Competitive Strategy: PESTEL, SWOT and Porter Forces in Business

This essay discusses the importance of PESTEL, SWOT and Porter's Five Forces in developing a competitive strategy for your business. It explains how these tools help in analyzing internal and external factors affecting your organization's growth. The essay also provides a detailed explanation of each tool and how it can be used to gain a competitive advantage.

Running Head: Competitive Strategy
Competitive STrategy
PESTEL, SWOT and Porter Forces in Business

Competitive Strategy
An organization’s strategy is defined with the help of various tools that are used in business.
Some of the tools that are used are PESTEL, SWOT, Porter’s five forces, STEER etc. All
these techniques help in the strategic planning which defines the growth of the organization
in future. The formal consideration of using these techniques are the three questions: As to
what the company does, it deals with whom and how it excels. There is another question of
how the company deals with the competitors. These tools are important to make any kind of
business strategy as it helps in shaping up the structure of the organization. This essay
focusses on the PESTEL, SWOT and Porter five forces tools and their details as to how they
help the organization is discussed.
SWOT Analysis
SWOT analysis is one the very effective tools that is used in every other organization. It
helps the company understand its Strength, weakness, opportunities and threats. SWOT
analysis objective is to provide the judgements that are structured in any of the processes of
the company. While the strengths and weakness is considered to be the internal part of the
company, the opportunities and threats are the external part of the organization (Osita, et al.,
2014).
Strengths: When the strengths of the company are measured, these are the questions which a
company should keep in mind.
 Advantages that the organization has.
 How is the company different from the others?
 What low cost resources do which others can’t.
 What people take as the strength of the company?
 How the company can do its sale?
 USP of the company.
Weaknesses:
 What are the things for improvement?
 What should be avoided by the company?
 What are the weaknesses which people see?
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Competitive Strategy
 How is company losing sales?
Opportunities:
 Opportunities that the company can spot.
 The trends which are recently in.
The opportunities which can be useful are:
 The technology changes in the market and in sales.
 Government policy changes if any.
 Social pattern changes, population and lifestyle changes.
 Events that are locally happening.
Threats:
 Obstacles that the company faces.
 Competitors work.
 Is the quality of other products changing?
 Technology changes which might threaten the positioning of the company.
 Any debts or cash flow obstacles?
 Weakness which can be a threat to the business (Ommani, 2011).
PESTEL analysis
PESTEL analysis helps in determining the environment in which the company does its
business. It is related to the external environment. These factors are Political, economic,
social, technological, environmental and legal. All these factors are analysed to see the
market growth or decline in a very specific field (Gupta, 2013).
Political Factors: Political factors always include regulations made by the government like
laws made on employment or the tax structure. If the company is starting then it should be
aware of all the political factors around it.
Economic Factors: Economic factors affects the power of purchasing of the company and the
capital cost. The economic factors will help the company to produce products that will help
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Competitive Strategy
the company gain the competitive advantage. The organization also needs to consider the
capital cost that will then be employed.
Social Factors: These factors include the size of the market and the consumer’s preferences.
If the social factors are considered, the company can satisfy the needs of the customers easily.
This way, the company can build relations with the customers for a longer period of time by
trying to educate the customers about the its products.
Technological Factors: Technological factors are more important than any other factors for
the company. They help the organization show as to whether the company is using the state
of the art technology or not. Technology keeps on changing every now and then. If the
company wants to stay in business, it should be aware of the changes in the technology
(Rastogi & Trivedi, 2016).
Environmental Factors: These factors include weather, climate change, and other
environment factors. These factors might affect some industries like tourism, insurance, and
farming. They also affect the operation of the company.
Legal Factors: These factors include law of employment, law of consumerism, law of
discrimination, and health and safety laws. Legal factors can also make an impact on the
company’s capital cost (Ho, 2014).
Porter’s Five Forces
In the year 1979, Michael E. Porter founded these five forces. These five forces help the
organization to determine the power of the company and its position in the market. If the
