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BUSINESS STRATEGY
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Contents
LO1 ANALYZE THE IMPACT AND INFLUENCE THAT THE MACRO ENVIRONMENT HAS
ON AN ORGANIZATION AND ITS BUSINESS STRATEGIES. ......................................................... 3
P1 APPLYING APPROPRIATE FRAMEWORKS ANALYZE THE IMPACT AND INFLUENCE OF THE MACRO
ENVIRONMENT ON A GIVEN ORGANIZATION AND ITS STRATEGIES. ........................................................... 4
M1 CRITICALLY ANALYZES THE MACRO ENVIRONMENT TO DETERMINE AND INFORM STRATEGIC
MANAGEMENT DECISIONS. ............................................................................................................................ 7

LO2 ASSESS AN ORGANIZATION’S INTERNAL ENVIRONMENT AND CAPABILITIES ......... 7

P2 ANALYZE THE INTERNAL ENVIRONMENT AND CAPABILITIES OF A GIVEN ORGANIZATION USING
APPROPRIATE FRAMEWORKS. ...................................................................................................................... 7
M2 CRITICALLY EVALUATE THE INTERNAL ENVIRONMENT TO ASSESS THE STRENGTHS AND
WEAKNESSES OF AN ORGANIZATION’S INTERNAL CAPABILITIES, STRUCTURE, AND SKILLSET. ............ 10

LO3 EVALUATE AND APPLY THE OUTCOMES OF ANALYSIS USING PORTER’S FIVE
FORCES MODEL TO A GIVEN MARKET SECTOR .......................................................................... 12
P3 APPLYING PORTER’S FIVE FORCES MODEL EVALUATES THE COMPETITIVE FORCES OF A GIVEN
MARKET SECTOR FOR AN ORGANIZATION................................................................................................. 12
M3 DEVISE APPROPRIATE STRATEGIES TO IMPROVE COMPETITIVE EDGE, AND MARKET POSITION
BASED ON THE OUTCOMES. ........................................................................................................................ 15

REFERENCES ........................................................................................................................................... 16
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LO1 Analyze the impact and influence that the macro environment has
on an organization and its business strategies.

“Business Environment is the aggregate of all conditions, events, and influences that
surround and affect it”. Keith Davis
The business environment is complex and dynamic in nature and has various factors
affecting it directly or indirectly which have has an impact on the survival and growth of
the business. Morrison, J. (2002)

Business environment can be divided into two levels: -

1. Internal or Organization Environment – Refers to all the factors that are within the
organization and can be controlled internally.

2. The external Environment-External environment consists of legal, political, socio-

cultural, demographic factors that are uncontrollable factors and firms need to adapt to this
environment.

External factors further can be divided into macro and microenvironment.

1. Micro Environment-These factors affect the performance of a company and its ability
to serve the customers. Microenvironment has a direct impact on business activities.

2. Macro Environment-The macro environment consists of the economic and non-

economic variables that provide opportunities and threats to firms. This is largely
uncontrollable and, therefore, firms adjust their operations to these environmental factors.
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P1 Applying appropriate frameworks analyze the impact and influence of the macro
environment on a given organization and its strategies.

Business analysis models are useful tools and techniques that help to understand the
organization's environment better and plan for it better. (Garcia Coleta, Karina & Lopes,
Humberto Elias &Salum, Fabian. (2017).
Dozens of generic techniques are available, but some come to the forefront more frequently
than others do. These include:
• SWOT
• PESTLE Analysis
• Scenario planning
• Porter's Five Forces framework

One of the most popular methods of analyzing the business environment is the PESTLE
Analysis. Often used by most organizations, it helps provide a holistic picture of the macro
components affecting the business operations.
Basu R. (2004). Tools for analysis—PESTLE analysis in implementing quality: A practical
guide to tools and techniques (1st ed.)
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A PESTEL analysis examines six key macro-environmental factors in order to understand

their interactions with the organization as shown in the diagram above. Let us discuss them
one by one in relation to COFFE AND CAKE LTD. (CC LTD.).

POLITICAL

Political factors shall include taxation and tariffs, regulations, political stability, and
elections. An organization that has a lot of regulatory control from the government end
would be highly affected by these.

For CC LTD. the political factors do not really interfere too much in the working of the
business due to the nature of their work.
CC LTD. being a medium-sized family business does not have too many concerns about
the tariffs and regulations. The bakery operations will not be affected by any political
changes or elections, as the government does not intrude in their operations.
So we see that the political environment is not much of a botheration for their smooth
running.

ECONOMIC
Economic factors refer to the indicators that give an idea about the economy such as GDP
growth, employment, inflation, and interest rates. Companies with foreign operations
would also be affected by fluctuating exchange rates. These factors are important to
forecast the long-term survival of a business.

