Impact and Influence of Macro Environment on Business Strategy

This article discusses the impact and influence of macro environment on the business strategy of an organisation. It explores the various factors of the macro environment, such as political, economic, social, technological, environmental, and legal, and how they affect the strategy formulation process. The case study of McLaren Automotive is used to illustrate these concepts.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
LO 1.................................................................................................................................................3
P1) Impact and influence of macro environment on strategy of an organisation ......................3
LO 2 ................................................................................................................................................7
P2) Internal environment and capabilities...................................................................................7
LO3..................................................................................................................................................9
P3 Porter's five force model to evaluate competitive forces within automotive sector............9
LO 4...............................................................................................................................................11
P4) Strategic planning...............................................................................................................11
CONCLUSION..............................................................................................................................14
REFERENCES .............................................................................................................................15
.......................................................................................................................................................16

INTRODUCTION
Business strategy can be defined as master plan that is formulated by the management of
a company or firm with the aim of securing a better competitive position in the business market.
Thus, basically business strategy is a set of action or decisions that assists and provide a
framework to accomplish and achieve the desired goals through a well planned and effective
strategy (Aluchna, 2018). For completion of this assignment the selected organisation is
McLaren Automotive which is a famous British brand and creator of luxury, high-performance
sports cars and super cars. McLaren Automotive is a automotive manufacture and all its vehicles
are hand assembled at McLaren production centre situated at Surrey, England, UK. The main
focus of this report is on providing a understanding about strategy process thus includes a critical
analysis of macro environment and determine strategic management decisions. Along with this,
analysis of internal environment together with appropriate strategies to improve competitive
edge is also there. At last, this report also consists a range of theories, concepts and models to
develop and produce a strategic management plan.

LO 1
P1) Impact and influence of macro environment on strategy of an organisation
Macro environment basically represent the conditions and factors that prevails in a
economy as a whole and have significant influence on all the organisations that operates in that
particular economy. Thus, it can be said that macro environment is a sum total or collection of all
the external factors like the GDP, inflation rate, spending power of customers, policies of
political parties, etc. that directly or indirectly create a impact on business strategy and other
decision making of process and operations of an organisation (Anwar and Hasnu, 2016). The
McLaren Automotive is a manufacture of sports cars and also provides electric control systems
for motor sports industry. This organisation is having a specialisation in creating high-
performance luxury super cars and sport scars and also operates a formula 1 racing team.
McLaren Automotive is a globally renewed brand well known for its high technology and
innovation has been pioneering and innovating in the competitive world of Formula1. The area
served by McLaren Automotive includes various locations of UK, US and now also expanding
in parts of Asia including Russia, India and China and also plans to open dealerships in Vietnam
and the Philippines (McLaren Automotive, 2020). Thus, being an international organisation, the
business strategies and policies of McLaren Automotive are highly affected and influenced by
its macro environment. To have a better understanding about the various factors of macro
environment of McLaren Automotive and to evaluate its impact on business strategy use of
PESTEL analysis is made which is provided below:
PESTEL analysis
It is a framework or toll used by an organisation for evaluation and analysis of its macro
environment and all the external factors that effect the working and operations of an organisation
together with creating an influence over decision making and strategy formulation (Cross, 2019).
Following are the important factors of macro or external environment of McLaren Automotive
creating a impact on strategy of organisation.
Political
This element reflects the level and extent to which a various polices formulated by
government and other political parties can create an impact on functioning of organisation.
Political factors includes the level of stability in political policy and includes elements like trade
restrictions, fiscal and other taxation polices. Continuous Change in government regimes and

