Analyzing the Macro and Micro Environments of Direct Line

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Business Strategy
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Contents
Introduction......................................................................................................................................3
LO1 Analyse the impact and influence which the macro environment has on an organisation......4
P1 Apply appropriate frameworks to analyse the macro environment for a given organisation.4
M1: Critically analyse the macro environment to determine and inform strategic management
decisions.......................................................................................................................................4
LO2 Assess an organisation’s internal environment and capabilities.............................................5
P2 Using appropriate frameworks analyse the internal environment and capabilities of a given
organisation..................................................................................................................................5
M2 Critically analyse the internal environment to asses the strengths and weaknesses of an
organization's internal capabilities structure and skill set............................................................5
LO3 Evaluate and apply the outcomes of analysis using Porter’s five forces model to a given
market sector....................................................................................................................................7
P3 Apply Porter’s five forces model and to evaluate the competitive forces of a given market
sector for an organization.............................................................................................................7
M3: Devise appropriate strategies to improve competitive edge and market position based on
the outcomes................................................................................................................................8
LO4 Apply models, theories and concepts to assist with the understanding and interpretation of
strategic directions available to an organisation..............................................................................9
P4 Apply a range of theories, concepts and models, interpret and devise strategic planning for
a given organisation.....................................................................................................................9
M4: Produce strategic management plan that has tangible and tactical strategic priorities and
objectives...................................................................................................................................12
D1: Critique and interpret information and data, applying environmental and competitive
analysis to produce a set of valid strategic directions objectives and tactical actions...............13
Conclusion.....................................................................................................................................15
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References:....................................................................................................................................16
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Introduction
Business strategies used by the manager in the business organization to increase the growth and
expansion of the business. The managers are more likely to use highly advanced techniques and
analytical techniques that are outside the control of the business. The business strategy can be
administrated with the help of different techniques and analytical tools. This study has identified
how a business organization can change the business structure or growth rate with the help of
strategic plan and decision making. Various management practices and procedures are very
helpful to recognize the values and tradition of business activities.
Basically, it refers to the choice which includes that any business makes about the market where
they are getting higher profitability and productivity. Strategy defines as a direction or scope of
business that a company implies through practices with the help of managerial hierarchies,
stakeholders, resources, cultures, challenging environment. Hence, the business achieves various
advantages through different configurations.
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LO1
P1 Apply appropriate frameworks to analyse the macro environment for a given
organisation
The framework of an organization is identified by its higher scope of authority like business
owners and proposed directors. They have explored their business across UK and on growing.
Direct line was established in 1985 in Croydon. They were selling only car insurances in the
beginning but as the opportunities come they move forward and now they are selling insurance
for pet, home, travel, life and breakdowns as well as business and landlord insurances.
Although the purpose of analyzing the macro environment framework of Direct line is
identifying possible opportunities and threats these are outside the control of the business that
will impact the industry. There are several factors of the business environment that help Direct
line to grow and prosper as a whole. The direct line is more likely to make cumulative impacts
that impact its growth directly in its industry with all necessary objects. Direct line group
analysis its micro environment for the identification of opportunities and growth that will impact
their performances like interest rate will impact the amount of disposable income and revenue.
There are PEST factors that are sufficient to identify the macro environment of the Direct line as
follows:
Political factors: Political factors indicate government influences in the industry. The changes
that are required can be possible with the help of organizational policies and procedures. Political
factors include areas like labor laws, fiscal policies, environmental law, political stability, rates
and trade restrictions.
Economic factors: Economic factors include growth rates, interest rates and inflation rates of
the economy that controls the business outside and how business operates and take decision with
the help of these. Direct line group is one of the biggest leading insurance companies in UK
which is gradually bringing new customer for their business. The effective framework of Direct
line is established by its owners and other managerial hierarchies.
Social factors: Social factors are often cover other objects like cultural aspects, health
consciousness, age structures, population growth, career and emphasis on safety. These social
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factors influence the demand for the products and services of direct lines. The services of Direct
line are recognized by the people rapidly. The interest of people has placed the organization on
top in the UK as the best leading company across the UK.