At CC LTD. the economic factors play a role but in a very subtle manner. The earning
potential of the people around Midland is good enough. The products that the bakery offers
are not too expensive so the sales taking a very bad hit in case of inflation or interest rate
hike are less. Of course elements like the overall economic growth and employment will
affect the fact that how much customers would the business get but so far the bakery does
not have trouble with sales on account of poor economic conditions. All the coffee shops
are located in the same region so exchange rate fluctuations etc. are again of no concern.
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SOCIAL
Society and culture largely affect the business environment. These factors include
demographics elements like population growth, age distribution, and gender ratio etc.
For CC LTD. yet again we see that the social elements are more or less favorable. The
population around has a preference for coffee shops and gives them a decent footfall.

TECHNOLOGY
Technology element of the PESTEL model includes factors like R&D, technology
incentives and up gradations etc. If the rate of technological change in the business
environment is too high it can pose a problem for companies relying highly on technology.
CC LTD. being a bakery does not have too much reliance on technology. So luckily there
is not much use of highly technical machines or gadgets in the business operations. The
technical macro elements will therefore not affect the operations to great lengths.

ENVIRONMENTAL
Environmental factors include weather, climate change, air quality, and natural disasters
are all. Some industries are especially at risk from changes in the natural environment due
to their nature of work like manufacturing, agriculture, tourism, and travel etc.
In the case of CC LTD., the advantage is that there is not too much of dependence on
environmental factors directly. Though indirectly it would have some impact. Example: a
shortage of vegetable in the market would increase the prices and so the cost of making a
sandwich for a bakery would go relatively up.

LEGAL
Legal factors would comprise of all laws and rules that a business must comply with to
function without any legal consequences. These include discrimination laws, consumer
protection laws etc.
CC LTD. being a medium scaled business and having simple nature of operations involved
does not have to take care of too many legal laws. The basic laws and rules of gender
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equality equal and just wages, consumer protection would apply to it and it has to keep
these in mind while structuring the business all through. As the employees in the bakery
are mostly family members, legal complications tend to be less automatically.

M1 Critically analyzes the macro environment to determine and inform strategic

management decisions.

The PESTEL model used above has helped us analyze the various macro aspects of CC
LTD. that affect the success of the business operations.
Basis these we can point out a few steps to improve upon.
Although we see that the scale of operations at CC LTD. are not too wide and nor are the
operations spread across the globe so it has the advantage of not being easily disturbed
by the political instability or the economic changes and fluctuations. But I strongly feel
that the company needs to plan better for its future and long-term existence and should
closely watch the social and technical aspects that (even though not in a direct manner)
affect its business.
The company has been losing out on customers due to competitors selling similar products.
CC LTD. should monitor and identify the taste and preferences of the population
surrounding its area to modify their products according to them. This will help them get an
edge over other and win over their customers.
Although there is not too much technology involved in the nature of work of a bakery but
a good know-how about the latest gadgets that aid in preparing their products can help
attain uniformity and quality consistency. Furthermore, time-saving can be done and
labor dependency can be reduced too. Gadgets have their maintenance cost too so the same
should be accounted for while weighing the benefits of investing in the gadgets.
I strongly feel that the company needs to analyze and use the macros better if it wants to
grow and sustain.

LO2 Assess an organization’s internal environment and capabilities

P2 Analyze the internal environment and capabilities of a given organization using
appropriate frameworks.
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The internal environment assessment and analysis is conducted after the external
environment analysis. While the external environment analysis seeks to identify
opportunities and threats in the external environment, the internal environment analysis
seeks to identify the strengths and weakness of your business.
Some of the techniques employed are Resource-Based View framework (RBV), Porter's
Value Chain and SWOT analysis.

We shall now discuss SWOT analysis as a means to look into the internal environment and
capabilities of CC LTD.

SWOT is an acronym, which stands for Strength; Weakness; Opportunity and Threats.
SWOT is used to assess a business or a proposition. This shouldn’t be restricted to a
business you own, but also to use it for your competitor’s business. (Lawrence G Fine,
2009)

STRENGTHS

In this section, we try to identify the key areas that work in favor of the business. These are
the internal capabilities and competencies of the business that keep it going strong.

A close look at CC LTD. helps identify the following strengths of the company:
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1. CC LTD. is a close-knit family business so the execution and implementation of ideas

are done quickly and efficiently.
2. The locations of the coffee shops are good and favorable.
3. As they own all their shops they save the rental cost of running the business.
4. Having a bakery as well as a coffee shop helps in averaging out the decline in sales that
one place might face with the profits from the other unit.
5. The HR employed is highly reliable as most of the family members are involved in the
business.

