Application of Frameworks to Analyse the Macro Environment

This document discusses the application of frameworks to analyze the macro environment and the internal environment of an organization. It covers the use of PESTLE analysis, stakeholder analysis, SWOT analysis, and Porter's five forces model. The case study focuses on Klarna, a Swedish bank providing digital financial solutions.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Application of frameworks to analyse the macro environment.............................................1
TASK 2............................................................................................................................................3
P2: Analysis of internal environment of an organisation.............................................................3
TASK 3............................................................................................................................................6
P3: Application of Porter's five forces model..............................................................................6
TASK 4............................................................................................................................................8
P4: Application of theories and concepts for devising strategic plans for an organisation.........8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategy refers to a combination of strategies applied by an enterprise and
decisions taken by it to gain competitive advantage and achieve its long-term goals and
objectives (András and Havran, 2016). It is a set of moves and measures which a business needs
to take in order to achieve high-level performance. It gives an outline of how business needs to
be carried out if desired outcome has to be reached. This project is based on Klarna which is a
Swedish Bank founded in 2005 providing digital financial solutions for its customers. It provides
solutions for online storefronts, direct payments, post-purchase payments etc. In this assignment,
focus will be made on analysis of impact and influence of macro environment on an
organisation, assessment of an enterprise's internal environment. Additionally, evaluation of
outcomes using Porter's five forces and application of different concepts to devise strategic plans
for a given organisation will be covered as a part of this report.
TASK 1
P1: Application of frameworks to analyse the macro environment
Macro environment refers to a set of external factors which have a bearing on the
operations of a company. PESTLE analysis can be used for analysis of an organisation's external
environment (Arasti, Khaleghi and Noori, 2017). It covers factors like political, economic,
social, technological, legal and environmental. As Klarna is a bank offering digital payment
solutions to its customers it is impacted by the influence put by all these factors which is
explained as follows-
Political factors- These factors are policy of the government, political stability, tax
policy etc. A change in any of them can lead to a change in planning of business. Thus its is
important for a company to effectively analyse them. Klarna is impacted by a change in any of
them as its strategies are affected directly.
 Opportunity- If there is a change in policy of the government and it becomes favourable
for business then it becomes an opportunity for Klarna as it can perceive a chance of
increasing its profits.
 Threat- Increase in taxes by the government by altering its taxation policy can impact the
profitability of Klarna.
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Economic factors- These factors are economic growth, exchange rates, interest rates,
disposable income of customers, inflation rates etc. A change in any one of them can alter the
financial plans of the enterprise (Arvidsson and Holmström, 2017). Klarna is impacted by these
factors as they can directly increase or decrease its level of profits.
 Opportunity- Booming economy due to high economic growth is an opportunity for
Klarna as it will substantially increase its customer base.
 Threat- Rising inflation rates are a threat for Klarna as it can directly impact the number
of customers it has.
Social factors- Social factors are population, heath consciousness, change in lifestyle of
customers, cultural barriers etc. Klarna is impacted by a change brought due to any of these
elements.
 Opportunity- Change in lifestyle of customers is an opportunity for Klarna as more and
more of them are adopting method of digital payments. This will directly help the
company in increasing its profits.
 Threat- Cultural barriers stop some people from keeping their money in banks for
savings purpose. This acts as a threat for Klarna as it affects its business model.
Technological factors- Technological factors are technological changes, R&D, level of
innovation etc. A change in any one of them can impact Klarna as they can either increase or
decrease its profitability (Bele, Panigrahi and Srivastava, 2017).
 Opportunity- Innovation in technology can positively impact Klarna as it will provide it
an opportunity to adopt more digital methods for payment solutions. This will attract
more customers towards it.
 Threat- Lack of awareness among people for technology is a threat for Klarna as it can
impact its business.
Legal factors- Legal factors are laws, rules and regulations framed by government etc. A
change in these factors can either benefit Klarna or can be a disadvantage for it.
 Opportunity- Relaxing of rules and regulations for doing business can positively impact
Klarna as it will allow it to increase its profits.
 Threat- Toughening up of laws by the government for the entire industry will also have
an impact on Klarna's business model as it can reduce its turnover.
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Environment factors- Environment factors are weather, climate, policies related to
environment etc. They have a direct bearing on an enterprise's business.