political regulation of economy causes both favourable or unfavourable fluctuations and impacts
on business organisation. The current Brexit issue i.e. Breaking away and exit of UK from
European Union is creating a threat for McLaren Automotive as because of this a decline in
expected sales of automotive vehicles are forecasted by many economist (HOW BREXIT WILL
AFFECT THE AUTOMOTIVE INDUSTRY, 2019). Beside this, the trade policy of UK are also
becoming stricter that is again a issue for McLaren Automotive which impacts its export and
import strategy (Eaton and Kilby, 2015). Apart from this, political parties of UK are showing a
favour of low emissions vehicles and taxes on Luxury vehicles and fuel guzzles has also been
increased, thus created a pressure on management of McLaren Automotive to makes and
formulated business strategy that are focused on creation of vehicles with low carbon emission to
get support from political parties.
Economical
These are the factors that directly leads to an impact on profitability of an organisation as
it includes factors like interest rate, purchasing power of customers, population of target
customers, rate of unemployment, raw material costs, level of pricing and the inflation, deflation
and overall growth rate of an economy that create impact on business operations. Due the recent
issue of Brexit the automotive sector is facing many consequences as the economy of UK is
facing a recession and the value of Pound is also get reduced as compare with the price against
the dollar and other countries which is diminishing the profit margins of McLaren Automotive
(Foss and Saebi, 2018). Beside this a high labour turnover is also seen in many parts of UK after
its braking from European Union which has again created a negative influence over working of
McLaren Automotive thus, effective business strategies are needed to face these consequences
and retain and maintain an adequate amount of workforce in the organisation to have smooth
flow of operations. McLaren Automotive should focus on adopting some flexible HR practices
to retain its talented employees and beside this, some modification and changes are also required
in its business strategy especially in its pricing strategy to have better profits to conquer the
negative effects of Brexit.
Social
These are the factors that are directly associated with consumers needs and wants
reflecting the lifestyle and cultural trends of a society also includes family demographics,
education level, attitude and age distribution of society. Social factors is the one that frames and

lead to change in trends and demand in a market thus, creates influence over the strategy and
product of an organisation (Gibe and Kalling, 2019). The society of UK is a characterised as a
lover of speed and driving and maximum part of society of UK is well educated and fond of new
technology which is a positive sign for McLaren Automotive as it is having a specialisation in
innovation and cresting super sports cars for lover of driving. Beside this, a increasing craze for
Formula 1 racing in society is also creating a positive impact over productivity and profitability
of McLaren Automotive. Apart form all this the society of UK feels more attracted towards
online shopping thus, some efforts and strategies can be lead by McLaren Automotive to have
an more interactive website to offer facility of online shopping to its customers.
Technological
This element of macro environment is associated or related with rate of technological
development and innovation and includes automation of various process and operations within
the organisation. Technology is considered as the heart of an automotive organisation as it
something that made it better and different from its competitors thus, McLaren Automotive
should make and formate such strategies that can keep a phase with latest technological
advancement (Hadid, 2019). The technological environment of UK is highly dynamic and many
changes are keeps on going with a rapid speed thus, it is necessary for McLaren Automotive for
having an effective Research and development department that can lead to effective innovation
in its products and car model. Beside this, an adequate amount of finance is also needed for
automation and adoption on new technology thus, McLaren Automotive should thus, creates an
influence over its financial strategy and other decisions making. The current bend of society over
online shopping has also created an influence on operations of McLaren Automotive as it
become necessary for this organisation to provide a better online interface for customers together
with a safe and secure online website and other security measures.
Environmental
This factors are associated with the surrounding environment and impact created on
ecological aspects that includes affect on climatic conditions, carbon footprints, recycling
procedure, methods of waste disposal, etc. the current environmental factors are showing a bend
towards strict regulations for protection and conservation of natural resources and aspects that
include an aim of creating pollution free atmosphere. This trend of macro environment has
created influence on McLaren Automotive through exerting a pressure on formulation of such

business strategy that will reduce the harm to environment and give boost to use of eco0freiendly
resources and also emphasis on sustainable growth (Johnson, 2016). Effective measures
regarding the recycling and waste disposal can also be implemented by McLaren Automotive for
having a better image in mind of society.
Legal
These factors are mainly associated with employment legislation, healthy and safety of
consumers and other legal laws and regulation formulated for betterment of citizens and
employees. With the increasing trend for online shopping and digital transformation, threat of
hacking of personal and crucial data together with other cyber crimes has increased for all
organisation including McLaren Automotive thus, proper measures are needed to be taken to
reduce such issues. Beside this, laws related with safety of customers has also became more strict
thus, lead to a pressure on McLaren Automotive for making effective strategy for safety of
consumers and maintain the quality of its cars model to reduce the chances of legal consequences
in future.
LO 2
P2) Internal environment and capabilities
The internal environment basically reflects the strengths and weakness of an organisation
that makes it able to remain competitive in business environment (Linder and Williander, 2017).
To have an analysis of internal environment and capabilities of McLaren Automotive use of
SWOT analysis and VRIO model is made which are described below:
SWOT analysis
It is a framework used for evaluation and analysis of internal strengths and weakness of a
firm tighter with the prevailing opportunity and threats. Following is the SWOT analysis of
McLaren Automotive.
Strengths Weakness
 The strength of McLaren Automotive
includes strong brand image of this group in
file of technology and innovation that
attracts a large number of customers for it.
 Beside this the capability of McLaren
 The weakness of McLaren
Automotive incvludes limited
productivity i.e. only a few
number of cars are prouced by thie
orgamnstsation and also having a