WEAKNESSES

These refer to the areas of the internal working of the business that need to be worked
upon. It's important to identify weaknesses if a business wants to grow and prosper.
Some areas where CC LTD. shows weakness are:
1. Although the owners have a lot of experience, lack of specialized knowledge restricts
their contribution towards new ideas.
2. Lack of innovation is there as no new products and variations have been added to the
business.
3. Proper marketing techniques are not been used to boost the sales of the business as
the result the sales are seeing a decline.
4. Lack of planning is there. No clear-cut future vision for the business is there in the
minds of the owners.

OPPORTUNITIES

Opportunities refer to the external environment changes or features that can work in favor
of an organizations business.

Now in the case of CC LTD., some external factors that are favorable are:
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1. The fact that the West Midlands area supports the culture of coffee lovers surely is a
great advantage to CC LTD., given their nature of the business.
2. The economic scenario and growth of the area are sound and thus the population is
keen to indulge in spending on their tastes and preferences.
3. CC LTD. has not explored areas outside of West Midlands so it has the opportunity to
expand.

The other political, technological and legal factors don’t play a very significant role in this
set up of a medium scale family run business.

THREATS
Threats again refer to any dynamic changes in the external environment that may adversely
affect the business.

For CC LTD. the following aspects can be a threat:

1. The fast-moving society is showing a shift of preference to easy takeaway meals that
competitors offer over the sit-down meal concept that CC LTD. caters to.
2. The competitors are participating in marketing and bringing on board new ideas. So the
innovation that they bring in is a threat for CC LTD. if it does not bring any changes to its
products.
3. The competitors like COSTA and STARBUCKS are renowned names worldwide and
have a strong brand following.

Thus we see how SWOT analysis has helped us break down all the issues that CC LTD.
needs to address as well as has helped to know the strong point that has kept it going.

M2 Critically evaluate the internal environment to assess the strengths and

weaknesses of an organization’s internal capabilities, structure, and skillset.
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SWOT analysis and a good study of CC LTD. has helped me get a good understanding of
the internal working and potential of the company. I feel that the company should not go
ahead and sell off its property as they have good capability to grow.
Few reforms and modifications that can help them sustain better in the competitive
market are as follows:
• The company has not explored the option of expansion and I strongly feel they
should expand outside West Midlands to take advantage of Economies of scale
especially as their products are perishable and need to be consumed in a short
duration.
• Also, the owners can hire managers that have specialized knowledge pertaining to
their business. Suggestions from such a person can work wonders from the
company to fill the gaps. The knowledge of such a person and the experience of the
owners together can make a blissful combination.
• As we notice that the company is facing a lot of competition from recognized
brands like costa, initiatives should be taken to change the product line a little and
new things can be added. As all these outlets work on the modern lines mostly CC
LTD. should try and retain the old days feel in its outlets and even the food they
offer so that it becomes a distinguishing appeal for their outlets.
• Another problem that the business is facing is that there is a shift of consumer
towards takeaway options so they can open small booth shops that offer takeaway
and drive away speedy options along with sit-ins that they conventional do.
• Another opportunity that the bakery business has is to provide bread to the new
shops that are opening up, even their competitors than can add to their own
business this way.
• Another area that needs focus is that of marketing. They must employ Internet
option to tell more potential consumers about their company and its product. They
should dedicate a few funds for marketing now for better growth and sales.
• The children of Khalid and Cheng are keen on inheriting the family business and
have new ideas to add to the growth of the company. The introduction of youth to
the business I feel will surely help.
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Thus it’s very clear that the company has a lot of unexplored potential to it and has
the capability to grow well.

LO3 Evaluate and apply the outcomes of analysis using Porter’s Five
Forces model to a given market sector

P3 Applying Porter’s Five Forces model evaluates the competitive forces of a given
market sector for an organization.

Porter’s Five Forces Model (M.Porter,1980)

The model of the Five Competitive Forces was developed by Michael E. Porter in his book
and has become an important method for analyzing an organizations industry structure in
strategic processes ever since.
Five forces analysis looks at five key external factors as shown in the image below. It
measures the competitiveness of an industry and thus its attractiveness or potential
profitability. An industry in which the combination of these five forces acts to drive down
overall profitability would be an unattractive one.

THREAT OF NEW ENTRANT

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This refers to the ease with which new competitors can enter the industry. When the
profitability in the industry for firms is more it becomes luring for new entrants to try and
become a part of the industry.

In the context of CC LTD., we see that the industry is such that the capital investment is
not too high and profitability is fairly good. This makes it attractive for competitors to enter.
This, of course, is not too great for CC LTD. as this would mean that its customer base
would be shared and sales would take a hit.

THREAT OF SUBSTITUTES

A substitute product is not a similar but a different product that can satisfy the customer in
the same manner as the original product. Example: for some tea can be a substitute for
coffee.

