The business organisations develop different strategies to gain the competitive advantage in the market. It is more important to develop some suitable competitive strategies for the organisations which can provide a deep knowledge about the market and about the rivals too. Other than that, Porter’s five forces focus on the major weaknesses of the company. It is helpful because it identifies factors where the company needs to focus more. As mentioned earlier different theories are there. The major four theories have been selected here. All of them are needed to analyse both the external and internal factors of the organisation which has major impact on the outcome of the company.
The main purpose of these four tools is to provide a proper knowledge about the market and to identify the areas where the company needs to focus more. Each of them has different significance for an organisation. SWOT analysis can identify strengths, weaknesses, opportunities and threats of a company. For example, SWOT analysis of H&M would help to know the inner strength of the company along with the weaknesses too. Porter’s five forces are required to analyse the business competition. For example, this tool would inform Lakme that Avon has already launched their CC cream so Lakme CC cream would be in great competition. Other than that, PESTEL analysis would help to understand the external market. For instance, the political and economic information would be got. Ansoff matrix is known as a tool that can help a company to witness the possible growth of them. For example, Ansoff matrix would help to growth more. This report has discussed about four tools those are highly significant in this discussion. The key finding of this discussion has added as these tools are being used to understand the market.
The business organisations develop different strategies to gain the competitive advantage in the market. It is more important to develop some suitable competitive strategies for the organisations which can provide a deep knowledge about the market and about the rivals too. Ansoffet al. (2019) has defined competitive strategy as the tool to create a defend position within the industry and to generate a supreme Return on Investment (ROI). The business owners use different tools to develop their strategies. These tools include PESTEL, SWOT, and Porter’s Five Forces and so on. Each of them has a different significance in business. This assignment has focused on the discussion of these tools. The author has chosen four tools like PESTEL, SWOT, Ansoff and Porter’s Five Forces analysis. The essay has not only described the theories, but also shed light on the implementation and application of the tools. This discussion has included 4 companies namely Tesco, McDinal’s, H&M and Sainsburry. They are some world famous retailers worldwide. The theoretical factors of the four strategic tools have been discussed. Other than that, the theories have been applied to these companies to provide some real life examples.
According to Nurmi and Niemelä (2018), PESTEL is known as an analytical tool which is being used by the marketers for analysing and monitoring the micro-environmental factors. It is an acronym of Political (P), Economic (E), Social (S), Technological (T), Environmental (E) and Legal (L).
Political:Kara (2018) has mentioned that political factor indicates the government intervenes in a business. It should include government policy, foreign trade policy, corruption, labour law, tax policy, trade restrictions and so on. For example, the business organisations in UK are suffering for Brexit. The business owners are bound to change their decisions due to it. Economic: This factor includes interest rate, exchange rate, interest rate, etc. All of them have anindirect and direct long term relation with the business organisations. Social: It is about the social norms or culture of the specific market (Pan et al. 2018).Technological: This factor is all about the technological upgrades which involve the innovation, activities of R&D and automationEnvironmental: It has become one of the most important factors in today’s business world due to the scarcity of raw materials, governmental targets of carbon footprint and pollution targets. For example, thus the business organisations have started being involved in various CSR activities.
Legal: This factor is very close to the legal factor. However, they include more specific legal systems (Nurmi and Niemelä, 2018). For example, the business organisations have to obey the employment laws of the particular market where they are establishing their businesses.
As stated by Kara (2018), PESTEL analysis should be applied when a firm is targeting its audiences or goods is looking for its market. It should be remembered that not a single factor in this framework can be ignored. Otherwise, the actual result cannot be gained. PESTEL analysis has informed Tesco about the current changes in market due to Brexit.
This is one of the most important tools to establish a new business or to expand a business in a new market. It helps the business owners to understand the external scenario of the market.
It is mainly known as Porter’s Five Forces where the main five forces have been identified as buyer’s power, threats from new entries, and threats of substitutes, supplier power and rivalry.
Threats of new entrants:Meyer and Cohen (2018) have mentioned that it ensures whether the entry of a new market is easier or not. This threat would be higher in the situations like lower amount of capital would be needed for entering into a market; no government regulation is there, identical products and lower customer loyalty.
Bargaining power of the suppliers: Mhlanga (2018) has added that suppliers’ power would be higher in case of price sensitive buyers or if few buyers are there. Other than that, if other supplier may offer lower costs, then ultimately the buyer threats would be generated.
Threats of Substitutes: It is about the situation when the buyers have other alternatives by which they would be able to get a better product or in a better price.
Threats of buyers: Buyers can demand for lower prices or for the high quality products. However, it would hamper the business profit as lower price indicate less revenue. The buyer power can be increased due to enough availability of the substitutes, price sensitive buyers, etc.
