Competitive Strategy: SWOT, Porter's Five Forces, RBV and PESTLE Analysis

This article discusses competitive strategy through various analytical tools such as SWOT, Porter's Five Forces, RBV and PESTLE analysis. It explains how to evaluate internal and external factors affecting an organization's profitability and develop business strategies accordingly. The article provides examples of Zara, Nestle, Honda and Amazon to illustrate the application of these tools.

Competitive Strategy
2018

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Table of Contents
SWOT Analysis.........................................................................................................................2
Porter’s Five Forces Model........................................................................................................4
Resource based view (RBV)......................................................................................................6
PESTLE Analysis.......................................................................................................................7
References..................................................................................................................................9
List of Figures
Figure 1: SWOT Analysis Model..............................................................................................2
Figure 2: Zara's Logo.................................................................................................................3
Figure 3: Porter's five forces model...........................................................................................4
Figure 4: Nestle's Logo..............................................................................................................5
Figure 5: VRIO Model...............................................................................................................6
Figure 6: Honda's Logo..............................................................................................................6
Figure 7: PESTLE framework...................................................................................................7
Figure 8: Amazon's Logo...........................................................................................................8

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SWOT Analysis
Figure 1: SWOT Analysis Model
(Source: Department of Health, 2018)
SWOT analysis is a tool which is used by organisations across the globe. It is referred as an
analytical tool which enables the parties to evaluate their strengths and weaknesses. It also
assists them in identifying various opportunities and threats for the corporations based on
which parties can form strategies to increase their profitability (Fallon, 2018). Based on this
analysis, a company can survive both internal and external forces which affect its business.
The internal elements of a company define its strengths and weaknesses such as human
resource abilities, effective organisational policies, leadership skills and others. External
factors define opportunities and threats of a corporation which include factors such as
competition in the industry, change in government policies, change in customer behaviour
and others (Yuan, 2013). By evaluating these factors, the corporations can develop policies
which are based on their strengths and focused towards their future opportunities.
Organisations use In order to understand this mode, an example of Zara can be evaluated
which is a fast fashion retailer which has operations situated across all over the globe. The
company is recognised throughout the world because it provides the latest brand clothes at

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relatively lower prices. One of the key strengths of the company is its ability to replace 75
percent of its merchandise in the display for a period of 3-4 weeks (TFL, 2016).
Figure 2: Zara's Logo
(Source: Inditex, 2018)
Other corporations took months to change their merchandises based on the latest fashion due
to which Zara has a competitive advantage in the fashion industry based on its responsive
supply chain (TradeGecko, 2018). The weaknesses of the corporation are that it did not invest
in its marketing strategy. The marketing strategy of the company is relatively weak due to
which it is unable to target a wider audience. Opportunities of the company include
expansion of its business in overseas markets and launching a new category of products for
new segment of customers (Gallien et al., 2015). Threats faced by the enterprise include
economic downtime of various developing countries, imitation or copy of original products
and high competition between fashion enterprises (Bailey, 2015).

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Porter’s Five Forces Model
Figure 3: Porter's five forces model
(Source: Burton, 2015)
This model was developed by Michael Porter which is used by corporations across the globe.
The model focuses on evaluating various aspects of an industry which result in influencing its
attractiveness and unattractiveness. Based on this framework, corporations can evaluate the
competitive environment in an industry to select whether to enter such market or not (Dobbs,
2014). Evaluation of this information assists the enterprises in developing relevant strategies
which are focused towards development of the organisation and its resources (Martin, 2017).
The theory provides five forces which affect an industry which includes supplier power,
buyer power, threat of substitute, competitive rivalry and threat of entry. Based on evaluation
of these factors, the organisations can determine the competition level in the industry which
enables them to develop appropriate business strategies. The bargaining power of suppliers
and buyers is referred to their ability to drive the price of supplies and products of the
company respectively (Investopedia, 2018). The threat of new entry is referred as the
difficulty faced by competitors while entering the industry. The threat of substitute is referred
to alternative products which are similar to the products of the company which customers can
select.