 Opportunity- Changing attitude of customers by adoption of paperless transactions will
increase the turnover of Klarna.
 Threat- Tough environment policies brought by the government can substantially reduce
the level of profits of the firm.
Stakeholder analysis- Stakeholder analysis refers to a process of identifying a firm's
stakeholders which can directly affect its business operations (Bialek-Jaworska and
Gabryelczyk, 2016). Klarna also has to perform this analysis to ensure that it keeps its
stakeholders satisfied. The stakeholder analysis in the context of Klarna is as follows-
Determining stakeholders- The stakeholders of Klarna who can affect its business
model are its customers, employees, government authorities etc. It is important for the company
to make sure that these stakeholders are satisfied or otherwise it will have an impact on its
profits. This is essential for its long-term growth.
Grouping and prioritizing- Grouping and prioritizing of stakeholders can be done
according to the influence they can have on the operations of firm. Klarna should keep its
stakeholders in different groups according to their priority and must accordingly make strategy
for them. It is necessary for planning strategies for growth.
Communication- A business needs to communicate directly with its stakeholders to find
out any issues, grievances or problems they may have. Klarna must communicate regularly with
them to find out their priorities and should make improvements according to their wish. It is
important for growing in the future.
TASK 2
P2: Analysis of internal environment of an organisation
Internal environment refers to intrinsic factors which have a bearing on the working and
operations of an organisation (Bıçakcıoğlu, Theoharakis and Tanyeri, 2019). They have to be
closely analysed by Klarna so that it can make appropriate strategies for its growth in the future.
SWOT analysis and VRIO model are tools which can be used to study the impact of internal
factors.
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SWOT analysis- A SWOT analysis is required by an organisation to assess its strengths
and weaknesses which are internal in nature and opportunities and threats which are external in
nature (Ehie and Muogboh, 2016). Detailed SWOT analysis in the context of Klarna is as
follows-
SWOT analysis
Strengths Weaknesses
 Strong customer base is as strength for
Klarna as it is a leading player in the
banking sector of the country. This
boosts its goodwill and credibility
among the customers in the market.
 Digital banking solutions offered by
Klarna to its clients make it
technologically more advanced then its
rivals.
 Loopholes in technology can impact the
business of Klarna as it can directly
impact its digital banking facilities
which can impact its profits.
 Lack of penetration in rural areas is
substantially impacting the business of
Klarna. It is also the reason for its low
revenue growth.
Opportunities Threats
 Klarna can diversify in multiple areas
of the country where it is not present
currently to substantially boost its
profits.
 Offering more facilities to customers
will enhance its brand image and
credibility. This is an opportunity it
needs to encash to attract more
customers towards it.
 Increasing level of competition in the
market is significantly impacting the
business of Klarna as it can reduce its
profits.
 Data leakage of customers is a big
threat to digital solutions offered by
Klarna to its clients as it can reduce its
turnover and revenue.
Using this model, Klarna can identify its strengths, weaknesses, opportunities and threats
which are required for identifying growth opportunities for the future (Foss and Saebi, 2018).
VRIO model- VRIO model is a strategic management tool which can be used
organisations to protect those resources and capabilities which are likely to give them long-term
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competitive advantage. Klarna can use it to find out those capabilities which sets it apart from its
other competitors. The application of VRIO model in the context of Klarna is as follows-
Capabilities Valuable Rare Inimitable Organised
Customer base ✔ ✗ ✗ ✗
Services ✔ ✔ ✗ ✗
Technology ✔ ✔ ✔ ✗
Goodwill ✔ ✔ ✔ ✔
Valuable- Customer base is valuable as it is because of customers that company's
standing is good in the market (Hitt, Li and Xu, 2016). Services are valuable because it is due to
services provided by enterprise that the customers are attracted towards it. Technology is
valuable because digital payment solutions of firm are dependent upon it. Goodwill is valuable
as it has been created because of brand image made over the years.
Rare- Customer base is not rare as many other competitors are having a large number of
customers. Services provided by the company are rare because no other competitor provides as
efficient services as it does. Technology is rare because such advance level of techniques are
used only by Klarna. Goodwill is rare because it is created by sustained efforts of organisation
over the years.
