Competitive Strategy

This document discusses the concept of competitive strategy and its importance in business. It covers various models and frameworks such as SWOT analysis, Porter's five forces, PESTLE analysis, and the resource-based view. Examples from companies like Zara, Nestle, Amazon, and Honda are provided to illustrate the application of these strategies. The document also highlights the significance of evaluating internal and external factors to develop effective strategies.

Competitive Strategy
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SWOT
While developing strategies goals in an organisation, corporations rely on SWOT
analysis in order to identify their key strengths and opportunities. The SWOT is an
acronym for strengths, weaknesses, opportunities and threats (Sevkli et al., 2012).
By using this model, companies can identify key internal factors that provide them
strengths and also evaluate their weaknesses. Through this model, the external
opportunities are identified by companies to expand their operations and increase
their profitability. Organisations also evaluate key threats that are likely to negatively
affect their growth and profitability in the market. The example of Zara can be
analysed to apply this model. Zara is a leading fast fashion company that offer its
products on a global stage. The company generates its strengths through its
responsive supply chain that enables it to change 75 per cent of its merchandise
display within a period of 3-4 weeks across the globe (Taplin, 2014).
The company controls each aspect of its supply chain, and it uses both in-house and
outsourcing operations to increase efficiency while reducing operations costs.
Weaknesses of the company include lack of investment in marketing which leads to
limiting its customer base and difficulty in controlling outsourcing operations (Turker
and Altuntas, 2014). Opportunities available for Zara include investment in marketing
strategy, expansion in foreign markets and launching a new product range. Key
threats that are likely to create challenges for Zara include wastage of raw materials,
reduce sales in foreign markets and growing competition. The company can exploit
its opportunities to tackle its threats by relying on its strengths. For example, it can
launch a new product line in emerging markets and reach new customers base to
increase its sales and reduce its competition (Taplin, 2014). It can also adopt
sustainable production practices to reduce wastage of raw materials and create a
positive brand reputation.

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Porter’s five forces
While managing their operations in an industry or entering into a new market, it is
important that companies evaluate the attractiveness of the market and the intensity
to the competition to formulate policies that enable them to address these
challenges. In this regards, companies can rely on the five forces framework that
was developed by Michael Porter. In this model, there are five forces which
companies have to evaluate in order to make sure that they evaluate the
attractiveness and competitive in an industry; these forces are competitive rivalry,
the bargaining power of customers, the threat of new entrants, the threat of
substitutes and the bargaining power of suppliers (Lee, Kim and Park, 2012). An
example of Nestle can be analysed to apply this model. Nestle is a leading brand in
the food processing industry with operations situated in many major markets. In its
industry, the bargaining power of suppliers is high which affect the operations of
Nestle (Sethi, 2012).
The company has to rely on its suppliers since they provide raw materials for its
products and maintaining a high standard of quality is important for Nestle due to
which suppliers can raise prices of the materials which can adversely affect Nestle
(Payaud, 2014). The bargaining power of the buyer is high because there are many
options available in the market and there are no switching costs. The threat of
substitutions is also high in the industry since many small and large companies offer
similar products which are easily accessible by customers. The threat of new
entrants is low since there are already established major brands in the industry and
the initial investment is considerably high (Sethi, 2012). Competitive rivalry is low
because Nestle has become a global brand that is known across the globe which
provides a competitive advantage to the company.

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PESTLE
Along with internal factors, there are various external factors that affect the
operations of a company which are necessary to be taken into consideration by the
management in order to develop strategies that address external issues. PESTEL
analysis is a popular tool that enables the management to identify these major
external threats which are categorised into six categories including political,
economic, social, technological, environmental and legal (Zalengera et al., 2014). By
evaluating these factors, companies can keep a bird-eye view on the market to spot
any factors that could create potential threats or opportunities for the business. This
can be understood by an example of Amazon which is a leading e-commerce brand.
The headquarters of the company is situated in Seattle which means that political
changes of the United States affect the business of the company (Schlosser, 2018).
For example, Trump Administration imposed a trade ban on its international
operations and increase tariffs which increased costs for the company. Economic
stability and growth of the US provide a positive growth opportunity to Amazon as
well. Social perception of customers the profitability of the company; for example,
customers protested the decision of the company to open a new headquarter in New
York City which affected its operations (Eadicicco, 2019). Amazon uses technologies
in its distribution chain and delivery process to gain a competitive advantage, for
example, robots in warehouses and drone delivery system. The company also
focuses on reducing its carbon footprint to create a positive impact on the
environment based on which its new office in Seattle runs 100 per cent on renewable
energy (Schlosser, 2018). Failure to comply with legal provisions leads to increasing
penalties on Amazon which hinders the growth of the company and reduces its
profitability.

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Resource-Based View (RBV)
In order to sustain their growth in the market, companies rely on their resources that
enable them to effectively conduct their business operations. Organisations rely on
RBV model to identify which resources can provide them a competitive advantage in
the industry. This model relies on the VRIO framework in order to evaluate resources
on four criteria including valuable, rare, inimitable and organised (Jang, 2013). The
resources that pass on all these criteria assist companies in generating a competitive
advantage. For example, Honda is a multinational automobile company which is
currently one of the world’s biggest automobile and engine manufacturer. The engine
manufacturing capabilities of the company provide a competitive advantage in the
industry. The company started manufacturing clip-on engines for bicycles and slowly
starting collecting expertise in this field (Chan and Hui, 2012).
Currently, the company manufactures car engines, bike engines, jet engines,
marine-based engines, generators and other engines which are a valuable part of
the business model of the company. This is a rare resource since other corporations
are specialised only in a particular area such as car engines. This resource is
inimitable because Honda has experience of many decades which assisted the
company in understanding intricate details of engines and expand its expertise in the
area (Honda, 2019). Lastly, this resource is also organised because the company
has established its operations across the globe and it manufactures engines for a
wide range of customers which include automobile companies, airlines, marine
companies and others. Since this resource passed on all criteria of the VRIO
framework, it can assist Honda in generating a competitive advantage in the market
that enables the company to expand its profitability and increase its customer base
to sustain its growth in the market (Chan and Hui, 2012).

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