HI6006 Key Strategy Development Tools Assessment Answer
The business strategies refer to a pattern of competitive moves and procedure, which a company takes into consideration for attracting consumers, triggering performance and achieving organizational goals. In this context, the management takes active participation in initiating wise business decisions for enhancing organizational productivity and profitability in the competitive market. It takes the initiative of outlining how a business should be conducted for meeting the changing needs and demands of the consumers (Bocken et al. 2016). Useful application of business strategies takes active participation in equipping the top management through an integrated framework for discovering analyzing and exploiting profitable opportunities, addressing potential challenges, making optimum utilization of its relative strengths and counter-balancing witnesses (Teece, 2018). The particular essay would emphasize on the selection of three strategic business models with the practical application of present examples of business. The selected strategic models for the specific topic are PESTLE, Five Forces and Ansoff Matrix.
This section would reflect upon the pros and cons of the above-mentioned strategic models through a theoretical evaluation and practical implication of business examples
2.1 Selected strategic model 1: Five Forces
2.1.1 Theoretical overview
The analysis of porter’s Five Forces assists in identifying the factors which will be influencing the profitability of organization within a particular industry. Through the application of this framework, the company could also become wary of the potential industrial hazards and competition from rival brands which could either hamper the organizational growth in the competitive market (Burgelman et al. 2018). However, the framework fails to address the total picture of the present market scenario; this is because if the situation of the market is not updated at regular intervals, the accumulated information could be outdated because the modern day market are prone to fluctuations and very few factors remain static.
2.1.2 Application of the strategic tool in the business context
For getting a better overview of Five Forces analysis, the case of McDonald's is taken into consideration.
Buyer’s bargain power: The particular element dealt with the preferences and influences of the customers and how their decision making is impacting the business of McDonald's. The buyers enjoy a high bargain power due to low switching of the costs, higher availability of the substitution and increasing provider numbers.
Supplier’s bargain power: The influence of the suppliers on McDonald's in regards to the organizational production capability is dependent upon raw material availabilities. The company possesses a low supplier bargain power due to a more significant number of suppliers, lower vertical integration of the suppliers and overall higher supply (Kelso, 2019).
Rivalry amongst the existing brand: The Company faces intense competition from the rival brand due to saturation of the food and beverage industry. In this business scenario, the established brands take active participation in marketing their products aggressively (Palmatier and Crecelius, 2019). This factor triggers intense competitive rivalry that the company is experiencing with its competitors. Additionally, the low cost of switching makes it easier for the consumer to shift towards rival brand depending on their preferences.
The threat of new market entrance: The entry of new companies could have a significant impact on the financial productivity and market share of McDonald's. However, the risks from the new entrance are moderate by nature. One of the strong force is that the cost of switching is relatively low, which could compel the consumers to select a new company over the existing one. However, the above-mentioned aspect will not have a huge impact on McDonalds because the company heavily invests on maintaining its brand identity and further development, which is not possible for any new company with an anticipated low budget.
Threat of substitution: The threats of substitution are the main worrying factor for McDonalds. Increasing higher availability of substitution results in reflecting a strong force in regards to product substitution. The main substitute product posing threat to the companies are localized bakeries and producers of artisan food products (Neate, 2015). If the consumers are dissatisfied with the service of McDonalds they could easily switch to a substitute brand.
2.2 Selected strategy model 2: Ansoff Matrix
2.2.1 Theoretical overviewing
The adoption of the Ansoff Matrix allows a marketer to predict the expected risks that could be involved while choosing the direction of the business. Ansoff Matrix helps the company in adopting a focused approach through determination and development of those strategies that will be procuring productivity and growth in the competitive market in regards to the astute strategies of the Ansoff framework (Galpin, 2019). One of the relative weaknesses of the Ansoff Matrix is its inability to consider the external market forces, which could be driving a business decision.