Inimitable- Customer base is not inimitable as the customers can change their
preferences. Services are not inimitable as the technology used by company can be copied by
other firms. Technology is inimitable because Klarna uses a unique technology for its digital
payment services. Goodwill is inimitable as Klarna has built it because of its brand image which
cannot be copied.
Organised- Customer base is not organised as some of them can move towards other
competitors also (Ibidunni, Ogunnaike and Abiodun, 2017). Services are not organised as there
may be a lapse in delivering them. Technology is not organised as it can have some issues or
problems. However goodwill is organised because it has been made with an effort.
Justification- From the above model, it can be concluded that goodwill is valuable, rare,
inimitable and organised . Thus it is the most important resource which Klarna has and it can use
it to plan its growth in the future. With goodwill, it has the ability of attracting more customers
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towards it. It is also important for maintaining a sound brand image in the market by providing
quality products and services to the customers so as to win their satisfaction.
TASK 3
P3: Application of Porter's five forces model
Porter's five forces is a model which identifies those competitive forces which can shape
a particular industry and determine its strengths and weaknesses (Porter's 5 Forces, 2020).
Klarna can use it to identify those elements which can affect its business in the long-run.
Application of the model in the context of Klarna is as follows-
Competition in the industry- It refers to the level of competition faced by the players of
the industry (Kennedy, Whiteman and van den Ende, 2017). If the number of competitors are
more then it lowers the power of company. If the competitors are less then it can set prices as it
likes which increases its power. Klarna operates in an industry where competition is more and
therefore it needs to develop effective strategies for growth.
Potential of new entrants- If there is potential of new entrants in market then it will
lower the power of a firm. If potential of entrants in market is low then it will increase the power
of company. Klarna is operating in banking industry where potential of new entrants hurting
business is low therefore it will face no problem in growing its business in the future.
Power of suppliers- If the power of suppliers is high in market then inputs will be costly
reducing profits of company. If the power of suppliers is low then inputs will be cheap increasing
the profits. Klarna's suppliers have a low bargaining power which will enable it to devise an
effective strategy for growth through maximisation of profits.
Power of customers- If the power of customers is high then it will drive the prices lower.
If the power of customers is low then the prices can be set high. In Klarna's industry the power of
its customers is high which means it is important for it to satisfy its customers to sustain and
grow in the future (Mol, Stadler and Ariño, 2017).
Threat of substitutes- If the threat of substitutes is high then it will lower the prices and
if it is low then it will increase the prices and profits. Klarna's industry does not faces and threat
of substitutes and thus it does not needs to take this factor into account while planning its growth
strategy.
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Bowman's strategic clock- It is a model which is used for strategic positioning which
means it reflects strategies for the positioning of a product so that it can gain maximum
competitive advantage (Mulyono, 2018). Its application in the context of Klarna is as follows-
Low Price and Low Value Added (Position 1)- In this situation, Klarna can set lower
prices for its services but the value of these services would be less. It is not ideal for company to
continue in this situation.
Low Price (Position 2)- In the context of Klarna, it is necessary that its managers make
its products and services look attractive and a lower fees is charged so that more customers can
be attracted. This position is ideal for the organisation.
Hybrid (Position 3)- It involves low price as well as product differentiation. This
position is ideal for Klarna as it can set lower fees for its services and also differentiate its
products from competitors.
Differentiation (Position 4)- Klarna can differentiate its products and services in this
position and must offer its customers high perceived value. This situation is ideal for the firm.
Focused Differentiation (Position 5)- In this position, Klarna can set the fees of its
services higher so that customers avail services because of their perceived value. This position is
ideal for Klarna.
Risky high margins (Position 6)- It is a high-risk strategy in which Klarna can charge
higher for its services without offering any extra in return. This position is not ideal for the
company.
Monopoly pricing (Position 7)- In it, Klarna can charge any price for its services if it
enjoys a monopoly in the market. However, the sector in which it operates does not allows for it.
Loss of market share (Position 8)- Klarna can set a standard price for its products by
offering a low perceived value with them. This position will lead to the company losing its
market share.
It can be concluded that hybrid position is the best one for Klarna as here it can set low
prices for its services and also differentiate it from other competitors. This will enhance it in
planning its growth and becoming a market leader (Savitri, 2018).
