HI6006 - Competitive Strategy

Essay – Key Strategy Development Tools

Introduction:

As discussed by Phadermrod, Crowder and Wills (2019), organizational goal achievement in the competitive business environment largely depends on effective business strategies. This assignment is purposed at developing an analysis of five strategy development tools which are majorly used by the marketers and business strategy developers to build effective strategies for the business. For this assignment, the researcher has selected four strategy development tools, including SWOT, PESTEL, Porter Five Forces and Ansoff Matrix. In relation to the practical business instances, these four marketing tools have been investigated in this essay. 

Discussion:

Tool 1 – PESTEL analysis

In order to develop an in-depth understanding of how external business environmental factors influence the organizational performance, PESTEL framework is utilized. This particular marketing tool possesses six dimensions, including political, economic, socio-cultural, technological, ecological and legal (Anton 2015). PESTEL framework provides more effective outcomes than SWOT analysis in the context of analyzing opportunities and threats of business. 

Advantage and disadvantage:

One of the major benefits of the PESTEL framework is that it identifies the opportunities and threats of a business in the current market context. Since the use of this model is time-saving and cost-effective, most business strategy developers prefer using it. A key limitation of this model is that it does not shed light on the business issues in the long run (Iacovidou et al. 2017). Political, economic, and social impact on business changes continuously.

Practical example:

PESTLE analysis of the Coles supermarket 

Tool 2 – SWOT analysis

This tool is majorly used for determining the impact of internal as well as the external business environment on organizational performance. Four quadrants of the framework include strengths, weaknesses, opportunities and threats. While strengths and weaknesses denote the internal business environment, opportunities and threats signify external environmental factors. 

Advantage and disadvantage:

SWOT framework is one of the most popular marketing tools marketers use to determine how internal and external forces influence the performance of a business. By using this cost-effective tool, weaknesses of a company can easily be identified (Bull et al. 2016). The limitation of this tool is that it does not provide a detailed analysis of complex business issues. 

Practical example:

SWOT analysis of Nestle

Tool 3 – Porter’s Five forces analysis

Organizational managers utilize this particular marketing model to determine the threats of business strategies by analyzing diverse microenvironmental factors, such as suppliers’ power, buyers’ power, threats of substitutes, threats of new entrants and competitive rivalry (Schawel and Billing 2018). 

Advantage and Disadvantage:

Through the application of this marketing tool, the management can easily identify the position of the organization in the competitive business environment. Porter’s five force analyses enable marketers to investigate the bargaining power of customer and suppliers to devise effective business strategies (O'Hara et al. 2017). On the contrary, the outcomes of the five-force analysis are limited since the variables of the model change frequently. 

Practical example:

Porter’s five force analysis of KFC

Bargaining power of customers: Consumers possess a high bargaining power, as they are exposed to a similar range of products offered by other companies, including McDonald’s, Pizza Hut and Burger King.

Bargaining power of suppliers: Suppliers have moderate power since they always want to work with large-scale global brands like KFC. 

Threats of substitutes: The availability of a similar range of products is very high, due to which customers can easily their brands.  

Threats of new entrants: Threats of new entrants is low due to the requirement of high investment, and existing competitive forces in the market. 

Competitive rivalry: KFC encounters a high level of competitive threats from its rivals, including McDonald’s, Pizza Hut and Burger King. 

Tool 4 – Ansoff Matrix

Ansoff matrix is one of the significant marketing tools that help managers in determining the product and marketing growth strategy (Takata 2016).  Ansoff Matrix discusses four growth strategies, including market penetration, market development, product development and diversification. 

Advantage and disadvantage:

Business strategy developers utilize this marketing model to analyze the potential risks linked to business strategies. Based on this model, organizational managers can develop growth strategies for the business. One key limitation of this model is that it fails to determine the possible areas of change in the diversification stage (Dawes 2018). It also fails to investigate the practices of external competitors. 

Practical example:

Apple Ansoff Matrix

Market penetration: Apple’s existing markets consist of 22 countries divided into five major operating segments, including Europe, Americas, Japan, Greater China and Rest of Asian Pacific. 

Product development: One of the key growth strategies of Apple is to develop new products integrating advanced and emerging technologies. The company provides updates to the existing products and launches new products in a continuous manner. 

Market development: Apple, one of the largest IT companies in the world by revenue, has focused on expanding business in the Asian markets to enhance its profitability to a great extent.  

Diversification: Diversification involves developing new products for new markets. Apple does not use diversification business strategy extensively. 

Conclusion 

Based on the analysis conducted throughout this assessment, it can be assessed that the marketing tools, including SWOT, PESTEL, Ansoff Matrix, and Porter’s Five force, play a significant role in identifying internal and external business environmental factors influencing organizational performance, and developing effective business strategies.