Business Strategy Report: Klarna's PESTLE, VRIO, and McKinsey Analysis

This report provides a comprehensive analysis of Klarna's business strategy, examining its position within the financial services market. It begins with an introduction to business strategy and Klarna's operations, followed by an in-depth analysis of the macro-environment using the PESTLE framework, considering political, economic, social, technological, legal, and environmental factors. The report then delves into Klarna's internal environment, employing the VRIO framework to assess its resources and capabilities, including financial resources, patents, workforce, and food products. Furthermore, the McKinsey 7-S model is used to evaluate Klarna's internal strengths and weaknesses. Finally, the report assesses the competitive forces within the market sector using Porter's Five Forces model and concludes with strategic planning insights, theories, concepts and models for Klarna's future growth and competitive advantage.

Unit 32
Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
P1 Applying appropriate frameworks analyse the impact and influence of the macro
environment on Klarna and its strategies...............................................................................1
P2 Discuss the internal environment and capabilities within organisational context............4
P3 Applying Porter’s Five Forces model evaluate the competitive forces of a given market
sector ......................................................................................................................................7
P4 A range of theories, concepts and models, interpret and devise strategic planning for a
given organisation..................................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business Strategy is a plan for achieving its vision, mission and objectives to gain
competitive advantage and to achieve the goals of an organisation. In other words, it is strategy
and combination of decisions that help firm in mobilising the resources and meeting challenges
and combatting threats (Cavusgil and et. al., 2014). It is developed by the managers of company
who convert the mission and vision into concrete strategy. Klarna is a bank that provide various
financial services like direct payments, post purchase payments and so on. The focus of firm is to
provide best financial services to meet the demands of customers. It has expanded its operations
at different places like Australia, Germany, Denmark, UK, USA and other operating parts to
create a large customer base. The report comprises of the impact of macro environment in
various areas of decision making in business. Also, the internal analysis uses the firm's resources
to identify the strength and to overcome the weakness while formulating firm's policies and
procedures.
The size, nature and scope of business performs various functions like finance,
marketing, human resources and research and development(Ocasio and Radoynovska, 2016).
The report covers Porter's five force model to ascertain the industry's strength and weaknesses
and to analyse the competitive factors of a business. It is a framework of evaluating the position
of a business that determine the productivity and profitability of a business. The report comprises
of theories, models and concepts to understand the strategic action available to an enterprise. It
consists of overview of firm and its vision, mission and objectives and its position in the market
and also its unique features to gain competitive advantage within the market.
P1 Applying appropriate frameworks analyse the impact and influence of the macro environment
on Klarna and its strategies.
The primary goal and objectives of any organisation helps it to achieve the desired level
of success(Mittal and Dhar, 2015). The company Klarna does also has the same objectives
which are attained by its efficient plan of actions. The strategies and decisions regarding the plan
are formed by performing particular analyses of the respective environment of company and its
stakeholder (Brewster, 2017).
By the term strategy here it is meant as the particular method which comprises of all the
factors and that is performed accordingly to bring the desired outcomes in the near future. The
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strategic practice of all kinds of arts and science for the attainment of organisational objectives is
necessary. These strategic aspects of Klarna are as follows:
Mission - The ultimate mission of the organisation is to provide the best and efficient
financial services in the country.
Vision – To become the leading financial corporation in UK and USA
Objectives – To generate more revenue from upcoming sales and enhancing the quality
and standards of customer interaction.
All these strategic factors and organisational vision can be achieved by evaluating the
macro environmental factor. This will be analysed by performing the PESTLE analyses in
relation to the Klarna.
Political factor: The political environment of working aspects in any nation affects the
business cycle of respective organisation(Bell, Bryman, and Harley, 2018). Being a financial
institution Klarna intrigues with many kinds of political and civil regulations. As per the
BREXIT system in UK the company may face a certain down in sales and international services
by the arising effect from other European networks. Whereas the stable political background of
the nation helps the business strategy of Klarna to perform effectively and smoothly by forming
more futuristic plan of actions for a long term.
