Importance of Strategic Development Tools for Businesses: A Case Study of Wesfarmers

RUNNING HEAD: COMPETITIVE STRATEGY
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Competitive Strategy
Essay
System 0032
[Pick the date]

Competitive Strategy
1
Introduction
Strategic Management tools are important to plan the future actions of the companies. These
tools help the businesses to analyze the current business environment whether internal or
external in order to formulate strategic plans for the future. Strategic management tools include
PESTEL analysis, SWOT analysis, Five Forces, Ansoff matrix, Ghemawat, and resource based
views. All the tools that are helpful in analyzing the business environment to make strategic
plans are considered as strategic management tools. The main purpose for using these tools is to
know where the business is going in the upcoming years and how to achieve those future
standards (Ansoff and Lewis 2018). These tools can be used by any businesses whether small
scale business or large scale business. This essay consist of the importance of using these
strategic tools and how these tools are used in the practical scenario by the businesses for that
Wesfarmers is chosen and its Five force analysis, PESTEL analysis and Ghemawat analysis is
done.
Strategy Development Tools
PESTEL analysis is considered as a strategic tool that is used by the businesses to analyze or
monitor the factors in external environment that have greater impact on the profitability and
sustainability of business. This is taken as an important step to devise a strategy that can help in
the business to survive in this competitive scenario. Analysis of external environment is essential
for any business because it provides valuable insight into the challenges that a business is going
to face in the future (Grunig and Kuhn 2015).

Competitive Strategy
2
Political factors are related to the degree of interference of government in the businesses or in an
industry through government policy, cross border policies, tax policy, and environmental law
and trade restrictions. Wesfarmers is greatly affected by the price regulation in the food and
retail segment as this affect their profitability and operations in long run.
Economic factors such as inflation, interest rate, exchange rate and aggregate supply and demand
in the economy affect the operations of the business. The main factor in this is growth rate and
inflation rate in the economy that affected the Wesfarmers and due to that company’s profit
decreases at the time of recession in the country.
Social factors are the societal things that such as culture, attitude, belief and values. Wesfarmers
analysis these factors and that help the company to target the right market and offer the right
product to satisfy demands of the society. Understanding social factors helps in knowing the
interest, attitude and habit of the society.
PEST
EL
Political
Economic
Social
Technolo
gical
Environ
mental
Legal