Strategic Analysis of Starling Bank: Business Environment and Strategy

This report provides a comprehensive analysis of Starling Bank's business strategy, encompassing its macro environment, internal capabilities, and competitive forces. The report begins by applying frameworks like PESTEL to analyze the impact of the macro environment on Starling Bank, considering political, economic, social, technological, legal, and environmental factors. It then delves into the internal environment, utilizing the Resource-Based View, VRIO, and McKinsey's 7S model to assess the bank's resources, capabilities, and organizational design. The report further evaluates the competitive landscape using Porter's Five Forces model, assessing the intensity of rivalry, the threat of new entrants, the threat of substitutes, and the bargaining power of suppliers and customers. Finally, the report interprets and devises strategic planning for Starling Bank by applying Ansoff matrix. The analysis provides valuable insights into Starling Bank's strategic positioning and future growth prospects.

BUSINESS
STRATEGY

Contents
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................3
TASK 1............................................................................................................................................3
P1 Applying appropriate frameworks analyze the impact and influence of the macro
environment on a given organization and its strategies. .............................................................3
TASK 2 ...........................................................................................................................................5
P2 Analyze the internal environment and capabilities of a given organization using appropriate
frameworks. .................................................................................................................................5
TASK 3............................................................................................................................................8
P3 Applying Porter’s Five Forces model evaluate the competitive forces of a given market
sector for an organization. ...........................................................................................................8
PART 2............................................................................................................................................9
TASK 4............................................................................................................................................9
P4 Applying a range of theories, concepts and models, interpret and devise strategic planning
for a given organization. .............................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy is very important for a company when it seeks to grow in the market in
the strategic manner. While putting it in simple terms, it is set of plans, goals and actions which
outline how the business shall compete in the market with its product or service. It is vital that
business must take into account many factors such as market competitors, business environment,
company’s structure, its strength, weakness and many others(Yuan and et. al., 2020).The
organization chosen is Starling Bank, a digital challenger bank which is headquartered in United
Kingdom. This report shall cover the influence and impact of macro environment, capabilities of
internal environment, porter’s five forces and theories and model for strategic planning.
PART 1
TASK 1
P1 Applying appropriate frameworks analyze the impact and influence of the macro environment
on a given organization and its strategies.
Macro environment is a conditio0n which exist in whole economy rather than in
particular region. In order to analyze the influence and impact of external factors, the following
framework is being applied which are narrated below-
PESTEL analysis
It is a framework which is used to analyze the macro factors of the economy which are
discussed below in context to starling Bank- Political- It consists of the political environment of the country where the business is
being operated. In relation to Starling bank, the Brexit uncertainty have delayed its
expansion in European nations which have resulted in delayed expansion of the Bank. Economic- It includes the economic factors like inflation, fluctuation in foreign currency
etc. The Starling Bank has been impacted by the slow economic growth of United
Kingdom due to pandemic of Covid 19. This has affected its grow and success. Social- It includes the socio cultural factors like demand, supply, behavior of people etc.
In relation to Starling Bank, the company has advantage that millennial are ready to adopt

