SWOT, PESTLE and Porter’s Five Forces: Tools for Gaining Competitive Advantage

Running head: MASTERS OF BUSINESS ADMINISTRATION
MASTERS OF BUSINESS ADMINISTRATION
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MASTERS OF BUSINESS ADMINISTRATION
Competitive advantage refers to the ability that is gained through the available resources
and attributes in order to perform at a better and higher level than the rest others, belonging in
the same market environment. Near about every organization has to face stiff challenges and
threats from their business rivals in every market in the current era. Hence, competitive strategy
is very important, as it helps the companies to ensure that they are accessing returns for a much
longer period of time. The main aim of this paper is to focus on the describing and explaining the
three tools- SWOT, PESTLE and Porter’s five forces. It shall elaborate on how these tools helps
in gaining competitive advantage for a firm and how they are used by different companies.
For every business, it is very important to know its surrounding environment from both the
external and internal point of view. Hence, evaluating the environmental opportunities in context
to the strengths as well as weaknesses of the resources of the organization and in context to the
culture of the organization is also important. SWOT analysis is a very useful process that is used
to understand and evaluate all type of situations present in the business and the organizations. It
is an acronym for STRENGTHS, WEAKNESSES, OPPORTUNITIES, and THREATS. It is
basically used for business planning, competitor evaluation, strategic planning, marketing,
outsourcing a service or resource, evaluating investment opportunity, evaluating method of sales
distribution, product development, and research reports etc (Ben-Daya et al., 2013). It is one of
the most effective tools present for analyzing the environmental information and data- for
internal (Strength, weakness) as well as external (opportunities and threats) factors. SWOT
analysis helps to maximize the strengths of a business by minimizing the affect of the
weaknesses on the business planning (Aithal 2016). It helps a company to achieve a clear insight
into the pasts and thinking out for a possible solution to the potential problem that is prevailing
in the business. The strengths determine the strong points of the organization. It comprises of all

MASTERS OF BUSINESS ADMINISTRATION
the tangible as well as intangible attributes that are internal to a company. It should be from both
the internal as well as external perspectives and customers. Strengths are a typical competence
when it provides a company a comparative advantage in the market. Analysis of the weaknesses
gives the company a clear view of on which areas the business need to improve itself. It should
include the opinion of the customers as well as of the other market players. With the same, the
opportunity is always considered to be a major situation in the environment of a firm as it
represents a reason for it to exist and grow further (Naccarella et al. 2018). Usually the useful
opportunities for a business come from changes in the policies of government in relation to the
field, changes in the regulatory and competitive circumstances etc. Lastly, threats are one of the
two external factors of SWOT analysis on which the organization does not have any control.
Threats have to be faced by each and every company. The slow growth of market, entrance of
the new competitors, changes in technologies and the increase in the bargaining power of the
suppliers and buyers falls under that threat factors.
Secondly, PESTLE analysis is also a very useful method used in identifying particularly the
external factors that may have an influence on the organization. The term PESTLE is an acronym
of the domain it considers- POLITICAL, ECONOMIC, SOCIAL, TECHNOLOGICAL,
ENVIRONMENTAL and LEGAL. It especially focuses on identifying the trends that would be
affecting the organization over a long period of time. It is also very important in order to make
better decisions by knowing the opportunities, and risks present on the horizon for the business.
PESTLE analysis involves a company considering these external environment before starting a
new project. The political factors have the tendency to get altered by the influence of the
government on an infrastructure of a country. It may include employment laws, tax policy, trade
restrictions, reform, environmental regulations, tariffs and political stability. The economic