Economic Factors: Foreign exchange rate and consistently growing interest rates, the
global capturing and the GDP of nation etc. are such economic factors that are effecting the
business and profitability of Klarna in a beneficial way(Brewster, 2017). In the United Kingdom
major economical drawback for the Klarna is the inflation in the costings due to Brexit criterion.
(Chen and Jermias, 2014). Thus also it gives an open and wide area for the growth and nurturing
of the financial institutions. The higher return on investment attracts the foreign direct investors
which is an opportunity for the Klarna to expand its workings and operations.
Social Factors: Social factors of environment comprises all those factors which are
rationales for interlinking of business with the society, such as demand of market taste of
consumers, moral values, habits of purchasing, and emerging trends in the lifestyle etc.
(McCahery, Sautner and Starks, 2016). The transformation of culture, social and moral values,
trends which are emerging in environment of United Kingdoms affects the financial trading of
Klarna on an extensive level. An efficient management of market monitoring is the only tool for
the survival of business from all the social factors.
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Technological Factors: Continuous transformation of the working standard for products
and services is a result of technological factors(Cavusgil, and et. al., 2014). In today's world
certain growing technical advancement are enhancing the high strength competitive. This is
making the overall business of Klarna bank AB a less profit earning. Regular updation of the
technology is the solution to negative outcomes of the business process. Although UK has a
bigger hub of science and IT which can provide the essential resources to the organisation.
Legal Factors: The laws and legislations of the nation where the company is operating
its business are the legal aspects of it (Chang, 2016). These factors are rigid in nature and needed
to be followed by the respective organisation to work effectively in the surroundings of United
Kingdom. Some legislations such as the international financial law can also behave negative on
the Klarna bank for the growth of the company into international market. As they limit the
marketing and trading of the organisation at a determined level.
Environmental Factors: All those factors of environment which affects business
directly and indirectly (Chen, and Jermias, 2014). The tasks and operations which are depended
on the natural factors may get disturbed because of the deflecting environmental conditions. The
elements of climate change within the UK as well as on the planety give the chances to the
Klarna bank AB to take certain necessary initiatives like doing social awareness campaigns. By
doing so it would enhance the moral of the stake holders of company as well as the environment
would also be benefited from this.
(Source: PESTLE Analysis, 2020)
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Illustration 1: PESTLE Analysis

P2 Discuss the internal environment and capabilities within organisational context
The internal analysis help to examine and assess the environment to provide assistance to
manager in decision making process and also contribute to achieve a significant position within
the market (Ocasio and Radoynovska, 2016). It is important for a firm to constantly undergo
internal environment analysis with a view to gain comprehensibility of the manner in which the
internal aspects of an entity place impact over the corporation.
Strategic capabilities refer to the abilities of the leader of the group that help the firm to
gain competitive advantage over others by forming an appropriate strategy. Through proper
planning, firm can decide the appropriate course of action from the various alternatives available
that help in achieving the objectives of a company (Klettner, Clarke and Boersma, 2014). Klarna
is a large Swedish bank in UK that provide range of online financial services such as payment
solutions, direct payments and many more. The aim of firm is to handle the claims of customers
and solve customer payments as it saves time and money.
To effectively conduct the internal analysis, Klarna Bank has made use of effective
frameworks, namely, VRIO. This will provide an overview of the shortcomings and positives of
the micro environment for the respective financial institution.
VRIO Analysis
This analysis help the firm to look at its internal resources to provide competitive
advantage(Davies, 2016). It includes various aspects like financial resources, patent, workforce
and food products in relation to valuable, rare, inimitable and organisation. The manager of
Klarna provides the VRIO analysis that are described as follows:
Resources V
Valuable
R
Rare
I
Inimitable
O
Organized
Financial
resources
Yes Yes Yes Yes
Patent Yes Yes Yes No
Skilled workforce Yes Yes No No
Food products Yes No No No
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Valuable:
The financial resources of Klarna are highly valuable as it provides various opportunities
to a firm in raising funds (Ocasio and Radoynovska, 2016). Also. The local food products are
highly valuable which makes it differentiated from its competitors. The employees of Klarna are
skilful and asset to a firm as specialised training are provided to them which help to increases the
productivity and efficiency of a firm. The employees are very talented and loyal that increase the
output of an organisation (Jeston, 2014). Choosing the right person and assigning task according
to their skills is very important for a firm as it provide future growth and also by providing
rewards and benefits so as to motivate the subordinates to complete the task in a proper time. The
patent provides the concerned firm with licensing revenue to the manufacturers that results in
greater revenue due to which they are valuable.