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Lastly, the competitive rivalry is the intensity of competition in the industry between
organisations. In order to understand this model, an example of Nestle can be evaluated in the
report. The company operates in food processing industry, and it offers products such as
coffee, tea, dairy products, frozen food, snacks, bottled water, baby food and other products
globally (Bhasin, 2017). Firstly, the rivalry between customers in food processing industry is
low since Nestle is a significant competitor that has gained a competitive advantage across
the globe. It is difficult for its competitors to reach the level of the organisation. The buyer
power is high in the industry because customers did not have to pay any switching costs.
Moreover, supplier power is high as well because Nestle relies on its suppliers across the
globe to ensure that they provide high-quality raw materials to the company (Hacklin and
Wallnofer, 2012). The threat of new entrants is low because the cost of establishing the
operations is relatively high (Koltrowitz, 2013). The threat of substitute products is high
because there are a large number of similar products available in the market which are
manufactured by both small and large manufacturers. Based on this analysis, the corporation
is able to evaluate the factors which affect its operations in the industry which enables it to
form business policies to sustain its growth in the food processing industry.
Figure 4: Nestle's Logo
(Source: Nestle, 2018)

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Resource-based view (RBV)
Figure 5: VRIO Model
(Source: B2U, 2016a)
Organisations use this model to recognise various resources which they have that provides
them a competitive advantage. Executives identify resources by using the VRIO framework
which enables them to collect necessary information and compare it with others (Lin and Wu,
2014). VRIO stands for valuable, rare, inimitable and organised. The resources which have
these traits provide a competitive advantage to the organisation. This model is under by top-
level management while forming future business strategies for the organisation. They focus
on effective resources to identify the ones which they have to focus on which benefit them in
the long run.
Figure 6: Honda's Logo
(Source: Honda, 2018)
In order to understand how this model works, an example of Honda can be evaluated which is
one of the largest engine and car manufacturers in the world. By using RBV model, the
corporation focuses on its business model which provides its competitive advantage by
manufacturing petrol based engines (Charan, 2012). The company manufactures petrol based

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engines in its facilities situated throughout the globe. The company gained expertise in the
engine manufacturing field since it started its business from clip-on engine for bicycles. Due
to its expertise in the field, the company started making jet engines, car engines, generators,
and marine-based engines which provides it a competitive advantage over other
manufacturers (Honda, 2018). Furthermore, it also entered into car manufacturing field where
it receives substantial success. By using RBV model, the company identified that it could
manufacture high-quality engines which provides it a competitive advantage in the field.
PESTLE Analysis
Figure 7: PESTLE framework
(Source: B2U, 2016b)
PESTLE analysis is used by corporations to identify various external factors which affect
their profitability in the market. Evaluation of these factors is important since it provides
crucial information to the management which assists them in developing business strategies.
The external factors include political, economic, social, technological, environmental and
legal. By analysing these factors, the corporations can track the environment in which they
operate which assist them in keeping a bird-eye view on the factors which affects their
operations (Zalengera et al., 2014). In order to understand this model, an example of Amazon
can be evaluated.

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Figure 8: Amazon's Logo
(Source: Amazon, 2018)
Amazon operates across the globe due to which international political environment affects its
operations. For example, ban on free trade activities by Trump Administration results in
adversely affecting the business of Amazon. The main operation of the company is situated in
the United States and economic stability in the country benefits the company (Madduri et al.,
2014). The corporation has a positive image worldwide which assist in expanding its
customer base. It uses technologies to improve its operations such as use of drones to deliver
packages. It complies with various legal regulations while operating its business in
international markets such as labour laws, employee security policies and others. It invests
heavily in environmental policies in order to reduce its carbon footprint. For example, it has
recently built a new offer in Seattle which uses green energy and has over 40,000 plants in
the office space (Musaddique, 2018).

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References
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