Technological factors: The ecological and environment characteristics include appropriate
research and development and automation. Technological factor affects barriers in the entry, the
lowest level of efficient production and consideration of in-sourcing & outsourcing. Basically
technological factors affect the cost effective strategy of products and services and often move
towards innovations.
M1: Critically analyse the macro environment to determine and inform strategic
management decisions.
There are a number of macro environment factors that need to be kept in mind while making
critical decisions regarding strategic management:
The economy is probably considered one of the most important factors that needs to kept in mind
while making decisions in this area. If there is a depression in the economy then the producer
would have to change their prices for the products.
Natural resources are another factor that needs to be considered while making decisions as there
are only a few lefts and their resources cannot be recycled.
The products that are being produced by the organisation needs to be in relations with the culture
of the society. In some countries, people do not like to buy animal skin products so an
organisation cannot sell these kinds of products. Also, the organisation would have to see what
audience it is going to target and what their purchasing behavior is (Kennedy 2016).
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LO2
P2 Using appropriate frameworks analyse the internal environment and capabilities of a
given organisation.
The internal environment of an organisation is also considered to be one of the important factors
that can lead to its success. There are various ways that can be used to see what the internal
environment of Direct Link is. The internal environment describes the employees which are
present in it and what business culture does the organisation follow. These are the factors that
affect the decision-making process in one way or the other. The mission of the organisation can
also help in describing the internal environment. Mission Statement of Direct line is that it wants
to make the insurance an easy process for the customers. This shows that the organisation is
more focused on their clients and wants to create an improved value for them. This shows that
the value system of Direct Link Group is very high thus resulting in a friendly environment. The
employees of the organisation should understand the value of it so that they can comprehend the
culture of Direct Link Group.
The strategies that are used by Direct Link Group for their operational process will are also part
of its internal environment. The organisation's strategy is divided into two parts that are set out
for its long-term planning. One of these long-term objectives is that the Direct Link Group is
planning on introducing new products for the future so that they can match the customer's needs
and trends. It will also make sure that its customer service centre is up to the mark so that the
customers can be helped with their problems or questions relating to the products or services
offered by Direct Link Group. The customer care will also show the culture of the organisation
which is to help the customers in any way possible.
Technology is also a part of the internal environment of the Direct Link Group. The motive of
the organisation is to implement new and innovative technology that will help the customers of it
to make the understanding of the products and services simpler. All of the aspects mentioned are
included in the internal environment of Direct Link Group which shows what the company is
made up of (Pestle Analysis 2015).
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M2 Critically analyse the internal environment to asses the strengths and weaknesses of an
organization's internal capabilities structure and skill set.
Strengths Weaknesses
One of the internal factors that can be seen of
Direct Link is that it's brand portfolio is very
strong, this is good for the business if it wants
to expand into new markets or introduce new
products in different markets in the future.
One of the main weakness that is seen of
Direct Link Group, regarding the internal
environment, is that the main headquarters is
situated on a rented propertied hence causing it
to incur extra costs.
The cost structure of direct line has products
with low prices so as to increase the customers
hence the organisation has been making profits
for most of the years. When customers see that
there are low prices of a good quality product
or service then they will automatically get
attracted to it.
The balance between the levels of assets and
liabilities of the organisation is not appropriate
leading problems in the liquidity of operations.
The cash flow of Direct Link Organisation is
another problem that can be identified as
creating issues for liquidity.
Another strength of Direct Link Group is that
the technologies that the organisation uses will
allow it to successfully enter into new markets
with too much hesitation. For the future Direct
Link Group is focused on giving a better
experience to their customers by upgrading its
technologies.
Regarding the employees, though they are a
skilled workforce there is little to no
diversification present in Direct Link Group.
The organisation prefers local workers than
people from other nationalities. The legal
department of the organisation does not have
any experienced employees.
The employees that are working in Direct Link
Group are highly skilled so that they can meet
the ends of the customer needs.