Rare:
The patent are rare resources as identified by manager of Klarna that makes different
from its competitors. As competitors would not copy the products easily from the respective firm
that provide future opportunities. This lead to boost the sale of products and increases the profit
of company that improves the overall performance (Ocasio and Radoynovska, 2016). The
respective firm provide specialised training to subordinates in order to increase the efficiency of
a firm and help in achieving goal. The financial resources are found to be rare according to
VRIO analysis as strong financial resources are possessed by few companies as these are earned
through prolonged profits.
Imitable:
The resources that company acquire is costly to imitate that is earned through profits that
company earn in previous years(Peng, 2017). Patent is difficult to imitate as it is described by
manager of Klarna because it is legally not allowed to copy a patent product (Goffee and Scase,
2015). The firm assure that there is optimum utilisation of resources as these are very precious
and costly. It is difficult for competitors to purchase these resources because a lot of investment
is required in research and development. The financial resources are costly to imitate because
these has been acquired by a company through the profits earned during previous years.
Organisation:
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The distribution network of Alliance Governance at Klarna is covering large network
across the globe to gain large access of customers(Spender, 2014). The concerned firm ensure
that the products are available in all of its outlets in order to gain competitive advantage
(Scholes, 2015). It provide assurance that firm is using its resources in right place by grabbing
opportunities and combatting threats which provide growth opportunities to a firm.
(Source: VRIO Analysis, 2020)
McKinsey model
McKinsey is a business management model that provide the framework for monitoring
the changes taken place in the internal analysis of an environment which provide growth
opportunities to a business(Jeston, 2014). It consist of various elements like strategy, skills,
style, structure and so on and all these are interrelated towards each other. Changes in an
organisation is must in a dynamic environment as there are changes in technology, taste and
preferences of customers. The manager of Klarna has applied the various changes in an
organisation to become a significant position within the market. The same are presented as
follows:
Strategy: The manager of Klarna follow the market penetration strategy by capturing
large market share and to gain large access of customers(Jocovic, and et. al., 2014).
System: Klarna provide innovative technology and provide instant solutions to their
customers across the globe(Veit, and et. al., 2014).
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Illu
stration 1: VRIO Analysis

Structure: The manager of a firm follow the hierarchical structure in an organisation to
accomplish task as the higher authority direct the subordinates and provide direction of action
and facilitate the smooth operation of a business(Klettner, Clarke, and Boersma, 2014).
Skills: The employees of Klarna are highly trained and skilled as it work with greater
potential and accomplish the task in a limited time.
Shared Values: In this, the main motive is to become the leading corporation in UK and
USA and to provide efficient services to their customers.
Staff: The number of employees working in a Klarna are 2700 as they achieve the task in
a proper time(Laudon and Traver, 2016). It is a large multi national company which has large
number of employees working in an organisation.
Style: The higher authority follows the democratic style of leadership as it consult the
subordinates, their ideas and opinion for achieving the goal of an organisation.
The McKinsey model could help the Klarna to prepare an appropriate strategy through
proper planning and thus also help to gain competitive position across the globe. The manager of
Klarna could itself adapt the changes in a dynamic environment so as to facilitate the smooth
operation of a business. This bring proper coordination and cooperation and help in completing
the task in a proper time.
P3 Applying Porter’s Five Forces model evaluate the competitive forces of a given market sector
Porter's Five Forces are combined together to deal with the external competitive factors.
These factors are the crucial part of the environment of business which is needed to be
considered while making any decision (Peng, 2017). Market conditions, enhanced competition,
rate of inflation can be monitored and controlled by these five forces. In relation to the Klarna
the analyses of competitive forces are as follows:
Threat of new entrants: The threat of new entrants in financial sector is generally high.