This model can be applied to a specific company, regions or market segment. All the players in market use to face same forces. However, the impacts on them would be varied. This analytical tool has helped McDonald’s to be cautious from its competitors. Various other options are there to the customers. Therefore, it is definitely a critical situation for the company.
This model permits a structural and systematic analysis of market structures as well as competitive situations.
The full form of this tool is Strength (S), Weakness (W), Opportunity (O) and Threat (T).
Strengths: Phadermrodet al. (2019) have pointed out that it is about the strong factors of an organisation. For example, extremely skilled employees, advanced technology, high class innovation, etc. can be mentioned.
Weakness: It focuses on the areas where the organisation needs some improvements. For instance, less capital, high level debt, average turnover and insufficient supply chain.
Opportunities: According to Jianget al. (2018), it is being considered as a favourable condition that benefits the organisation For instance, if a nation cuts traffic, then the car manufacturers would get the chance to export cars into the new market. It would enhance the both the sales and market share.
Threats: It is the factor which can affect a firm. For instance, draught should be considered as a threat to a company who produce wheat.
Phadermrodet al. (2019) have pointed out that SWOT analysis should be applied when the organisation is trying identify the positive and negative factors of it. Other than that, it also helps to know the factor where more focus is needed. This tool has helped H&M to identify its internal strengths.
SWOT analysis helps in getting a structured approach to gain the objectives.
It can be used for evaluating the opportunities for the companies so that their sales can be increased.
Market Penetration: Dawes (2018) has opined that it is about to sell more existing products and service to the existing customers.
Market Development: It helps to find out the way by which the company can grab a new market.
Product and Development: According to Glassey-Previdoliet al. (2018), it helps to identify the ways by which the existing products can be developed.
Diversification: It helps to identify the system by which a company can take enter into a new market.
Dawes (2018) has discussed that the management team of the company likeSainsbury can apply this tool get actual opinions about their products and to get idea about the demands and needs of the target customers.
This is a common tool which helps the company to know about the position of the products in the market. Most importantly, it helps to identify new and potential market too.
The above discussion has focused on four specific tools which have been taken by the marketers to improve the performance of the company. It can be said that the tools are quite linked to each other and SWOT and PESTEL are very common in this regard. Most importantly, they are related to each other. SWOT identifies the primary links. On the other hand, PESTEL is about external scenarios of the company. Other than that, Porter’s five forces focus on the major weaknesses of the company. It is helpful because it identifies factors where the company needs to focus more.
Ansoff, H.I., Kipley, D., Lewis, A.O., Helm-Stevens, R. and Ansoff, R., 2019. Implanting strategic management.Springer.
Kara, E., 2018. A Contemporary Approach For Strategic Management in Tourism Sector: PESTEL Analysis on The City Muğla, Turkey. İşletmeAraştırmalarıDergisi, 10(2), pp.598-608.
Pan, W., Chen, L. and Zhan, W., 2018. PESTEL analysis of construction productivity enhancement strategies: A case study of three economies. Journal of Management in Engineering, 35(1), p.05018013.
Mhlanga, O., 2018. An analysis of the impact of the micro environment on airline performances in South Africa using Porters' five forces model. International Journal of Tourism Policy, 8(4), pp.303-318.
Phadermrod, B., Crowder, R.M. and Wills, G.B., 2019. Importance-performance analysis based SWOT analysis. International Journal of Information Management, 44, pp.194-203.
Jiang, R., Mao, C., Hou, L., Wu, C. and Tan, J., 2018. A SWOT analysis for promoting off-site construction under the backdrop of China’s new urbanisation. Journal of Cleaner Production, 173, pp.225-234.
Dawes, J., 2018. The Ansoff Matrix: A Legendary Tool, But with Two Logical Problems. But with Two Logical Problems (February 27, 2018).
Glassey-Previdoli, D., Metz, J.C. and Fragnière, E., 2018, March. An" à la Ansoff weak signal" feedforward control for pharmaceutical distribution: A pilot study on standard operating procedure for managing customer complaints. In 2018 7th International Conference on Industrial Technology and Management (ICITM) (pp. 130-135).IEEE.
Meyer, C. and Cohen, D.G., 2018, July. Porter’s Five Forces in the Post-industrial Age. In Academy of Management Proceedings (Vol. 2018, No. 1, p. 16589). Briarcliff Manor, NY 10510: Academy of Management.
Nurmi, J. and Niemelä, M.S., 2018, November.PESTEL Analysis of Hacktivism Campaign Motivations. In Nordic Conference on Secure IT Systems (pp. 323-335). Springer, Cham.
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