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 four 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.
Strategic analysis is mainly considered to be a process which can help the organizations to analyse the internal and external environment in an effective manner. The capabilities that are possessed by the organization are thereby combined with the strategies in an effective manner in order to achieve the goals. Strategic analysis thereby needs to be performed in a rigorous manner by the organizations so that they are able to function in a cost-effective way. The various analytical tools and methods can thereby be used by the organizations so that they can function in a lucrative way in the industry. The analysis of diverse factors which are able to affect the processes will thereby play a key part in the development of proper strategies for the companies (Barros, Hernangómez and Martin-Cruz 2016).
The analysis in the
essay will be based on the ways by which the strategic analysis tools are used by different modern organizations. The strategic analysis tools which will be analysed in the report include, PESTLE analysis, SWOT analysis, Porter’s five forces analysis and Porter’s Generic strategies.
Analysing the SWOT framework
The SWOT analysis tool is mainly used by the organizations in order to function in the industry in a cost-effective way. The inner environment of the company can be examined with the help of this framework. The strengths and weaknesses of an organization which affect the strategy formulation are detected with the implementation of this model. The opportunities which are provided to the company based on its successful growth and threats which are faced by the company are also analysed with the help of this analysis tool (Daspit et al. 2017).
Advantages – The major advantage which is provided by the SWOT analysis based tool is related to the ways by which it can help in analysing the internal factors of the company. The levels of simplicity of the tool and the multi-level analysis based advantages that are provided by the tool are able to help the organization in an effective manner. SWOT analysis based tool is also quite cost effective in nature (Demir, Wennberg and McKelvie 2017).
Disadvantages – The subjective data collection process that is used by the company is able to impact the strategies that are developed by the company. The lack of proper weighting factors is also a disadvantage of the tool.
Example – The SWOT analysis tool can be used by Tesla Motors in order to analyse the strengths that it possesses and weaknesses based on capacity related issues can be analysed in an effective manner. The major growth based opportunities that are thereby provided to the company in terms of usage of modern technologies is an important part of the analysis. The threats related to competition faced by the company in the automobile industry can be analysed with the help of this tool (Durand, Grant and Madsen 2017).
Discussion based on PESTLE Framework
The external environment based factors are able to affect the operations of modern organizations. These factors are mainly based on the political situation, economic condition of the country, technological advancements, social factors, legal areas and effect on environment can be analysed with the help of PESTLE framework. The main aim of the analysis is based on the strategies that can be developed by the organizations in order to operate in the existing or new operational environment (Dyer et al. 2015).
Advantages – The cost effectiveness of the model is the most important advantage which is provided to the organizations. The straightforward method of analysis is thereby helpful for the organizations and the analysts in order to understand the external environment.
Disadvantages – The results which are provided with the help of PESTLE analysis require constant checking and reviewing as the external factors tend to change quite fast. The
Example – Tesco is a retail organization which has its base in the United Kingdom. The company thereby needs to analyse the external environment based factors in order to develop appropriate strategies to operate in the new market area (Ethiraj, Gambardella and Helfat 2018).
Discussion based on Porter Five Forces Framework
The industry of operations of the company can be examined with the help of Porter’s Five Forces framework in order to function in the environment in an effective manner. The five forces which are able to affect the cost-effectiveness of the organization thereby include, the stages of competitive rivalry in the industry, the effects of new organizations on the existing companies. The threats that are faced by the company based on substitute products, the power of the suppliers in the industry and the levels of power of the buyers is an important part of the porter’s analysis (Dobbs 2014).
Advantages – The most significant advantage of Porter’s five forces framework is based on the high usage of the process for analysing the industry in an effective way. Simplicity related to the implementation of this process is also an advantage of the model.
Disadvantages – The static character which is depicted by Porter’s framework is a major disadvantage of the model. The changes which take place in the industry are not always detected promptly by the model.
Example – The Porter’s Five Forces model can be used by Woolworths in order to analyse the ways by which changes in the retail industry are able to affect the processes and profitability (Ethiraj, Gambardella and Helfat 2018).
Discussion based on Porter’s Generic strategies model
The Porter’s generic strategy model has suggested two types of strategies that can be implemented effectively by the organizations. The two types of strategies are mainly cost leadership strategy and broad differentiation strategy. The cost leadership strategy is based on the usage of low prices in order to operate in the environment. The broad differentiation strategy on the other hand can be used for creating a particular area of differentiation as compared to the other organizations (Engert, Rauter and Baumgartner 2016).
Example – The cost leadership strategy has been implemented by McDonalds in order to attract customers in its operations all over the world. On the other hand, the broad differentiation strategy is used by Apple in order to target the premium market segment.
The essay can thereby be concluded by stating that the strategic analysis tools can be used by different organizations to analyse the internal and external environment in an efficient manner. The industry of operations can also be analysed for determining the strategies which are used by the company.
Barros, I., Hernangómez, J. and Martin-Cruz, N., 2016. A theoretical model of strategic management of family firms. A dynamic capabilities approach. Journal of Family Business Strategy, 7(3), pp.149-159.
Daspit, J.J., Chrisman, J.J., Sharma, P., Pearson, A.W. and Long, R.G., 2017. A strategic management perspective of the family firm: Past trends, new insights, and future directions. Journal of Managerial Issues, 29(1), p.6.
Demir, R., Wennberg, K. and McKelvie, A., 2017. The strategic management of high-growth firms: a review and theoretical conceptualization. Long Range Planning, 50(4), pp.431-456.
Dobbs, ME 2014, 'Guidelines for applying Porter's five forces framework: a set of industry analysis templates', Competitiveness Review, vol. 24, no. 1, pp. 32–45.
Durand, R., Grant, R.M. and Madsen, T.L., 2017. The expanding domain of strategic management research and the quest for integration. Strategic Management Journal, 38(1), pp.4-16.
Dyer, J.H., Godfrey, P., Jensen, R. and Bryce, D., 2015. Strategic Management: Concepts and Cases. Wiley Global Education.
Engert, S., Rauter, R. and Baumgartner, R.J., 2016. Exploring the integration of corporate sustainability into strategic management: a literature review. Journal of cleaner production, 112, pp.2833-2850.
Ethiraj, S.K., Gambardella, A. and Helfat, C.E., 2018. Theory in strategic management. Strategic Management Journal, 39(6), pp.1529-1529.
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