the digital financial services with flexible feature which helps in attracting the young
generation which will ultimately help in growing business(Moktadir and et. al., 2020). Technological- It includes the technological up- gradation which supports the business.
The starling bank deals with digital financial services and increased cyber safety concerns
have affected the company as it may cause the loss to the company due to cyber-attack. Legal- The new policies in Europe have been rewritten due to general data protection
regulation which have offered to citizens of EU the protection on new level. The bank has
obligation to protect the data of its customers and comply with all GDPR regulations in
order to promote customer trust and engagement. Environment- It involves the environment sustainability in order to protect the
environment. In relation to starling Bank, it has an advantage of attracting customers as it
has small carbon footprint as compared to other banks which deal in digital medium. A
study showed that people get attracted to such organization which works in eco-friendly
manner.
Stakeholders analysis
The power interest matrix bifurcates the stakeholders of the company on the basis of their
power and interest in company. In context to starling Bank, the stakeholders analysis is discussed
below- High power- High interest- It involves the stakeholders who are required to be managed
closely(Farrukh and et. al., 2020). The board of directors and key personnel of bank are the
one who are to be satisfied fully and make their engagement. High power- less interest- It involves the stakeholders who are to be keep satisfied. In
relation to Starling bank, It includes the employees of organization who have power in
organization but keeps less interest in working. They manage the working of bank. Low power- High interest- It includes the stakeholders who are required to be informed
only. In relation to Starling bank, the customers are the one who have less power vut high
interest in the working of bank as they are dependent on their working. Low power- low interest- It includes those stakeholders who are required to be monitored
only. In context to starling bank, it includes the suppliers as they are only to be monitored
but does not require excessive communication (Kong, Yang, Liu, and Yang, 2020).
Ansoff matrix

This matrix involves four different strategies which are required to be analyzed by the
company in order to plan their strategy for the future growth. Starling Bank can use any of the
following strategy in order to grow and expand. These are discussed below- Market penetration- It focuses on the increasing the sale of the existing product or
service in the existing market. Starling bank can use this strategy to increase its sales in
its existing market with same services. Product development- It focuses on introduction of new service or product in an existing
market. Starling bank may use this strategy to attract new customers in its existing
market. Market development- It mainly focus on entering new market with existing product or
service. This strategy shall help in expansion of the bank in new market in order capture
new market.
 Diversification- It focuses on entering new market with new offering. It involves heavy
risk as Starling bank has to enter new market with new service which has heavy risk
involved.
TASK 2
P2 Analyze the internal environment and capabilities of a given organization using appropriate
frameworks.
It is important to analyze the internal environment of company so that it can use its internal
capabilities in order to achieve its strategic objectives. The strategic capabilities is a process
which offers improvement and enhancement in the strategy of business so that it can implement
modified strategies to meet the competitive advantage of market(Acuña-Carvajal and et. al., 2019).
The analysis of internal capabilities and environment are discussed below using following
framework-
Resource based view
It is the framework of manager which is utilized to tell the resources of the company so
that it can be exploited in order to achieve the sustainable competitive advantage. The key insight
of this is that not all resources have an equal importance nor it has potential to become a source
of competitive advantage. There are mainly two types of resources which includes tangible such

as land, building, capital, equipment, etc. and intangible which includes intellectual property
rights (Lin and et. al., 2021).It is important for the company to use many resources in such manner
that it is utilized efficiently and effectively with minimum wastage.
VRIO
It is an analytical technique which is used for evaluating the resources of the company and
thus provides competitive advantage to them. In context to Starling bank, the VRIO model is
illustrated below- Valuable- The valuable resource of this bank is its integrated information technology
system which offers online service to all its customers. Rare- The rare resource of Starling bank is its financial services as it offers expertise
financial service to its customer which distinguishes it from its competitors. Imitable- The imitable resource of Starling Bank include its resource capacity for
recycling. The bank have recently replaced its debit card to a new card which is made
from, 75% of recycled rigid PVC plastic. Organized- The organized resource includes the human resource and the services of the
bank such as mobile application which can give instant service to customers. Starling is
the first bank of UK which has in- app provisioning for the Apple pay.
Mckinsey’s 7S
It is the tool which makes analyzation of the organizational design of the company by
seeing at the 7 key internal elements. It helps in identifying whether these elements are
effectively aligned or not and allows the company to achieve the business objectives. In context
to Starling Bank, it is illustrated below- Strategy- It is a plan which is developed by the company to achieve the sustained
competitive advantage and helps in competing in the market (Rehman, and Anwar,, 2019).
For instance, the money and pension service helped the Starling bank to put forward the
strategy which can be easier and supportive in order to access the debt advice system
which can help in resolving the problems relating to debt problem. Structure- It represents the way in which business units and divisions are organized and
includes who is accountable to whom. The Starling Bank follows hierarchical
organizational structure which have a chain of command from the superior to
subordinate.