Automotive of providing a eco-friendly
manufacturing facility together with the art
of hand assembled vehicles taking place at
production centre is also its strength which
is making it different and superior than other
competitors.
 An ability of McLaren Automotive of
creating and providing a high quality auto-
mobiles providing a perfect balance of game
changing technology, innovation and
superior design.
 The manpower and highly skilled and
talented employees of McLaren Automotive
having a capability of making use of its vast
knowledge for creation and building of high
performance cars for success and better
growth of this organisation (Marín, 2019).
 Along with all this, the good track road of
McLaren Automotive in winning car racing
championship especially in the Formula 1
racing is creating effective publicity and
marketing for this organisation.
low global presence as compared
to other competitors like Bentley,
Aston martin, etc (Maheshwari
and Yadav, 2018).
 the premium procing stregy is also
a wekness of McLaren
Automotive as it limit the number
of traget audience and consumer
base.
 Beside this, lack of effecive
distribution system and limited
quiltfied reaopir shops is also a
weakness of McLaren
Automotive.
Opportunities Threats
 McLaren Automotive is having an
opportunity to introduce hybrid cars in
different location of world to have an
increase in its market share.
 An opportunity of developing and
introducing some low cost cars in market of
Asia are also prevailing.
 A threat of duplication of
technology from copycat car
manufactures is prevailing in its
business environment.
 The ban and sanction imposed on
Russia is also a threat for McLaren
Automotive as it is one of the

 Along with this, Co- branding and
penetration in Potential market together with
effective marketing strategy is also
facilitating opportunity for McLaren
Automotive.
main supplier of this organisation.
 Beside this the strict acts and
regulation regarding safety of
customers is also a threat (Marx,
2015).
VRIO analysis
Use of this framework is made to have an analysis about the internal capabilities, assets
and resource of an organisation. The internal capabilities and strengths of McLaren Automotive
is provided below through making use of VRIO analysis.
Resources Valuable Rarity Inimitable Organized What is the
result?
Global presence Yes - - - Competitive
Disadvantage
Distribution
channel
Yes Yes - - Partially
competitive
Human
resource
Yes Yes Yes - Temporary
competitive
advantage
Technological
resource
Yes Yes Yes Yes High
Competitive
advantage
With respect to above stated VRIO model of McLaren Automotive it can be analysed
that global presence, distribution channels and networking, Human resources and technological
resources are the considered as the valuable resources of this organisation as theses are the
capabilities that makes McLaren Automotive able to grab all possible opportunity and also helps
in eliminating the threats (Perez-Franco and Phadnis, 2018). The rarity resources of McLaren
Automotive includes distribution channels and networking, Human resources and technological
resources as theses are the abilities that can not be acquired or duplicate by all other competitors

thus, reflecting rare capability of McLaren Automotive. Beside this , Human and technological
resource are the Inimitable factors that can not be easily copied by other competitors without
spending a large sum of money thus, yield a satisfactory level of competitive advantage in
business market. Along with all this, the most crucial and well organised resource and capability
of McLaren Automotive which provide maximum strength and competitive advantage is
technology advancement and innovation. It is also a sustainable resource as continuous efforts
are made by McLaren Automotive to provide best technology and creative and innovative
products to its customers (Zucchella and Previtali, 2019).
LO3
P3 Porter's five force model to evaluate competitive forces within automotive sector
Porter's five forces is characterised as a framework that helps in analysing the
competitive environment of companies. Utilization of this model helps companies in
understanding the competitiveness of industry and determining potential profitability of firm's
strategy. In order to analyse the competitiveness of automotive industry, Porter's five force
model is use by manager of McLaren Automotive that includes five forces which are mentioned
below:
Bargaining power of buyers: This power is defines as the ability of buyers to negotiate
on prices that excerpt profit from sellers. The customers have the power to reduce the price of
product. However, it totally relies on size as well as number of customers. In automotive
industry, the power of buyers is high as there are numerous competitors available in market that
offers similar products to customers. This poses a threat for McLaren Automotive as customers
can switch any time whenever they get better offerings from the competitor side. This creates a
pressure on company to reduce the price of its sports cars (Gibe and Kalling, 2019).
Bargaining power of suppliers: The supplier's power is depicted by number of existing
as well as potential suppliers in industry. If the suppliers are more in number, then it provides an
advantage to company to get assembly parts at lower rates. But, if the suppliers are less in
number, then firm may require to purchase inputs at higher prices. In context of automotive
industry, there are many suppliers available but, the switching cost is high. McLaren automotive
is dependent on suppliers for acquiring assembly parts which administers them an undue