2.2.2 Application of the strategic tool within the context of the business
The selected company for evaluation for the Ansoff Matrix id Coca-Cola and its interpretation is illustrated below:
Penetration of the market: The particular strategy helps of company to enhance the market share, either through selling of existing products to existing consumers or through the identification of new consumers based within the present market (Gurcaylilar-Yenidogan and Aksoy, 2018). Coca-Cola takes active participation in pursuing market penetration as one of its key growth strategies. The company could do so due to the presence of a strong brand identity.
Development of the market: It is the procedure through which the company aims to determine a new market for its existing product category. Coca-Cola started its business operation in the United States of America. However, the company is now operating in most of the nation across the globe such as India, United Kingdom, and Australia etc. This could serve as an instance of the geographic development of the market.
Development of the product: It states the procedure of launching new product within the existing market (Dzhedzhula and Yepifanova, 2018). A good instance for the development of Coca-Cola product was the launching of the cherry coke in the year 1985. It is regarded as the first brand extension of Coca-Cola, which was beyond the original recipe. In this context, the launching of new product contributed towards the enhancement of revenue generation from the organizational perspective.
Diversification: The particular strategy emphasizes on making of new products for the new consumer base. The Coca-Cola applied diversification strategy on numerous occasions by spending $4.1 billion for acquiring Glaceau, which also included the brand of health drinks named Vitamin water in the year 2007 (Geller, 2007). Adding to its extended portfolio, the company is prioritizing the emphasis towards the growth of the health drink sector.
2.3 Selected strategic model 3: PESTLE
2.3.1 Theoretical overview
The PESTLE framework helps the company to make effective utilization of the available profit generating opportunities, which comes into the picture from time to time due to alterations within the external environment. The framework also helps in mitigation of the probable constraints with the existing and new business environment (Iacovidou et al. 2017). One of the major limitations of the PESTLE framework is the factors keep changing at regular intervals and therefore, not suitable for longer term analysis.
2.3.2 Applying the tool on a business
The company that is considered for analyzing the Pestle Framework is Starbucks
Political: The Political environment would illustrate the influence of government on the business operations of Starbucks. Regional integration is identified as the present trend, which gave proved advantageous for Starbucks for expanding in the global market. The existence of Bureaucratic red tape present in several nations has hindered the business operations of the company as well as it serves as a constraint for Starbucks specifically while expanding into developing countries (Gerstein, 2010).
Economic: The increasing economic development of the developing nations and declination of the unemployment rates has provided an effective business opportunity for Starbucks in the competitive market. However, the enhancing cost of labour is causing hindrance for organizational productivity as it automatically increased the spending of the company for the ingredients.
Social: The increasing demand for consumption of speciality coffee has increased amongst the consumers due to the consistent development of the coffee sector (Sethl, 2017). The consumers are getting more interested in consuming premium quality coffee and in this context, the company took active participation in widening its category of healthy products.
Technological: The increasing tendency of mobile purchasing amongst the consumers provides an opportunity for the company for enhancing the revenue generation. The organization could also take the initiative of improving the efficiency of its supply chain due to the provision of several new technologies which could be utilized by the coffee farmers. However, the increasing availability of Home-oriented machines of speciality coffee could prove to be a challenge for Starbucks in regards to product substitution.
Legal: The Company takes active participation in enhancing business performance by complying with the rules and regulations of product safety. However, the tightening of the employment regulation is mitigating the accessing power of the company in regards to the labour market of developing nations.
Environmental: The trend of business sustainability is emphasizing upon those business procedures which are having minimal impact on the environment. Therefore, the company focuses on the inclusion of CSR within its activities of the supply chain. Additionally, recycling packaging is considered as one of the key aesthetics of its business operation for minimization of environmental impact (Lucas, 2019).
While concluding, it could be stated that the selection of appropriate strategic tools allows a company to attain financial sustainability and enhance the consumer base simultaneously for gaining supremacy in the competitive market. It also cautions a company of the potential hazards which could be hindering the business operations and propose growth strategies for revival. In regards to the specific study, the application of five forces is considered for getting an overview of the industrial environment. The PESTLE framework allowed the company to get notified regarding the factors affecting the external environment. The Ansoff matrix outlined the application of growth strategies for companies for attainment of competitive supremacy.