Throughout the years in Direct Link Group,
there has been a rise of radical issues within
the organisation that has affected the culture
and has made changes in the behaviour of the
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employees (their morale is low).
The organisation is spread across the world
which makes sure that the values of it are
followed everywhere so that the customers feel
valued and respected. By doing this Direct
Link Group will have a higher customers base
thus resulting in more profits (Chron, 2019).
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LO3 Evaluate and apply the outcomes of analysis using Porter’s five forces model to a
given market sector.
P3 Apply Porter’s five forces model and to evaluate the competitive forces of a given
market sector for an organization
It is necessary for an organisation to see what competitive edge it holds in the market. The
organisation should be able to identify key factors that make it stand out from its competition.
Porter’s Five Forces can help Direct Link Group in getting a better understanding of the
competition that there is in the market.
Porter’s Five Forces
Threat of New Entrants
The first force is related to new companies that are entering the market and how they would
affect the performance of Direct Link Group. The organisation is involved in a sector in which
the economies of scale is hard to accomplish, so the new companies would not want to start in
this sector. The costs for operating such business as Direct Link Group is really high so new
companies would be put in a difficult financial situation. There are also wide arrays of
government policies that need to be followed by new companies for establishing themselves in
this industry. Direct Link Group can use these factors to give it a competitive edge over new
entrants in the industry (Dälken 2014).
Bargaining Power of Suppliers
There are a huge amount of suppliers that are involved for Direct Link Group so it does not have
to worry that much about bargaining done from the supplier's side. But if this were to change
then the organisation would have to face problems because the products that are provided by the
suppliers do not have any standby making it the only one available. To face such risks in the
future, Direct Link Group can start to buy from suppliers who are providing at low costs and if
not then the organisation should switch to another supplier as the cost involved in switching may
not be that high. The organisation should have more than one supplier for its supply chain.
Bargaining Power of Buyers
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There are many other insurance organisations like Direct Link Group in the market so the
customers do not have that much of bargaining power as they could easily pick the same product
from the other companies. Though this may be good for Direct Link Group there could be price
fluctuations and price wars in the market that could disturb the whole process. One way that
Direct Link Group can attract and maintain its high sales is by creating new and innovative
products that would be unique and would give the organisation a competitive edge over its
competitions.
Threat of Substitute Products or Services
There are substitutes of the products that are made by Direct Link Group but they are pricing is
very high. The products that are offered by the organisation are of high quality and their prices
are also low so most of the customers will choose these. Direct Link Group does not have any
problem with this force. Though in the future if it does have any problems with this competitive
force then it should focus on creating better quality products so that the customers stay loyal to
the organisation and do not move to another product easily.
Competition with Present Companies
There are organisations in the market that want to achieve the top position. For Direct Link
Group to become the top in the market it should see what the supply and demand are so that it
can make products accordingly and not have an excess of products that are not being sold
(Business News Daily 2018).
M3: Devise appropriate strategies to improve competitive edge and market position based
on the outcomes.
There are various strategies that Direct Link Group can use to increase its competitive edge over
its competition.
One of the most used and common strategies is making products different and unique from other
organisations. This would show that the organisation has a diverse number of products available
for the customers to choose from and the customers would not go to other organisations to buy
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anything. The diversification would also increase the brand's awareness thus creating a larger
customer base for it (Entrepreneur 2016).
Another strategy that can be used is by implementing new and innovative process into the
operations of the organisation. These new and innovative processes may increase the supply and
efficiency of the products thus resulting in faster production of goods. This will give Direct Link
Group a competitive edge as the products may be manufactured and a faster rate and will be
available to the customers quicker than any other organisations. The delivery processes could use
an innovative process so that the customer can have their product or service delivered to them at
a much quicker pace.
The marketing strategy can be used by Direct Link Organisation for it to gain a competitive
edge in the market. The organisation can advertise its products and services at big promotional
events that happen across the world so that it can create awareness. In the present, the
organisation should focus more on promotion to be done on the internet as most of the time
people are on the internet searching for products (News Leader 2016).
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