advantage. So, the bargaining power of suppliers is high for company which creates a threat for
it of paying high amount for acquiring raw materials.
Rivalry in industry: In automotive industry, the rivalry is high as organisations compete
on both the dimensions, price and non-price. Various competitors of McLaren Automotive are
operating in the industry including Porche, BMW, Ferrari, Lotus car, Cadillac, Mercedes Benz,
etc. which gives tough competition to company. Though, the company is successful, the rivalry
in industry creates a threat for it as competitors provides various incentives and offers to attract
more number of customers towards buying their own vehicle (Hadid, 2019). Thus, the industry
rivalry is high for McLaren Automotive.
Threat of new entrants: High amount of financial as well as monetary resources are
required by new entrants in order to enter into automotive market. In the automotive industry of
a United Kingdom, many big companies are operating in the same industry. In order to enter into
automotive market, companies requires high amount of investment which makes it difficult to
new entrants to enter in market and sustain their position. Thus, the threat of new entrant for
McLaren Automotive is low as the barriers to entry are high in industry. This provides an
opportunity to company to gain high revenues and profitability in market and gain competitive
advantage over rivals by bringing innovation in its products at constant manner (Johnson, 2016).
Effective market research and development activities also helps company in attaining
competitive edge over rivals.
Threat of substitute products: Many substitutes or alternative transportation modes are
available like trains, taxis and buses, but, none of them provide that much convenience and
accessibility that own vehicle provides. Thus, for McLaren Automotive, the threat of substitute
product is low as the quality and features of its products makes it distinct from others which
provides an advantage to company.
The above mentioned are five forces which creates some opportunities and threat for
company. In order to sustain strong market position and gain competitive advantage, it is
necessary for McLaren Automotive to formulate suitable strategies. In order to overcome the
threat of high bargaining power of suppliers, firm requires to maintain good relationship with
them which helps it in acquiring raw materials at appropriate prices (Linder and Williander,
2017). Apart from this, setting prices of its cars as per the price of competitor's product will help
company in attracting more number of customers and gaining competitive advantage in market.

LO 4
P4) Strategic planning
It is mainly associated with the process of defining strategy made fir for providing
direction to employees and effective allocation of resource with the aim of achieving overall
growth objectives of an organisation (Pramanik, Maiti and Maiti, 2018). Use of Ansoff matrix is
made by McLaren Automotive to select moat profitable and suitable growth strategy to achieve
the target of sustainable growth and expansion.
Ansoff Matrix
It is a strategic planning tool that lead to a framework for executives and mangers to
devise and execute a strategy for archiving the goal of future growth. The Ansoff matrix has
provide four main strategies that can be adopted by McLaren Automotive for its future
expansion:
Market penetration- It is a strategy that involve selling of a old or pre exist product in
matured or prevailing market. Under this growth strategy use more emphasis is given to
marketing and promotional activity to reach and attract customers of an existing market beside
this strategy also includes reduction in price of product to counter more customers. McLaren
Automotive can adopt this strategy for enhancing its productivity through keeping a check on its
price and adopting more effective marketing strategy (Sanders and Wood, 2019). The risk
involved in this strategy is minimum as no new market or product is introduced thus, provides a
safest way for expansion.
Market development- This strategy of Ansoff matrix includes targeting of a new market
where demand for existing product can be easily developed. Adoption of this strategy by
McLaren Automotive provides a better and larger market share and require an effective market
analysis to develop and identify a potential market for its product to achieve its target of business
expansion. The risk under strategy is mainly associated with the the cost and expanses made for
market analysis and development of a new market.
Product development- This strategy includes the launch of a new product or developing
certain new features in a prevailing product. Adoption of this growth strategy is quite risky as
threat of failure of product is always high (Sellitto and Hawking, 2019). Beside this, for adoption
of product development strategy by McLaren Automotive an effective, innovative and highly

