Competitive Strategy: Analysis of Internal and External Environment

Running head: COMPETITIVE STRATEGY
COMPETITIVE STRATEGY
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1COMPETITIVE STRATEGY
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

2COMPETITIVE STRATEGY
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).