Business Strategy Development Tools

This article discusses the essential strategic business development tools used by companies, focusing on Wesfarmers. It covers PESTEL analysis, Five Forces, SWOT analysis, and Strategy Formulation. These tools help in identifying external and internal factors that impact the company's performance and aid in formulating effective strategies.

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Business Strategy Development Tools

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1. Executive Summary
Wesfarmers is one of the listed company in the Australian stock exchange which is located in
Perth. It is the most recognized brand in Australia and operated in retail, manufacturing and
industrial sectors. It deals in a wide variety of products which provides high sustainable profit
to the company. The paper summarizes several business strategic development tools such as
PESTEL, SWOT, Five forces and Strategy formulation. Each tool is used for identifying
different factors and in a different process. PESTEL analysis is used for identifying the
external environment aspects that impact the business in various ways. Hence, it has been
found that Wesfarmers applied the PESTEL analysis tool to determine the external factors so
that it could increase its profitability. SWOT analysis is essential to evaluate the strengths as
well as weaknesses, threats, and opportunities. It is found that Wesfarmers identified its
strengths, weaknesses, opportunities, and threats so that it could improve its strategy and
take advantage of its strength to get success in the market.
Five forces analysis is used for understanding the rivals of the company, power of consumers
and suppliers, threats of new business and threats of substitutes. Wesfarmers has used the
application of five forces for gaining competitive advantage as well as profitability. Strategy
formulation is a critical process for selecting a suitable course of action to accomplish goals.
Hence, Wesfarmers has successfully applied this process for accomplishing several goals of
the business. It could be recommended to Wesfarmers that it should provide a memorable
shopping experience to its customers by offering the products at a reasonable price.

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Table of Contents
2. Introduction....................................................................................................................................................3
3. Main Tools......................................................................................................................................................3
3.1 PESTEL....................................................................................................................................................3
3.2 FIVE FORCES...........................................................................................................................................4
3.3 SWOT......................................................................................................................................................5
3.4 STRATEGY FORMULATION......................................................................................................................5
4. Conclusion......................................................................................................................................................7
5. References......................................................................................................................................................8
6. Appendices.....................................................................................................................................................9

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2. Introduction
The primary purpose of the paper is to evaluate the essential strategic business development
tools used by several companies. The tools which will be described in the paper are PESTEL
analysis, Porter’s Five Forces model, SWOT analysis and Strategy formulation. Every
business should have strategy development tools for achieving the primary goals of the
organization. Wesfarmers is one of the leading company in Australia. The company was
founded in 1914 and engaged in retail, manufacturing of chemical and fertilizers, gas
distribution and coal mining businesses. The strategy development tools are used for
analyzing the business of Wesfarmers. The strategic tools are useful in determining the
competitive environment, external as well as internal factors that have an impact on the
performance of the company. Formulation of strategy is the critical part of a business
management process. The analysis of various factors by using the tools would help in
executing better strategies.
Figure: Activities of Wesfarmers
(Source: Bondarenko et al., 2017)
3. Main Tools
3.1 PESTEL
3.1.1 Theories including journal articles
According to the theoretical framework based on the article, PESTEL analysis is an essential
tool for the business entity to determine the external factors of the environment ( Nguyen,
2016). It also helps in evaluating certain advantages or disadvantages of the company.
PESTEL mainly stands for political, economic, social, technological, environmental and legal
factors. It is crucial for every business to use PESTEL analysis.
3.1.2 Application and its impact

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PESTEL analysis can be used by Wesfarmers when it will plan to introduce a new business in
the market or want to expand its business in a different country (King and Boxall, 2019).
Political: The political factors may vary with the sudden change in the laws and regulation of
the government. The profitability of Wesfarmers may be impacted by political factors such as
tax laws or contract laws as the Australian government changes the rules and laws
significantly.
Economic: The factors such as interest rate, GDP, the inflation rate in Australia may impact
on the investment and demand of Wesfarmers.
Social: The reflection of society may impact Wesfarmers as it encompasses the beliefs or
values of the community.
Technological: Technological developments by competitors can influence Wesfarmers.
Environmental: The change in climate or the pollution fines may impact the company as it
produces a large amount of waste.
Legal: Wesfarmers has its policies which are not enough to protect the company from legal
factors such as, intellectual property laws.
3.1.3 Opinion
As per my opinion, PESTEL analysis is significant for every company as it helps in identifying
the influencing factors that affect the success of the business. If a company does not follow
the tool, then it may be at risk.
3.2 FIVE FORCES
3.2.1 Theories including journal articles
Porter's five forces are based on the industrial-organizational theory (IO). The theory assumes
that the market structure is the major attraction of the company as it influences the firm's
strategic behavior (Gerard, 2018). The five forces tool helps the company in identifying the
powers of buyers, dealers or the competitors in any business situation.
3.2.2 Application
The application of five forces helps Wesfarmers Limited in understanding the power of
suppliers as well as buyers of the company, rivalries, threat of new business and threat of
substitute goods in a retail business (Takata, 2016).
Competitive rivalry: Wesfarmers is one of the leading company in Australia. It has a low,
competitive rivalry and is gaining competitive advantages at a high rate.
Power of buyers: Wesfarmers promote sustainable method for conducting business, and it
also conducts market research for understanding the modern trend of the consumers. Hence,
it has moderate buying power.
Power of suppliers: Wesfarmers deals in a variety of products which limit its competition in the
market of suppliers. Dependency on too many dealers can be the major barrier for the
company.

