Competitive Strategy: Analysis of Internal and External Environment

This article discusses the different frameworks used for analyzing internal and external environment of companies including SWOT, PESTLE, Porter's Five Forces, and Porter's Generic Strategies. The advantages, disadvantages, and examples of their implementation are also discussed.

Running head: COMPETITIVE STRATEGY
COMPETITIVE STRATEGY
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Introduction
The industry can be explained as the group of organizations which are able to provide
similar types of products and services to the customers in an effective manner. The services
or products which are thereby offered by the organizations are considered to be the close
substitutes of each other. In comparison to general environment of the organizations, industry
environment plays an important role in affecting the competitiveness of the companies.
However, the analysis of external environment is also important for the proper operations of
the modern organizations. The strategies which are developed by the companies are also
based on the ways by which internal environment is analysed (Demir, Wennberg and
McKelvie 2017).
The internal and external environment of the companies can be analysed with the help
of different frameworks or models. The different frameworks which can be used for the
analysis of internal and external environment include, SWOT analysis, PESTLE analysis,
Porter’s Five Forces analysis, Porter’s Generic Strategy analysis. These models and their
advantages and disadvantages will be analysed in the discussion.
Discussion based on SWOT framework
SWOT analysis tool is mainly used for the purpose of analysing the internal
environment of the modern organizations which is based on their strengths, weaknesses,
opportunities and the threats. The different factors which are a part of the internal
environment of the organizations are based on the achievement of effective objectives which
have been set by the management. The strengths and weaknesses are an important part of the
internal environment of the company and on the other hand, opportunities and the threats are
based on its placement in the industry (Durand, Grant and Madsen 2017).
Advantages – The SWOT framework can be used for the purpose of supporting the
project based objectives. This framework can be used for gaining valuable information based
on different aspects of the organizations. The integration of data is an important part of the
SWOT based framework. The simplicity which is related to the proper application of
implementation of SWOT framework is an important advantage (Ethiraj, Gambardella and
Helfat 2017).
Disadvantages – The one dimensional nature of the model is a major disadvantage of
the SWOT framework. The strengths, weaknesses, opportunities and threats of the

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organization are analysed with the help of this framework. However, it is not possible to
analyse the changes which can take place in these factors due to external factors. The
subjective nature of SWOT framework is thereby able to affect the ways by which the data is
analysed with the help of this framework (Frynas and Mellahi 2015).
Example – The SWOT analysis of Woolworths is able to provide the strengths that
are held by the company and the major weaknesses that is faces in the industry. On the other
hand, the opportunities and threats are based on ways by which the company is placed
effectively in the industry of its operations (Woolworths.com.au 2018).
Discussion based on PESTLE Framework
PESTLE analysis is a tool which is can be used by the organizations in order to
analyse the environment in which they are planning to start their operations. The analysis of
external environment is thereby based on the six most important factors which include, the
political factors, the economic factors, social factors, technological factors, legal factors and
the environmental factors. This can be used by the organizations in order to keep a track of
the changes that take place in the external environment (Hill, Jones and Schilling 2014).
Advantages – The cost effective and straightforward nature of PESTLE framework is
an important advantage which is provided to the modern organizations. The companies can
also gain a deeper understanding of the environment in which they operate with the help of
this framework. Management of the organization further becomes alert about the external
environment based factors which can affect the operations in new areas (Michael, Storey and
Thomas 2017).
Disadvantages – The PESTLE analysis based framework requires constant review by
the management of the organizations in order to improve the operations of the company
according to the external environment. The analysis also requires huge number of people for
conducting the entire process in an effective manner (Morschett, Schramm-Klein and Zentes
2015).
Example – Domino’s Pizza needs to analyse the external environment in an effective
manner with the help PESTLE framework in order to start its operations in new countries.
This will help the company to develop its strategies for operations in the areas
(Dominos.com.au 2018).

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Discussion based on Porter Five Forces Framework
Porter’s five forces is mainly used for the analysis of the industry in which the
organizations operate. The levels of competition are thereby identified with the help of high
intensity levels of competition which is thereby faced by the organizations in the market. The
five forces which are analysed with the help of this model include, the levels of competitive
rivalry in the industry, the threats that are faced based on entry of new companies, the threats
experienced from substitute products, the bargaining based power of the customers and the
suppliers (E. Dobbs 2014).
Advantages – The levels of understanding which are provided by the model based on
the industry of operations is a major strength. The simplicity based on proper usage of the
model is also an important advantage that is offered by Porter’s model. The competitive
strategies can be easily with the help of results which are provided by the analysis based on
Porter’s model (E. Dobbs 2014).
Disadvantages – The theoretical base and static character of the model is an
important factor that can act as a disadvantage or major weakness as well. The fast changes
which can take place in the industry dynamics is a major disadvantage of using the results of
Porter’s analysis (Wheelen et al. 2017).
Example – Telstra Corporation can thereby use this model for the purpose of
analysing the telecommunications based industry of Australia. This will help the company to
bring effective changes in the operations and strategies to operate in a profitable manner
(Telstra.com.au 2018).
Discussion based on Porter’s Generic strategies model
Porter’s generic strategies are based on the four major approaches which have been
suggested for the purpose of gaining competitive advantage in the industry. The companies
can thereby implement any one of the strategies in order to attain the desired objectives.
Cost leadership strategy can be implemented by the company in order to gain a
competitive position in the industry with the help of low prices of the services and products.
This strategy is implemented by organizations which target larger areas of market (Moon et
al. 2014).

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Cost focus strategy which is suggested by Porter is related to the lower cost
production based process in the smaller market segments.
Differentiation focus based strategy is implemented by organizations in order to
create an effective differentiation in the industry with the help of the quality of its products
and is target towards a niche market.
The differentiation leadership strategy is also implemented by the business
organizations which target a larger market area as compared to the differentiation focus
strategy (Moon et al. 2014).
Example – The differentiation focus strategy has been implemented by Apple Inc. in
the industry. The company thereby focuses on the quality of products rather than the price.
The products are thereby offered to the premium group of customers who are highly
concerned about the quality (Apple.com 2018).
Conclusion
The discussion can thereby be concluded by stating that the internal and external
environment of organizations and the industry can be analysed in an effective manner with
the help of the above mentioned strategic tools. The companies which have been used as
examples have used these tools in an effective manner.

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References
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Telstra.com.au 2018. Telstra - mobile phones, prepaid phones, broadband, internet, home
phones, business phones. [online] Telstra.com.au. Available at: https://www.telstra.com.au/
[Accessed 31 Aug. 2018].
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