Competitive Strategy: SWOT, Porter's Five Forces, and Resource-based View Model

Running head: COMPETITIVE STRATEGY 0
Competitive Strategy

COMPETITIVE STRATEGY 1
The management of a company is responsible for assessing the business environment and
implementing strategies in order to increase its profitability and expand its operations.
However, the management faces a number of external and internal issues which affects its
operations and profitability. In order to address these issues, the management uses different
strategy management tools while implementing business policies. A strategy development
tool helps management in collecting necessary information regarding internal and external
factors in an organisation which can be used by them while implementing business strategies
(Kunc and Bhandari, 2011). This essay will focus on three strategy development tools which
include SWOT analysis, Porter’s five forces and Resource-based view model. This essay will
examine the functionality of each model and discuss how they are used in an organisation.
Examples of different corporations will be analysed in the essay in order to ascertain the role
of each model.
SWOT
SWOT analysis is defined as a process that identifies a company’s strengths, weaknesses,
opportunities and threats. It is an analytical framework for assessing what actions can be
taken by a business based on internal (strengths and weaknesses) and external (opportunities
and threats) factors (Sevkli et al., 2012). A SWOT analysis is used by senior executives in an
organisation such as Chief Executive Officer, Chief Operating Officer and senior level
executive in order to determine what assists the company in achieving its corporate goals and
what obstacles are necessary to be overcome in order to achieve desired results. It assists
management in understanding where the organisation is today and where it will be in the
future, and they can use this information to implement strategic policies that focus on
sustaining its growth (Yuan, 2013).
For example, the Coca-Cola Company noted that its strengths include vast distribution
network situated across the globe and a well-known brand name that is recognised by people
worldwide. It opportunities include business expansion in developing and emerging markets
and diversification of products. The company’s weaknesses include competition with
PepsiCo, the absence of healthy beverages and lack of product diversification (Baah and
Bohaker, 2015). Threats include growing popularity of “healthy” beverages, subsequent
competition and foreign currency fluctuations. In order to address these issues, Coca-Cola
increased its investment in marketing and expands its other beverages categories which result
in increasing company’s profits and making it the largest soft drink manufacturer.

COMPETITIVE STRATEGY 2
Porter’s Five Forces
The five forces model is substantially popular among companies since it assists them in
analysing different external factors that influence their profitably. The tool was given by
Michael Porter, and it focuses on evaluating various strengths and weaknesses of a sector.
The five forces which were given by Porter include competition in the industry, the potential
of new entrants into the industry, power of suppliers, power of customers, and the threat of
substitute products. Generally, the tool is used by senior level managerial personnel in an
organisation to search for attractiveness and profitability (Mathooko and Ogutu, 2015). It is
used by management while entering into new markets or launching new products or services
to ascertain an industry’s profitability and attractiveness.
The senior level management uses this model before launching a new product or entering a
new market, so they are able to evaluate its attractiveness which enables them to form
strategic policies (Vining, 2011). General Motors (GM) is a good example. The company
operates in the automobile industry, and it offers its products across the globe. The
competition in the automobile sector is high because a large number of companies operate in
the industry such as Ford, Honda, Toyota and others (Acharya, Schaefer and Zhang, 2015).
Buyers’ power is moderate due to high switching costs and small size of individual buyers.
Suppliers’ power is weak because there are a large number of suppliers available and GM did
not face high switching costs. The threat of substitutes is moderate because there is a low
variety of substitutes and moderate switching costs available. The threat of new entrance is
low because of high capital requirements, fierce competition and moderate switching costs
(Cooley and Cooley, 2011). These factors enable top-level management of GM to implement
appropriate policies for sustaining their future growth.
Resource Based View
The Resource-based view (RBV) is an approach to generating competitive advantage in a
corporation. It is a managerial framework that is used in order to identify strategic resources
that have a potential to deliver competitive to an enterprise. A corporation exploits these
resources in order to sustain competitive advantage (Nath, Nachiappan and Ramanathan,
2010). In order to generate a competitive advantage based on a resource, it is necessary that
such resource shows attributes of the VRIO model. The VRIO model analyses a resource
based on value, rarity, inimitability and organisation. This model is based on both tangible
and intangible assets in a company. Tangible assets include plant, machinery, cash and other