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The threat of substitute products: This force is too high for Wesfarmers. But, the company
adopts an eco-friendly method for production and offer high-quality services to customers
which helps in lowering the threat of substitute.
The threat of new entrants: The threat of new business is comparatively low for Wesfarmers
as it is highly recognized for its brand and diverse market.
3.2.3 Opinion
From my point of view, five forces analysis must be applied by all entities for understanding
various threats or powers which would help in making better strategies for the future.
3.3 SWOT
3.3.1 Theories including journal articles
As per the level approach theory in the given article, SWOT analysis is a strategic tool used
for identifying the strengths, weaknesses, threats, and opportunities of a company. It acts as
a key component in the strategic planning of the business.
3.3.2 Application
The application of SWOT analysis is very advantageous for Wesfarmers as it enables the
company to achieve an awareness of strength, threats, opportunities or weaknesses (Leiber,
Stensaker and Harvey, 2018).
Strengths Weaknesses
 Wesfarmers has an enormous
variety of different businesses
 It is a recognized brand
 It has a high growth rate
 Wesfarmers has a large number of
shareholders
 It operates in a highly competitive
market
 It does not have strong capacity in
making profit
 It has a low geographic presence
in Australia
Threats Opportunities
 Massive competition from top
competitors like Myer, Woolworths
 Demand for the products is low
due to the economic downturn
 Customer as well as employee
loyalty
 Improved quality as well as service
 Earn revenue and profitability due
to global expansion
3.3.3 Opinion
As per my point of view, SWOT analysis must be used by the recognized companies so that
they could improve their weaknesses and take advantage of its strengths. The uses of this
tool help in gaining competitive advantage within the market.
3.4 STRATEGY FORMULATION
The process of choosing an appropriate course of action for achieving the vision as well as
the goals of the business is known as strategy formulation. It is crucial for the success of a
firm as it offers a framework that leads to successful outcomes. It contains six steps such as

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defining the firm, the strategic mission, strategic objectives, competitive strategy, and
implementation of strategies as well as evaluation of the progress of the firm.
Wesfarmers has successfully utilized the strategy formulation process by identifying its
customers and developed a strong customer base (Zhang et al., 2016). It also states a clear
strategic mission for carrying out the plans of the business. The mission is to provide a
satisfactory return to its shareholders. The company introduced other market objectives for
transforming the firm into a public organization. Wesfarmers develop a set of strategic
objectives for achieving the mission or goals of the business. Its primary objective is to offer
best quality services to its customers. It sets a competitive strategy to understand the
competitors and to gain a competitive advantage in the market. To implement the strategies,
Wesfarmers introduced a timeframe and milestones for recognizing the goals.
Figure: Logo of Wesfarmers
(Source: Chih and Zwikael, 2015)

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4. Conclusion
It is concluded from the above analysis that the strategic development tools are necessary for
all business entities for identifying various factors as well as opportunities in the market.
Different tools are used for identifying different factors or elements. Wesfarmers is the leading
and recognized company in Australia that enjoys a strong position in the market. Hence, it is
essential for the company to be aware of its weaknesses, opportunities, threats, and
strengths so that it could improve the performance of the business. It is also crucial for
Wesfarmers to do a PESTEL analysis for analyzing various environmental factors that can
influence the profitability of the company. The company also applied the strategy formulation
process to achieve the attainable goals and meet the requirements of the consumers to build
a strong customer base. Moreover, five force analysis is useful in understanding the power of
buyers or suppliers, threats and competitors of the company.

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5. References
Bondarenko, T.G., Isaeva, E.A., Orekhov, S.A. and Soltakhanov, A.U., 2017. Optimization of
the company strategic management system in the context of economic instability. European
Research Studies, 20(2), p.3.
Chih, Y.Y. and Zwikael, O., 2015. Project benefit management: A conceptual framework of
target benefit formulation. International Journal of Project Management, 33(2), pp.352-362.
Gerard, H.T., 2018. The Relevance Of Porter’s Five Forces In Today’s Innovative And
Changing Business Environment.
King, S. and Boxall, N.J., 2019. Lithium battery recycling in Australia: defining the status and
identifying opportunities for the development of a new industry. Journal of Cleaner
Production, 215, pp.1279-1287.
Leiber, T., Stensaker, B. and Harvey, L.C., 2018. Bridging theory and practice of impact
evaluation of quality management in higher education institutions: a SWOT
analysis. European Journal of Higher Education, 8(3), pp.351-365.
Mathooko, F.M. and Ogutu, M., 2015. Porter’s five competitive forces framework and other
factors that influence the choice of response strategies adopted by public universities in
Kenya. International Journal of Educational Management, 29(3), pp.334-354.
Nguyen, D.L., 2016. Vietnamese coffee in the path of International Integration: The United
States export market analysis.
Sacks, G., Mialon, M., Vandevijvere, S., Trevena, H., Snowdon, W., Crino, M. and Swinburn,
B., 2015. Comparison of food industry policies and commitments on marketing to children and
product (re) formulation in Australia, New Zealand and Fiji. Critical public health, 25(3),
pp.299-319.
Takata, H., 2016. Effects of industry forces, market orientation, and marketing capabilities on
business performance: An empirical analysis of Japanese manufacturers from 2009 to
2011. Journal of Business Research, 69(12), pp.5611-5619.
Zhang, X., Deng, Y., Chan, F.T., Adamatzky, A. and Mahadevan, S., 2016. Supplier selection
based on evidence theory and analytic network process. Proceedings of the Institution of
Mechanical Engineers, Part B: Journal of Engineering Manufacture, 230(3), pp.562-573.

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6. Appendices
Figure: PESTLE analysis
(Source: Sacks et al., 2015)
Figure: Report of Wesfarmers
(Source: Mathooko and Ogutu, 2015)

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