Key Strategy Development Tools

This paper evaluates the uses of four strategic tools - PESTEL, SWOT, Ansoff Matrix, and Porter's Five Forces - in helping companies exchange and execute their business processes within competitive markets. Examples from companies like Adidas, Telstra, Tesco, and Starbucks are provided to illustrate the application of these tools. The paper concludes by highlighting the importance of these tools in strategic management.

Essay – Key Strategy Development Tools
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APRIL 23, 2019

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Introduction
There are four crucial strategic tools that helps a company in order to exchange and execute
their concerned business processes within the competitive market areas. This paper will help
in evaluating the desired need and the uses of these strategic tools such as PESTEL, SWOT,
Ansoff Matrix and porter’s five forces with the help of suitable examples.
PESTEL Strategy Model
The full form of PESTEL is political, economic, social, technological, environmental and legal.
A tool or framework used by the companies for analyzing the factors of external marketing
environment that affects the business is referred to as PESTEL analysis (Fozer et al., 2017).
The model is primarily useful when a new business is going to enter a foreign market. The
political factors may include foreign trade policy, labor law, tax policy, government policy,
environmental laws, political stability and trade restrictions. Economic factors consist of rate of
interests, inflation rate, economic growth, and exchange rate. The factors significantly impact
the organization.
The social factors may involve career attitudes, population growth, health consciousness and
age distribution. These factors directly affect the marketers on their understanding the
consumers. Technological factors can affect the management in different ways such as new
methods of distributing as well as producing goods or services and new ways to communicate
with the target market (Koshesh and Jafari, 2019). Environmental factors involve increasing
scarcity of raw materials or carbon footprint targets. Legal factors contain the rights of the
consumers, health, safety, equal opportunities and advertising standards that should be
known by the company for a successful trade.
Figure: PESTLE ANALYSIS
(Source: Koshesh and Jafari, 2019)
Example of Pestle analysis, Adidas is a firm based in Germany which deals in apparel and
sports shoes. Adidas faced many risks, and its focus in several political factors such as war,
nationalization, and terrorism (Kiełkowska et al., 2018). The economic factors such as
taxation or inflation affect the profit of the company. Its products meet the latest trends, and
the social factors affect the buying habit of an individual which results in decreasing the
revenue. Adidas has been using online websites for selling the products. It also focuses on
the production of sustainable products that help in enhancing brand image. It does not affect
by any legal factors until now.

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SWOT Analysis
The full form of SWOT is strengths, weaknesses, opportunities, and threats. It is a model or
framework used to identify as well as analyze both internal and external factors. SWOT is
used by the business entities and also by non-profit organizations. The purpose of using this
model to achieve insight into the future and current position of the organization in the market
(Bull et al., 2016). It is a technique used for evaluating the risk, competition, potential, and
performance of the entity. Strength means the internal features that support a successful
result. Weaknesses denote to the internal aspects that work against the effective result of the
company.
Opportunities refer to the external elements that can be used by the business for its
advantages. Threats refer to those external factors that could damage the success of the
business. By using SWOT analysis, a business could focus on the vital factors that affect the
business. A business could address its weaknesses and create several goals as well as
strategies to use the opportunities (Phadermrod, Crowder and Wills, 2019). The entity could
take advantages of its strengths by using a SWOT analysis.
Figure: SWOT ANALYSIS
(Source: Phadermrod, Crowder and Wills, 2019)
For example, Telstra is one of the leading telecommunication in Australia. It has a strong
base in terms of customer service and includes more than 35,000 employees to serve
customers across the world. The strength helps in protecting the existing market share. One
of the weaknesses of Telstra is limited liquidity position. By identifying the weakness with the
help of SWOT, the company could improve its strategy. Increase in demand of the telecom
services is one of the opportunities of Telstra which is identified by using a SWOT analysis.
The major threats identified by using SWOT are high competition and rapid changes in
technology. The company evaluates future events and their impacts on the performance of
the business by SWOT analysis.

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Porter’s Five Forces Model
The Five Forces Model of Porter is a tool used to analyze the competitive position in the
market. The primary objective of the model is to evaluate the potential profit of the business
sector (Mathooko and Ogutu, 2015). The Five forces help in determining the competitive
power in the situation of the business. The model is used by the companies for analyzing the
structure of the business and the corporate business strategy. The five forces are competitive
challenge, the threat of substitute products, power of consumers, power of dealers and threat
of new entrants into the market.
The power of suppliers is the force that refers to the extent to which the prices can be
influenced by the suppliers. The power of buyers refers to the ability of the buyers to affect the
quality as well as pricing of the products. The threat of new entrants means the entry of new
business into the market which is low for the top competitive industries (Zhao et al., 2016).
The threat of substitute products denotes to the development of alike goods in the market with
superior flavor. Competitive rivalry refers to the high competitor of the business in the market.
Figure: Porter’s Five Forces Model
(Source: Zhao et al., 2016)
For instance, Tesco uses the five forces model to analyze the competitive environment. The
top competitors of Tesco are Asda, Waitrose, Morrisons and Sainsbury’s who possess high
competition to the company in terms of products, promotion, and price. The threat of
substitute product is relatively high for Tesco as it does not offer a unique value proposition.
Tesco is the major brand in the market of food retail. Hence it has a low threat to the entries
of new business. The company contributes 80% of all shopping in the UK. The bargaining
power of customers for Tesco is high as the purchasers can easily switch from one brand to
another. The power of suppliers is low for Tesco because it has real strength.

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Ansoff Matrix model
Ansoff matrix model refers to a model that is used for marketing planning and helps in
business to determine the strategy of the product as well as market growth (Filippov, 2017).
This model is usually applied for getting the opportunities which would help in growing
revenue of the business. The Ansoff matrix is sometimes called a product-market matrix. The
main purpose of this strategic model is to focus on the development of the business. The
firms used this marketing model for evaluating the opportunities to improve their sales by
showing different combinations for new markets.
The model consists of four strategies which help the marketers in understanding the risks of
the business (Genoveva and Siam, 2017). The first strategy is market penetration that
focuses on increasing sales of the prevailing products in the existing market. The second
strategy is product development that primarily emphases on developing innovative products
for an existing market. The third strategy is market development that helps in taking the
existing products into the new market. The fourth and final strategy is diversification that
focuses on introducing new products for the new market. The lowest risk strategy is market
penetration whereas the highest risk strategy is diversification.
Figure: Ansoff Matrix model
(Source: Genoveva and Siam, 2017)
For example,
Market penetration: Starbucks began to write the customers' names on the cups of coffee to
increase sales as a consequence of customer satisfaction (Haskova, 2015).
Product development: Starbucks have announced a new premium coffee that contains
exclusive coffee beans.
Market development: Starbucks has a wide variety of coffee products that target both existing
and new markets. It includes products like cappuccino, Frappuccino blended coffee or
espresso that are available in the coffee shops throughout the world.
Diversification: Starbucks planned to launch a food range into the new market which is a
diversification strategy as it becomes a high risk to increase revenue with the new product in
the new market.

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Conclusion
The paper helped in evaluating the desired uses of the various strategic management tools
which helps in providing the preferred elevation in the execution of the concerned business
processes. The paper concludes four tools and its uses with the help of suitable examples
from different companies.

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References
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