CC LTD. produces coffee, cakes, and breads. Most competitors that enter the market and
pose a threat are coming up with the same products rather than substitutes so far. This
surely does not mean that there is no threat of substitutes for a company like CC LTD. Tea
acts as a good substitute for coffee for some and burger act as a good substitute for a
sandwich for some so there is surely scope of substitutes coming up. If such substitutes are
made available in the industry at competitive prices there is a threat of a shift in
consumption.

BARGAINING POWER OF CUSTOMER

This refers to how sensitive the customer is towards the price of the product. If the customer
is highly sensitive to prices, it is difficult to transfer the cost burdens on the consumer.

The industry is offering products at competitive and lower prices and chains like costa
take advantage of economies of scale so it becomes difficult for medium scaled businesses
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like CC LTD. to compete at its own terms. CC LTD. is facing a similar situation where it
has been seeing reduced profit as its raw material cost has been increasing since a few years
but it has not been transferring it to the customer to avoid reduction of sales. This kind of
scenario is not very favorable for the company, as he has to be very careful about his price
moves.

BARGAINING POWER OF SUPPLIERS

Powerful suppliers can pressure buyers by raising prices, lowering quality, or reducing the
availability of the supply.

The food industry and the segment that CC LTD. is a part of does not have too much
shortage in terms of suppliers and raw material; so as the number of suppliers is ample in
the industry and this makes the bargaining power of suppliers weak. Such a situation is
beneficial for CC LTD. Although the raw material cost has been increasing for CC LTD.
and it needs to look into this.

COMPETITIVE RIVALRY

This refers to the level of competition in an industry. A highly competitive market goes for
cutthroat competition and survival of the smaller fish become difficult in such cases.

Industry in which CC LTD. works is also becoming more and more competitive by the
day. Giants like COSTA, STARBUCKS, TESCO are spoiling customers for choice at
competitive prices and this is becoming challenging for the company.

Thus, we see that the industry scenario and the way the company CC LTD. is operating is
not too much in the sink. At the same time, we must not neglect that it has been doing a
profitable business for the last 25 year and there has been a slight reduction in profits only
since the last 5 years.
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M3 Devise appropriate strategies to improve competitive edge, and market position

based on the outcomes.

The fact that CC LTD. has been doing quite well since the last 20 year and has only faced
few issues in the last 5 years gives us a clear sense that the bigger story for the company is
bright. The company needs to concentrate on a few aspects and bring some changes
according to the changing times to do better.

The company can work the following ideas to gain a competitive edge and a favorable
market position for itself:

1. As the company has a lot of coffee shops that work around the concept of ‘relax and
enjoy your coffee’, it needs to make this idea more attractive to its customers. For this,
it can work on the ambiance of the coffee shop and add to items to compliment the coffee
beside cakes.
2. A Company that ignores the changing demand and behavior of the society would be
foolish. So if the company is seeing a shift of interest in takeaway meals and lunch. They
can invest in opening up drive-thru and take away alongside their regular coffee outlets.
3. The customer today is spoilt for choice because of exposure to too many options. For
long-term survival, it is thus important to create not just a product but also an
experience that a customer can value.
4. CC LTD. has the advantage of being a part of the industry for a long time so it needs to
use its experience wisely and to its advantage. The next generation can bring on board
specialized knowledge that has been lacking in the business so far.
5. In today's world marketing plays a key role and CC LTD. also need to dedicate few
funds towards its presence on the Internet that can help to fetch better customer base.
6. As the company has its own bakeries, thus a lot of finished products from there can act
as raw material for eatables at the coffee shop. They should use this to their advantage
and gain from the economies it can bring to them as they get material cheaper then what
they would from the market.
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All this will help them create a different image and association in the market and will help
attract customers too. Working on these ideas in a systematic and well-planned manner is
essential for them to gain an edge in the market and create a customer base loyal to them.

References

Basu R. (2004). Tools for analysis—PESTLE analysis in implementing quality: A practical

guide to tools and techniques (1st ed.)

Davis, K. and Blomstrom, R. (1966). Business and its environment [by] Keith Davis [and]
Robert L. Blomstrom. New York: McGraw-Hill.

Garcia Coleta, Karina & Lopes, Humberto Elias &Salum, Fabian. (2017). Business
Models: Analysis of its Conceptual and Theoretical Development.

G Fine, L. (2009). The SwotAnalysis: Using Your Strength to Overcome Weaknesses,

Using Opportunities to Overcome Threats. North Charleston SC, United States:
Createspace.

Morrison, J. (2002) The International Business Environment, Basingstoke, Palgrave

Porter, M. (1980). Competitive strategy. New York: Free Press.