The report represents the strategy development tools with their use for different purposes. These tools are aligned with the current practical business examples for making a sound understanding. There are several strategy development tools out of which three major tools are discussed in the report in detail. The tools are described with relevant examples and their functions to meet the business related goals and objectives.
Strategy Development Tools
In today’s complex and dynamic business environment it is very difficult to plan for any flexible and complicated strategy making. Thus to deal with this situation, the strategy development tools are used by the organization. Strategy development is a process in which identification and research of strategic options is made for selecting the most promising and favorable strategy. It is used to decide the way to allocation of resources in an organization to achieve the goals and objectives of organization (Wawarta, and Paroutis, 2019). It has several techniques and methods for research and analysis of strategies which are known as tools of strategy development. Several strategy development tools are following:
Porter’s Five Forces
Real-time Strategic Planning
The term SWOT defines the strengths, weaknesses, opportunities and threats hence it is a technique to evaluate these four factors. It assists the organization in development of strategy for success and growth. For such purpose it is required to find that which relevant factors are good, not so good, bad or worst. To make a SWOT analysis, the information from different levels and departments of organization is needed to be recorded on the basis of which an idea can be predicted that where the company currently stands (Phadermrod, Crowder, and Wills, 2019). Also this information helps to identify the strengths, weaknesses, threats and opportunities.
The functional area in which the organization has great performing records and which makes it different from its competitors is considered as the strengths of the company.
Weakness is also an inherent factor of organization which can be derived by focusing on people, resources and system of organization itself. This is based on the gaps where improvement and development is required to avoid the issues.
These are chances or openings which could lead the company to a positive outcome. Usually it occurs in the outside environment of organization hence good opportunities are required to be availed immediately.
It includes the factors or situation which could have a negative impact on the organization. Generally these factors affect the business of organization from outside such as supply chain issues and change in market requirements.
Use of SWOT
The model of SWOT analysis is used by the companies to identify the relevant factors in business decision making. Generally this analysis is done by the companies while taking any significant business action such as restructuring of internal policies and exploring new projects or initiatives. In addition to that, SWOT is implemented for preparing a strategy in relation to any internal or external business purpose (Abdel-Basset, Mohamed, and Smarandache, 2018). It helps the organization in making well informed and effective business decisions by revealing all concerned strengths, weaknesses, threats and opportunities.
Example of SWOT
Henry is the manager of a small consultation firm and to make some future growth strategies, he wants to make a clear report of his firm’s current position. For that purpose he gathers his team and created a SWOT Analysis shown below (Bull, Jobstvogt, Böhnke-Henrichs, Mascarenhas, Sitas, Baulcomb, Lambini, Rawlins, Baral, Zähringer, and Carter-Silk, 2016). On the basis of which he prepared a future growth policy for the firm’s success.
Every business is working in an environment where both micro and macro factors are not in the control of company thus to analysis these factors, the company uses the tool of PESTLE analysis. It helps the company to understand the macro environment factors. The term PESTLE stands for Political, economic, social, technological, legal and environmental (Christodoulou, and Cullinane, 2019). It is a fundamental tool used by the company in decision-making and in taking proactive actions.
Use of PESTLE
This tool is used to assess the changes occurring around the business which includes both opportunities and threats. It helps the organization to make an effective analysis of these factors to take appropriate action on time. These changes may occur due to any social, political, economic or environmental reason (Düerkop, and Huth, 2017). In addition to the analysis of macro environment it is also used for assessing the potential growth of new venture.
Example of PESTLE
Adidas is one of the unbeatable brands for sports garments and shoes, which is performing in this business since a very long period (SHTAL, BURIAK, AMIRBEKULY, UKUBASSOVA, KASKIN, and TOIBOLDINOVA, 2018). Hence there are many external factors which are required to be analysis to maintain the status of company.
Porter's Five Forces
This is an important tool to understand the competition in business environment and to identify the potential success of proposed strategy. It is helpful to understand the factors present in environment or industry which have an impact on the profitability of strategy of company. This model believes that the companies should keep a close eye on their rivals and always look beyond the expected actions of competitors (Zhao, Zuo, Wu, Yan, and Zillante, 2016). It defines five forces in competitive environment which could cause harm to the company’s profitability.
It refers to the number and strengths of the competitors of company. Thus it considers that how many competitors are there in the similar industry and what unique qualities they have.
This force considers the power of suppliers and the increase in the price of supplies by them. It evaluates the number of suppliers which the company has and the quality of supplier’s services. It also examines that how much cost will occur if company switches from one to another supplier (Huang, 2019).
It reflects the buying power of customers who can drive the company’s prices down. It evaluates the possible chances and cost if the buyer will switch to another company’s product.
Threat of Substitution:
The available substitute and alternative products in the market generates the fear of customer switching to other companies.
Threat of New Entrants:
The entry of new competitors with new technology and developed products could erode the market of existing products of company.
Use of Five Forces
The model of Five Forces is used by the companies to identify the relevant factors which may influence the business of organization. It helps the company in improving the industry position and increasing the profitability. This is a competition oriented model which focuses on studying the existing companies (Bu, and Guo, 2019). The use of five forces model can be properly understand by the following diagram.
The report concludes that strategy development tools promote the effective decision making in business. Different strategic tools are used for separate business objectives such as analysis of market, competitors, business environment and growth factors. Three major techniques described in the report have their own benefits and functions which aids the organizations to meet their strategic requirements. These tools performed a significant role in the identification and selection of best strategic option for the company.
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