strategic plan which can assist businesses in prioritizing their efforts so the operations of firm
can be performed effectively.
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Online
STRATEGIC CAPABILITIES. 2019. [Online]. Available through:
<https://managingresearchlibrary.org/glossary/strategic-capabilities>
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