Competitive Strategy Assignment

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Competitive Strategy

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In the modern era, the intensity of competition has increased significantly in industries. The
corporations operating in these industries have to ensure that they adopt strategic policies to
generate a competitive advantage over their competitors to sustain their growth in the market.
The management uses strategy development tools while forming business strategies in order
to evaluate the business environment factors which affect their operations (O’Brien and
Meadows, 2013). This essay will evaluate PESTEL analysis and Porter’s five forces
framework which are two of the most common strategy development tools used by
corporations across the globe. Both of these theories will be evaluated to determine how they
work and examples of Amazon and Nestle will be taken to understand how they assist the
management in forming strategic policies.
PESTEL Analysis
The PESTEL analysis is a common strategy development tool which assists marketers in
evaluating the key factors which influence their business. The PESTEL is an acronym for six
factors which affect businesses and their operations in their respective industry. These factors
include the political landscape of the market, economic outlook, socio-cultural adaptations,
technology space and advancements, environmental and sustainability policies and legal and
ethical domain (Yuksel, 2012). Through this model, the marketers are able to track the
environment of the industry in which they operate if they plan to diversify their product
offerings or services. This tool works as a bird-eye view of the industry through which
different factors can be evaluated by the company. Political factors are influenced through
political parties which affect the spending and confidence of customers. Economic factors
include employment rate, rate of inflation, GDP and change rate. Social factors are linked
with ideas, values, opinions and culture of market participants (Dockalikova and Kashi,
2014). Technological factors comprise opportunities and threats relating to technological
advancements. Environmental factors include imposition of ecological responsibilities on
parties to reduce environmental damage. Legal factors include regulations and ethical
operations of businesses.
A PESTEL analysis of Amazon can assist in understanding how the management of the
company uses this tool to form business strategies to achieve effectiveness. Evaluation of
changes made in the political environment is important so that the corporation is ready to face
key challenges. For example, Trump Administration has imposed a ban on free trade which
affects the business of Amazon in other countries (Mac, 2017). The government has also

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decided to conduct the audit of postal services also affects the business of Amazon. In major
markets of Amazon such as the United States, Australia and the United Kingdom, the
economic stability assists the company in managing its operations and expands them in the
market which increases the customer base of the enterprise. Amazon has a positive social
image in the e-commerce industry. The perspective of customers towards the e-commerce
market is changed as well, especially in developing countries such as India which assist
Amazon in reaching new customers in order to increase its market share (Sen, 2018). The
corporation uses modern technologies while managing its operations to ensure that it is able
to increase the efficiency of processes and accuracy in management. For example, the
warehouses of Amazon contain billions of products which are effectively managed through
robots, barcode scanners, order processing and others (Caudell, 2017). The supply chain of
the corporation is continually working to optimise shipping practices by leveraging
technological advancements which provide it a competitive advantage in the industry. The
corporation complies with environmental policies while managing its operations, for
example, use of renewable energy and 40 thousand plants in the new rainforest office of the
company which is situated in Seattle (Business Wire, 2018). Effective compliance with legal
requirements such as labour laws, taxation laws, consumer protection policies, employment
regulations and others assist the management in ensuring that they conduct their business in
ethically manner. Evaluation of these factors assists the corporation in generating and
maintaining a competitive advantage in the industry.
Porter’s Five Forces Framework
Understanding of the industry in which a company operates is significant to ensure that it
develops its policies based on the factors which affect their operations. These factors also
include the business of corporations when they decide to diversify their offerings into new
markets (Dobbs, 2014). Michael Porter developed a tool which assists corporations in
determining the five key forces of an industry which affects their business. This model
enables enterprises in analysing the attractiveness and competitive intensity in the industry
which influences their profitability in the market. The five forces include competitive rivalry,
threat of new entrants, threat of substitutes, bargaining power of customers and bargaining
power of suppliers. The competitive rivalry is referred to the intensity of competition in a
particular industry. The threat of new entrants is referred to the ability of new competitors to
enter into the industry and the entry barriers. The bargaining power of customers is referred