Question

This assignment aims at ensuring that students have familiarised themselves with the foundational strategy development models and are able to relate them to current practical business examples. . Details Write an essay explaining what the main strategy development tools are and how they are used in business in 1500 words. Your essay must contain a comprehensive discussion of 3 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.

Answer 1

Mason, Kjellberg and Hagberg (2015) conducted an analysis according to which, effective business strategies play a significant role for organizations to achieve goals and objectives in the competitive business environment. The selected five tools that have been analysed in this assessment include PESTEL, Porter Five forces, SWOT, Ansoff Matrix and Porter Generic Strategy.

Tool 1 – SWOT analysis

The SWOT analysis tool is basically used to investigate how internal and external business environment influences the performance of the organization. There are four quadrants of SWOT analysis, including

-Strengths,

-weaknesses,

-opportunities and

-threats.

Threats and opportunities denote the external business environment, whereas strengths and weaknesses stand for the internal business environment.

Advantage and disadvantage:

SWOT analysis is a low cost tool, which can be implemented easily in the business. Through the application of this tool, weaknesses of business can be analyzed effectively. Conversely, this tool fails to make a detailed analysis of the complex scenarios of business.

Tool 2 – Ansoff Matrix

An imperative strategic planning tool, ansoff matrix contributes to the managerial decision-making of growth strategy development. There are four growth strategies for this tool, such as:

-market development,

-market penetration,

-diversification and

-product development.

Advantage and Disadvantage:

Through the application of this tool, both market planners and managers investigate the probable risks associated with the new strategy implementation in business. This tool also facilitates managers to develop growth strategies for business.

The problem with this model is that it cannot identify the required moulding in diversification strategies as well as market development planning. Ansoff matrix is a theoretical model that fails to investigate external competitors’ practices.

Tool 3 – PESTEL analysis

Application of this tool helps, organizational managers investigate how external environmental factors influence the performance of the business in the competitive marketplace. PESTLE model discusses six key factors, including:

-political,

-economic,

-social,

-technological,

-legal and

-environmental.

When it comes to identifying threats and opportunities of business, this model works better than SWOT TOOL.

Advantage and Disadvantage:

PESTEL model investigates the threats and opportunities of business in the present market scenario. This model is widely used in business since it is time-efficient and cost-effective. On the contrary, this model does not discuss the issues of business in the long run. External factors, including political, social and economic situations change in a continuous manner.

Tool 4 – Porter’s Five forces

This model helps organizational managers in analyzing the profitability and threats of the strategy through the investigation of microenvironmental factors, including

-the power of suppliers,

-the power of buyers,

-threats of substitutes,

-competitive rivalry and

-threats of new entrants.

Advantage and Disadvantage:

By applying this model in the business, organizations can evaluate their present position in the competitive sector. Customers’ bargaining power and suppliers’ power, which are the significant factors to achieve profitable outcomes in business, can be evaluated or measured through analysis of Porter’s five-force model (Woodside 2014). Conversely, variables of the five-force model change repeatedly, which restrict the analytical outcomes for a limited time.

Tool 5 – Porter generic strategies

The application of this model in business facilitates the organizational managers to evaluate three key strategic options, including

-differentiation,

-cost leadership, and

-focus.

Advantage and disadvantage:

Generic strategies discuss the cost leadership that plays a significant role in minimizing the expenditure of business. This model facilitates the organization to strategize product price effectively. Nevertheless, organizational often fail to match all traits involved in the generic strategies.