 System- It consists of the procedures and process which reveals the daily activities of the
business and how the decisions are made. In context to Starling Bank, the organization
provides its financial service through its mobile application which is available in iOS and
Android in order to deliver the services efficiently and in easy manner(Fraser, 2019). Skill- These are the abilities which helps the employees of the company to perform well.
It includes the competencies and capabilities too. In relation to Starling Bank, it has
skilled and talented employees who are capable serving digital financial services. Staff- It is concerned with what types of the employees are required and how many
employees does the organization has. The Starling bank has 800 employees who work
day and night for the growth of bank. Style- It represents way in which company is managed by the top level mangers. It
mainly includes the management style of the leaders of company. In context to Starling
bank, it follows participative leadership style where the leaders welcome the opinion and
ideas of the subordinate and support them throughout their journey.
 Shared values- It includes the standards and norms which guides the behavior of
workforce and the action of company and gives foundation to organization. The values of
Starling bank is hat they are committed to to provide the workplace culture which reflects
the value of inclusion, fairness, non discrimination and compassion(Madhushree, Kumar,
and Aithal, 2018).
TASK 3
P3 Applying Porter’s Five Forces model evaluate the competitive forces of a given market sector
for an organization.
This model of Porter's five forces analyses and identifies the competitive forces which can
shape the industry and also helps in determining the weakness and strength of company. In
context to Starling Bank, the Porters five forces is discussed below which will help it realize the
competition level in industry and increase its the long term profitability of company. Competition rivalry- It includes the number of competitors and also its ability to undercut
the firm. In context to Starling Bank, the power of this force is high as there are many
banks out there which are becoming digitized in today's era and also due to pandemic of

Covid 19. this increases the power of this force for the Starling bank(Martínez Hernández
and et. al., 2021).
 Threat of new entrant- It is the power of organization to get impacted by a force of new
entry in market. In relation to Starling Bank, the threat of this force is low as establishing
new bank can involve high time, cost and formalities which is not possible for any
individual. Moreover it also requires many formalities to establish the bank. Threat of substitutes- It includes those services which can used in place of organization's
services and poses threat on them. The power of this force for Starling Bank is high as it
faces this threat mainly from non financial institutions which provides services like
insurance, income securities, mutual funds, etc. Bargaining power of suppliers- It involves the probability of the suppliers to drive the
cost of input. In relation to Starling Bank, the suppliers includes customer deposits, loans
and mortgages. By utilizing them the bank can function effectively. Its power is
moderate as the power of suppliers is based on market and is considered in order to
fluctuate between medium to high.
 Bargaining power of customers- It is the ability of consumers to drive the price lower. In
relation to starling Bank, the power of this force is low the Starling bank provides all such
financial services to customers which makes difficult for them to switch to other bank.
PART 2
TASK 4
P4 Applying a range of theories, concepts and models, interpret and devise strategic planning for
a given organization.
In order to have the strategic planning for a company, it is important to apply various
theories and framework which can contribute in efficient strategic planning. The different
framework are discussed below-
Porters Generic strategy
There are different companies who approaches market in different manner. The Porters
generic strategy provides 4 types of strategy which can be used by the company to classify the