company is trying to expand, these forces will be able to know about the development of new
products and the profit of the company (Indiatsy, et al., 2014).
Power of Suppliers: Number of suppliers are included in the power of suppliers and also the
switching cost is included which differs from one to another. If the product is unique, the
significance of the supplier can easily affect the company’s profit. In case if the organization
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Competitive Strategy
maintains good relations with the manufacturers or the developers, they also try and maintain
the relations with the company and give them good deal in the cost of the supply (Njambi , et
al., 2016).
Power of the Buyers: The pricing of the product is very important when the buyers are
considered. It all depends on the market size and the significance of the buyer. The cost of
switching also matters from the suppliers to the buyers as well. In case if the company is
providing the customers with the complete services and the training of the usage of the
products, the customers will always be satisfied. But for maintaining the long-term relations,
the technology used should be latest and the unique products should be launched (Tehrani &
Rahmani, 2014).
Rivalry: Competitive rivalry is also very important factor to determine the company’s
positioning in the market. If there are a lot of competitors who offer great services and the
products which are similar, might create an impact on the market and it can be divided within
the companies. In order to maintain the sales, the organization should be aware of such things
and improve accordingly (Majumdar & Bhattacharya, 2014).
Substitution Threat: In case if the substitutes exist in the market, there is always a possibility
of a new threat for the company. The customers in that situation might shift from one
company to another. If the cost of the competitor company is low, there is a huge possibility
of the customers to shift to the rival company.
Threat of the New Entrants: If the market is increasing and going into a huge profit on the
whole, it will always attract the new entrants. If the new entrants come, the profit of the
company can affect in a bad way (Omsa, et al., 2017).
These forces should be clearly and deeply studies so that the organization earns profit and is
aware of the threats if any.
In the essay, some of the development tools like PESTEL, SWOT and the Porter’s five forces
are discussed. All these factors are important to analyse the company’s positioning in the
growing market. They will help the organization to analyse the internal factors like strengths
and weaknesses as well as the external factors such as political, legal, threat, opportunities
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Competitive Strategy
etc. A company has to go through these types of strategy development tools all throughout
the year to maintain a good knowledge about the surroundings the organization is working in.
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Competitive Strategy
References
Gupta, A., 2013. Environment & PEST Analysis: An Approach to External Business
Environment. International Journal of Modern Social Sciences, 2(1), pp. 34-43.
Ho, J. K.-K., 2014. Formulation of a Systemic PEST Analysis for Strategic Analysis.
EUROPEAN ACADEMIC RESEARCH, 2(5).
Indiatsy, C. M. et al., 2014. The Application of Porter’s Five Forces Model on Organization
Performance: A Case of Cooperative Bank of Kenya Ltd. European Journal of Business and
Management, 6(16).
Majumdar, S. & Bhattacharya, P. P., 2014. Porter Five Forces Analysis of the Leading
Mobile Cellular Telephony Service Provider in India. International Journal of Computer
Science and Mobile Computing, 3(2), pp. 146-152.
Njambi , E., Lewa, P. & Katuse, P., 2016. Relationship between Threat of Substitutes and
Competitive Advantage of Large Multinationals in Kenyan Beverage Industry. The
International Journal Of Business & Management, 4(7).
Ommani, A. R., 2011. Strengths, weaknesses, opportunities and threats (SWOT) analysis for
farming system businesses management: Case of wheat farmers of Shadervan District,
Shoushtar Township, Iran. African Journal of Business Management , 5(22).
Omsa, S., Abdullah, I. H. & Jamali, H., 2017. Five Competitive Forces Model and the
Implementation of Porter’s Generic Strategies to Gain Firm Performances. Science Journal
of Business and Management, 5(1), pp. 9-16.
Osita, I. C., R, I. O. & Justina, . N., 2014. Organization’s stability and productivity: the role
of SWOT analysis an acronym for strength, weakness, opportunities and threat. International
Journal of Innovative and Applied Research, 2(9), pp. 23-32.
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Competitive Strategy
Rastogi, N. & Trivedi, M. K., 2016. PESTLE TECHNIQUE – A TOOL TO IDENTIFY
EXTERNAL RISKS IN CONSTRUCTION PROJECTS. International Research Journal of
Engineering and Technology, 3(1).
Tehrani, M. B. & Rahmani, F., 2014. Evaluation Strategy Michael Porter's five forces model
of the competitive environment on the dairy industry. American Journal of Engineering
Research, 3(5), pp. 80-85.
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