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TASK 4
P4: Application of theories and concepts for devising strategic plans for an organisation
Porter's Generic Strategies:- This competitive strategy is described as the process for
an organisation to compete from its rivalries with its competing advantages to remain sustainable
in global market. The managers of Klarna implement these generic strategies for maximising its
revenue and profitability ratios in order to achieve success (Tallman, Luo and Buckley, 2018).
These strategies are explained below in reference with managers of Klarna are as follows:-
 Cost Leadership:- This strategy is referred as the process to maintain least cost
effectiveness which attracts consumers to buy more of their products which results in
accomplishment of goals. The managers of Klarna can use this to minimise their cost
which leads in increase of sale and profits with high profit-margin.
 Differentiation:- It is the process which analyse the specific demand of their specialised
product for their target market. The managers of Klarna can use this to enlarge their
consumers by targeting large area with their specialised products on which they are ready
to pay high amount.
 Cost Focus:- This is understood as to minimise cost for their qualitative products which
leads to increase their competitive advantage in competing from rivals to remain stable.
The managers of Klarna can use this to increase consumer support with loyalty through
their target positioning.
 Differentiation Focus:- It is explained as the process of producing highly specialised
product for specialised consumers to meet their demands of specialised target market.
The managers of Klarna can use this approach as competitive advantage for their superior
quality which satisfies their consumers needs, desires and wants.
From the above discussion, the managers of Klarna should adopt cost leadership strategy
as minimising the cost effectiveness leads to attract more consumers which increase their
competitive advantage. This also maximises their revenue with increased profit-margins.
Strategic Management Plan:- This plan is described as the collection of vision, mission,
objectives, strategies, tactics, etc., which can create competitive advantage for an organisation in
achievement of success for its stability. The managers of Klarna implement this plan for goal
accomplishment effectively and efficiently.
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Vision:- It is to make all payment smooth for shopping of consumers which creates good
experience for superior quality products.
Mission:- The aim is to make easier for people to shop online.
Objectives:- This is to make people experience modern purchasing system which
provides strength and capability to achieve its goals.
Promotion methods- Promotion refers to a type of marketing communication which is
used for communicating with the customers and persuading them for purchasing the product.
There are a range of promotion methods available for a company. Klarna can use the following
methods for promoting its products-
Advertising- Klarna can use online as well as offline modes for advertisement of its
products. In online mode, it can use social media channels to directly reach the customers. In
offline mode, it can use methods like billboards, posters etc. to promote its products and services.
Sales promotion- Klarna needs to use sales promotion techniques like attractive offers
for customers for using its digital payment channels, payback points, reward points. Also, it can
tie-up with shopping partners so that customers using its services are offered discount.
Tactics-
Use of social media- Klarna must use social media effectively so that it can expand its
reach among the young generation of customers. It is quite necessary for targeting younger
generation of customers and telling them about bank's schemes, range of products, services
offered etc.
Strategic partnerships- Klarna can form strategic partnerships with other brands so that
they can offer discount to its customers on making purchases from them. This will enhance its
brand image and will also allow in leaving behind other competitors of the bank.
STP framework- It is a framework which is used to simplify the process of market
segmentation for a particular organisation (Tsalis and Nikolaou, 2017). Using it, Klarna can
identify the segmentation of customers, the target group of customers and positioning of its
products in the market. The framework in the context of Klarna is explained as follows-
Segmentation- In it, Klarna can identify bases which it can use for segmenting its
customers into various categories such as on the geographical, behavioural, demographic and
psychographic basis.
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Targeting- Klarna can target young customers as it offers a wide range of digital
payment solutions. Therefore targeting younger generation of customers will help it in enhancing
its image amongst them.
Positioning- Klarna can develop product positioning for different segments and also it
can make marketing mix of products for each segment. It is essential if it has to cover many
markets with different needs and demands of customers. Therefore specific strategies are
required for positioning.
CONCLUSION
From the above report, it can be concluded that business strategy refers to measures that a
business must adopt for becoming successful and for planning its growth. In this assignment,
frameworks have been applied to analyse the macro environment, internal environment of the
firm has also been analysed. Porter's five forces have been evaluated for analysing the level of
competition. Also, concepts and theories have been used to develop a strategic plan for the
company.
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Porter's 5 Forces. 2020. [Online]. Available
through:<https://www.investopedia.com/terms/p/porter.asp>
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