organizational behavior and also drive its behavior. The different strategies which may be used
by Starling Bank is narrated below- Cost leadership- In this strategy, the company sets out to become low cost producer in
industry. In this, the companies focus on reducing the cost in order to deliver product or
service to the customer, thereby ensuring the profitability by increasing sales but with
low cost. In context to starling Bank, it can offer its services to bank like loans at low
interest rates so that the customers can get attracted and they can also involves in mouth
publicity in order to promote business of bank.(Oldman and Tomkins, 2018). Differentiation- In this, the company seeks to become unique in industry together with
some dimensions which are valued by customers. It chooses one attribute which the
customer can perceive as essential and then the company position itself uniquely in order
to meet their demands. The Starling bank can bring innovative financial service fro
customers so that it can establish a good brand image in market. Focus- It includes two aspects which are cost and differentiation. In relation to cost
focus, the Starling bank has to determine the effective cost in order to make everyone
avail its services and in relation to differentiation focus, the Starling bank must focus on
introducing new innovative techniques to consume the services.
Bowman Strategic clock
It is the model which helps the organization to get the right positioning in terms of strategies
so that it can position itself in the market in order to battle high competition. In context to
Starling Bank, the aspects of this model is discussed below- Low price and low value added- This is based on making sale of the quantity. The
services offered are low in its value and the rate is also low. In this, The Starling bank can
offer its services with low high interest rate on loans and low interest rates on deposits. Low price- It involves becoming the low cost option for the customers in the market. In
this, the Starling Bank has low margins so cost reduction and the process efficiency is the
key to become successful(Wadström, 2019). Hybrid- It is a combination of both low price and differentiation. In strategy ensures that
the price is competitive ideally with low price and promotes added value aspects of
product. Starling bank can use this strategy to increase its sale overall.

 Differentiation- This strategy involves differentiating the product or service from the
competitors by adding the high perceived value. In this, Starling bank must focus on
innovation and bring such services which are innovative to attract customers. Focused differentiation-It focus on providing the high value foods at high price. When
this strategy is implemented, it offers high profit to company but it is difficult to
maintain. Risky high margins- It involves the strategy which is to be understood completely before
embarking on it as it offers high price without perceived value to the offering. The
Starling bank is offering high interest on loans which is risky as it may result in decline
of customers( Bhattacharyya, 2020). monopoly pricing- In this, the single organization controls the pricing and product and
other factors like price points, competitors and value plays very less of the factor.
 Loss of market share-It is one of the worst position which suggests that organization is
exiting from the market or is declining. This strategy can be opted when a company
decides to move to new market. Starling bank can use this strategy when it leave its
current market and move to other.
Strategic management plan
Vision The vision statement of Starling Bank is to making the banking service
better for every person through demystifying money.
Mission Its mission statement is simple that they want to create the bank like no
other as it put its customer at first priority and nake the use best
technology in order to transform the relationship of bank with its
customers.
Strategy In order to attract more of the customers and make its existence
counting, the starling bank can make use of the market development
strategy where it will enter new market with its existing product or
service.
Tactics
 Product/ service- Starling Bank offers retail banking service to
its customers as it is a digital challenger bank which focus on
business and current account products.

 Price- The Starling bank offers competitive pricing to its
customers as it charges similar interest, service charges and any
other fees to cover up its transaction cost, risk premium,
overheads.
 Place- The Starling bank is situated n United Kingdom with
covering approximately 11500 banks. It provides its services
through physical banks and through digital medium such as
mobile application and many others.
 Promotion- Starling Bank uses traditional medium such as
advertisement through television, radio, etc. in order to attract
customers of UK to avail its services.
Evaluation The evaluation shall be done by using the tool of bench-marking
wherein the bank will set the benchmark or the standard and will
compare its plan with the actual one so that it can achieve its standard
and objectives.

CONCLUSION
It is concluded from the above report that strategic management is an important practice
in the company as it helps in building strategy in order to grow and expand. It is important to to
analyses and identify the internal environment which includes framework like resource based
view, VRIO analysis and McKinney's 7S model so that analysis is done effectively and
frameworks like pestle, ans off and stakeholder analysis helps in scrutinizing the external
environment. Porter's five forces in an important model to evaluate the competitive force of the
company. Further it is concluded that strategic planning of the company involves using the
Porter's generic strategic and Bowman strategic clock so that the company can choose the best
strategy for its benefit, growth and success.