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

Running head: COMPETITIVE STRATEGY 0 | P a g e
Competitive Strategy

COMPETITIVE STRATEGY 1 | P a g e
There are a number of main strategy development tools which are used by organisations for
determining various micro and macro factors that affect their business. The companies use
these tools to create strategies for addressing current and future business issues and
improving the performance of the firm. This paper will discuss three of the most common
strategy development tools which are used by organisations across the globe which include
Porter five forces model, Resource-based view model and SWOT analysis. In order to
understand how each of these models is used, examples of companies from different
industries will be analysed in the essay. This essay will evaluate the examples of Woolworths
Limited, Honda and BHP Billiton for understanding Porter five forces model, Resource-
based view model and SWOT analysis respectively.
Porter’s Five Forces Model Analysis
The five forces model was developed by Michael Porter in 1979, and it assists companies in
evaluating the competitiveness of an industry. The potential entrants, substitutes, industry
competitors, buyers and suppliers are included in five forces which are useful means of
analysing industrial environments and these factors also assists companies in selecting
effective strategies for generating a competitive advantage (Jurevicius, 2013). The
competition in the industry is an important force because a large number of competitors and
their capabilities threaten a corporation’s profitability. The potential of new entrants is
increased if there is a requirement of less time and money and increase in new entrants
resulted in increasing competition of an enterprise which negatively affects its growth. The
power of suppliers is referred to the ability of suppliers in the industry to raise prices of goods
and services (Moreno-Izquierdo, Ramon-Rodriguez and Perles-Ribes, 2016). The power of
buyers is referred to customers’ ability to drive up prices of products and services. Suppliers’
power deals with the ability of suppliers to increase the prices of raw materials or services.
The threat of substitutes is referred to alternative products or services that can be purchased
by customers in place of a company’s products which increases competition for the firm.
Example – Woolworths Limited operates in Australian retailing industry and it is the
second largest firm in Australia in terms of revenue. The bargaining power of suppliers low
because there are a large number of suppliers available in the industry and the company
enters into a contract with them due to which they cannot hike their prices (Arli et al., 2013).
The power of customers is low to medium because there are no switching costs for
customers. However, customers rely on Woolworths because it offers high quality fresh food

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products. The threat of new retailers is low because initial investment is high and heavy
competition from established market leaders such as Coles, ALDI, Big W and others (Keith,
2012). The threat of substitutes is low to medium because customers can easily purchase
products from Woolworths’ competitors. The competition rivalry is high in the sector
because a large number of competitors operate which offers competitive pricing such as
Coles, Big W and ALDI.
Figure 1: Porter's Five Forces Model
Resource-based View Model Analysis
Resource-based view (RBV) model is used while analysing and interpreting resources of a
company in order to understand how organisations achieve a sustainable competitive
advantage in the industry. The RBV model primarily focuses on the theory of difficult-to-
imitate characteristics of an enterprise for analysing sources which have superior
performance capabilities which result in providing a competitive advantage of the firm
(Nason and Wiklund, 2018). Resources which not be purchased by an enterprise and require
an extended learning curve are more likely to be customised as per the company’s
requirements, and they are more difficult to be imitated by the competitors. The RGV model