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Five Strategy Development Tools in Business

HI6006 Student Assessment Details



Assessment 1


Length 

Criteria
1. Individual Assignment
Write an essay explaining the main strategy development tools and how they are used
1200 wordsComprehensive discussion of any 4 of the following:
PESTEL, 5F, PROFIT, SWOT, Generic, Ansoff, Ghemawat, with academic references and practical examples.


Write an essay explaining what the main strategy development tools are and how they are used in business.

Your essay must contain a comprehensive discussion of 4 of the following: PESTEL, Five Forces, Resource-Based View, PROFIT, Input/Output, SWOT Analysis (you may include Cross Impact Analysis), Generic Strategies, Ansoff, Ghemawat, with reference to academic journals and practical examples from industry.

Answer

Introduction: 

According to the analysis conducted by Mason, Kjellberg and Hagberg (2015), effective business strategies play a significant role for organizations to achieve goals and objectives in the competitive business environment. The purpose of this assessment is to evolve an investigation of five strategy development tools that are commonly used by a majority of the business. The selected five tools that have been analysed in this assessment include PESTEL, Porter Five forces, SWOT, Ansoff Matrix and Porter Generic Strategy. Alongside investigating the utilization of these selected tools, the researcher has also discussed the practical implementation of tools in organizations. 

Discussion:

Tool 1 – SWOT analysis

The SWOT analysis tool is mainly used for investigating how internal and external business environment influences the performance of the organization. There are four quadrants of SWOT analysis, including Strengths, weaknesses, opportunities and threats. Threats and opportunities denote the external business environment, whereas strengths and weaknesses stand for the internal business environment. 

Advantage and disadvantage:

SWOT analysis framework is a low cost tool, which can be implemented easily in the business. Through the application of this tool, weaknesses of business can be analyzed in an effective way (Cameron and Green 2015). Conversely, this tool fails to make a detailed analysis of the complex scenarios of business. 

Practical example:

SWOT analysis of McDonald’s

Strengths 
  • They have a strong product portfolio
  • Huge overseas market
  • Strong brand reputation
Weaknesses
  • Slow product development
  • Reduced market share
Opportunities
  • Expansion of business in the new markets
  • Work collaboratively with local retailers
Threats
  • Increasing competition in the market
  • Many consumers become health conscious


Tool 2 – Ansoff Matrix

It is an imperative strategic planning tool, which contributes to the managerial decision-making of growth strategy development. There are four growth strategies for this tool, such as market development, market penetration, diversification and product development. 

Advantage and Disadvantage:

Through the application of this tool, both market planners and managers investigate the possible risks associated with the new strategy implementation in business. This tool also facilitates managers to develop growth strategies for business.

The issue with this model is that it cannot identify the required changes in diversification strategies as well as market development planning (Resnick et al. 2016).  Ansoff matrix is a theoretical model that fails to investigate external competitors’ practices. 

Practical example:

Ansoff Matrix analysis of Coca Cola

Market penetration: It discusses the growth strategy for Coca Cola’s market share in the existing marketplace by selling new products to the consumers. Coca Cola can draw the attention of new customers through the application of promotional mix elements. 

Product development: The Company, in this growth stage, focuses on evolving new products and services for satisfying customers’ needs and demands (Plassmann et al. 2015). For engaging customers in the business, Coca Cola continues its product development.  

Market development: Coca-Cola builds up a new group of customers to sell its existing products. For instance, Coca-Cola Zero, which emerged in the market in 2005, was re-launched as Diet Coke many years late. 

Diversification: This strategy discusses the process of introducing new products to the existing portfolio. 

Tool 3 – PESTEL analysis

Through the application of this tool, organizational managers investigate how external environmental factors influence the performance of the business in the competitive marketplace (Leigh and Blakely 2016). PESTLE model discusses six key factors, including political, economic, social, technological, legal and environmental. This model works better than SWOT tool when it comes to identifying threats and opportunities of business.

Advantage and Disadvantage:

PESTEL model investigates the threats and opportunities of business in the present market scenario. This model is widely used in business since it is time-efficient and cost-effective. On the contrary, this model does not discuss the issues of business in the long run. External factors, including political, social and economic situations change in a continuous manner. 

Practical example:

PESTLE analysis of Woolworths Supermarket 

Political
  • Government’s intervention in breaking the monopoly market
  • Increased tax rates and regulations for controlling the price
  • Wage regulation for providing minimum wage to the workers
Economic
  • Increased exchange rate
  • Increased unemployment and inflation rates
  • the high cost of labour
Social
  • consumers’ preferences for staple foods
  • continuously changing lifestyle and demands of the customer
  • customers prefer experiencing one-stop buying
Technological
  • high costs of technology
  • social media marketing 
  • use of SAP-based technology 
  • impact of technology on the cost structure and value chain
Environmental
  • the legal framework for protecting the environment
  • reducing carbon footprint
  • air and water contamination related regulations for retail food companies
Legal
  • Customer protection and fair competition laws
  • Health and safety law
  • Protection of customers’ data as per Data Protection regulation


Tool 4 – Porter’s Five forces

This model helps organizational managers in analyzing the profitability and threats of the strategy through the investigation of microenvironmental factors, including the power of suppliers, the power of buyers, threats of substitutes, competitive rivalry and threats of new entrants. 

Advantage and Disadvantage:

By applying this model in the business, organizations can evaluate their present position in the competitive sector. Customers’ bargaining power and suppliers’ power, which are the significant factors to achieve profitable outcomes in business, can be evaluated or measured through analysis of Porter’s five-force model (Woodside 2014). Conversely, variables of the five-force model change repeatedly, which restrict the analytical outcomes for a limited time. 

Practical example:

Porter’s five forces analysis of KFC

  • Customers’ power: Buying power of customers is high since they can achieve a similar range of products from others fast food companies, including McDonald’s, Burger King and Pizza Hut. 
  • Suppliers’ power: They have moderate power, as suppliers always want to be associated with the large-scale food chain, like KFC. 
  • Threats of substitutes: Threats of alternative products is quite high since customers can have similar products from restaurants. 
  • Threats of new entrants: The requirement of high investment and existing high competitive forces are some key factors that reduce the threats of new entrants. 
  • Competitive rivalry: KFC faces huge competitive forces from others’ fast food chains, including McDonald’s and Burger King. 

Tool 5 – Porter generic strategies

The application of this model in business facilitates the organizational managers to evaluate three key strategic options, including differentiation, cost leadership, and focus.

Advantage and disadvantage:

Generic strategies discuss the cost leadership that plays a significant role in minimizing the expenditure of business. This model facilitates the organization to strategize product price effectively (Shaikh and Karjaluoto 2015). Nevertheless, organizational often fail to match all traits involved in the generic strategies. 

Practical example:

Jet2 Holidays implemented this model in business for increasing the profitability of the business. The organization cut down the production cost and reduced the additional expenditure spent on arranging travel for organizational managers (Harmeling et al. 2017). The products and services were designed in a specific way that meets the frequently changing needs and demands of customers. Through the implementation of these strategies, the company commenced gaining profit margin and achieving sustainable economic performance. 


Conclusion:

From the analysis conducted in this assessment, it can be summarized that the business strategies have a significant role in facilitates organizations to attain their goals and objectives in the competitive marketplace. With the use of different marketing tools discussed in this essay, organizations can evolve effective business strategies for gaining competitive advantage. The researcher, in this essay, has applied five diverse tools in five different industries to identify the advantages and restrictions of models. 

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