skilled R&D department is required together with talented employees for development and
creation of a new product or better features.
Diversification- This strategy is a complex and most risky option for any organisation
and it includes development of a new market together with launch and introduction of new
product. Before choosing this option of growth McLaren Automotive should make effective
planning regarding the availability of finance as huge of funds are required for market research
and innovation of any new product.
On the basis of above description about various strategies of Ansoff matrix, the most
suitable strategy is diversification as it lead to increase in both market share and customers base.
McLaren Automotive can make efforts for launch of some new products in the untouched
regions and locations of world to have an enhancement in its productivity and amount of profit.
Strategic management plan
Overview
McLaren Automotive is a British exotic sports car maker which is a one of the most
illustrious high technology brand. This organisation is having expertise in providing high
performance sports car with game changing technology and racing expertise. With the aim of
enhancing its global presence and improving its productivity McLaren Automotive is planning to
expand its business operations in Asia and also opening dealership in Philippines and Vietnam
with a launch of new generation of Hybrid car. It will lade to better growth and expansion of
McLaren Automotive and also yield competitive advantage and better brand positing in the
market (McLaren looks to Asia and hybrid cars to stay on track, 2020).
Vision
The vision of McLaren Automotive is, “To provide a breath taking and memorable
driving experience to its customers through providing a perfect balance of speed, technology
performance and dynamic engineering.”
Mission
The mission statement of McLaren Automotive is, “To strive for excellence together with
pioneering technology and restless spirit for having perfection in everything designed and
created to yield maximum satisfaction to customers.”
Objectives

The objectives of McLaren Automotive behind launch of its new generation hybrid cars
in unsaturated markets of worlds are as follows:
 To increase its market share by 15% in coming 9 months (Sutrisno and Rossieta, 2019). To have an enhancement in its productivity and sales revenue by 20% in one year.
Goals
The goals and targets of McLaren Automotive behind launch of new generation hybrid
cars in new markets of world is to have better global presence and enhanced target market
together with achievement of target of having an increase in its productivity level. Beside this, it
also facilitates better competitive strength in the automotive sectors and enhance its strengths and
new hybrid cars also make it superior than its competitors at global level.
Strategy
For achievement of its objects and goals, McLaren Automotive has adopted
diversification strategy as it facilitates more emphasis on research and development to have
better creation and innovation in product for launch and development of hybrid cars (Thompson,
Strickland and Gamble, 2015). Diversification also provide a better way for having timely
market research and evaluation of new market before entering and launching any product to
reduce the risk and chances of failure for McLaren Automotive .
Tactics
The tactics for achievement of above sated goals and objective of McLaren Automotive
includes emphasis on training of employees to make them capable to build and develop hybrid
cars. Beside this a team of specialist and top engineers are also made to have an effective R&D
for development and creation of new generation cars. Beside this, marketing team has also made
efforts to evaluate and identify the potential market for the success of new hybrid cars of
McLaren Automotive (Vom Brocke and Mendling, 2018),
Control and implementation
It is one of the most crucial part of any project as without proper control measures and
execution of planing in a correct way the objectives and goals can not be achieved on time. For
having an effective control and monitoring performance of all associated activities and
employees use of KPI tool is made by McLaren Automotive as it provide a evaluation of
performance and effectiveness of employees and tasks through providing a comparison among
planning and actual performance (Yoffie and Cusumano, 2015).

CONCLUSION
As per the above mentioned report, it has been concluded that formulation and updation
of business strategy is necessary to keep a balance between on going changes in the market and
current planning and decision making of firm so that management can effectively drive all the
employees and team members to perform well for the success and growth of organisation.
PESTLE analysis helps company in determining the impact of macro forces on activities and
operations of business. By the help of SWOT analysis, strengths, weaknesses, threats and
opportunities are analysed which helps company in framing appropriate strategies to exploit
opportunities and overcome threats. Porter's five force analysis helps in determining competitive
position of firm in industry. Various growth strategies are employ by company in order to gain
competitive advantage in market.

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Online
HOW BREXIT WILL AFFECT THE AUTOMOTIVE INDUSTRY. 2019. [Online] Available
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McLaren Automotive. 2020. [Online] Available
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McLaren looks to Asia and hybrid cars to stay on track. 2020. [Online] Available
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