Because there is a high need of the funds and other financial services in the market and who so
ever provides these services on an efficient rate of supply and demand. The customer channel
shifts toward that business (Lawton, 2017). Thus it is an easy approach for new companies to
attract more and more of new market share. The new entrains in the sector creates a higher
competition and also derives the existing consumers towards them. Thus company should
introduce the loyalty schemes. By these situations it could become a really tough condition for
the business to survive and attain the growth for the long term in the market.
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Threat of substitutes: Substitution threat to the bank is high according to the current
market scenario. As the business is facing a tough competition from the new and small financial
ventures (McCahery, Sautner and Starks, 2016). They are enabled to provide the latest services
of finances to the potential customers. These critical conditions can be evaluated and resolved by
the management of the Klarna by providing the complimentary means to the permanent
customers and attracting new customers by offering new and beneficial bonanzas The higher
risks of substitutes are the bigger threats as most of them has the goal to male other business
obsolete, while Klarna should emphasis on the distinctive appearance and consumer services.
Bargaining power of customers: Among the banking sectors the bargaining power of
customer is limited (Veit and et. al., 2014). The fixed and predetermined regulations have the
rigid nature. Which does not allow anybody except the superior management to moderate any
term or change any condition. The consumer power in respect to demanding any adverse
demands for the business is quite less and thus in relation to this the Klarna Bank is effectively
managing the balance to increase the loyalty of its consumers and on the same side the
organisation is building the growth of business in market. This scenario within the Klarna makes
it effective for the organisation to follow a set pattern of providing the services to its customers.
Bargaining power of suppliers: Within the confines of finance sector the bank faces a
low power of bargaining by the supplying elements on a very limited level. The equilibrium of
supplier and the need of the business should always be maintained and in the context to Klarna
bank the low power of supplier leads to secure more profit return through the cost cutting. Thus
the organisation has the potential to earn more profitability and expend its business (Mittal and
Dhar, 2015).
Competitive rivalry: The competitive rivalry of Klarna in the financial section of market
is relatively much higher. Biggest rival of the company is Barclays, that offers a wide range of
financial services and efficient standards of banking products and services in a suitable price
range of the market(Lawton, 2017). Thus to eeffctivey beat the extent of competition with the
rivals it is essential for the company to focus on more new and innovative approaches and use
them in attracting the new consumer share and providing them cheaper and beneficial services.
The Klarna bank should consider the values of customer and their demand to beat the extensive
competitive rivalry.
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Illustration 1: Porter Five Force Analysis

P4 A range of theories, concepts and models, interpret and devise strategic planning for a given
organisation.
Identification of the strategic growth of the business is achieved by performing the
Ansoff Matrix. It is managerial tool which is used to counter the conditions of market which are
about to happen or ever happened in the period of time (Spender, 2014). It can also be
understood as the principle which helps the organisation to program and design the series of
formulation. This helps in determining the particular course of action which is needed to be
followed by the respective manager of the company. In relation to the Klarna the following four
strategies of Ansoff matrix is here by:
Market Penetration: under this strategy the major emphasises is done on to the growth of
the existing segment of sales of a product. It is performed to analyse the provisions of that
respective product or services (Chen and Jermias, 2014). Klarna ca follow this strategy, by can
moderating its existing policies that'd enhance the market share of it as well.
Market expansion: Another name of the market expansion is the market development.
It targets the growth and expansion of the existing product (Jocovic and et. al., 2014). The
expansion and growth is achieved by providing the assistance to the operational level of
marketing of the Klarna. Such actions can be fulfilled by tapping into new market places such as
in te markets of CANADA and attracting the potential customer segment. This strategy helps in
achieving the optimum sales and growth in profits.
Product expansion: This strategy seeks to introduce new products and its variations in
the existing market place for the growth of the brand (Brewster, 2017). Product expansion will
certainly add the specific options in the Klarna bank to reach the extensive proportion of
consumers. This helps to understand the demand and need of existing market. Klarna bank can
introduce its new financial services of mutual funds in the segment of market investment and
general trading of shares.
Diversification: among this business strategy the major operations of launching the new
product variation in to a whole new marketplace (Davies, 2016). Execution of diversification
process among the untapped area of business premises is considered as the riskier process to
follow. As in this strategy the chances of facing failure is quite high. Along with that
disadvantage it will prove as a cost consuming strategy for Klarna.
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