Key Strategy Development Tools

This document discusses the key strategy development tools used by businesses, including PESTLE analysis, Porter's Five Forces model, SWOT analysis, and Input/Output analysis. It explains how these tools help companies analyze their external environment, competitive position, and inter-industry relationships. Examples and references are provided to illustrate the application of these tools in real-world scenarios.

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Essay – Key Strategy Development Tools

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Table of Contents
PESTLE Strategy Model............................................................................2
Porter’s Five Forces Model.......................................................................4
SWOT Analysis.........................................................................................6
Input / Output..........................................................................................8
References.............................................................................................10

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PESTLE Strategy Model
A PESTLE analysis refers to a tool that is used by the
companies in their business to examine the various external
factors of the environment. PESTLE means Political,
Economic, Social, Technological, Legal, and Environmental.
The strategy tool helps the companies to determine the
political factors, social factors, economic factors, legal
factors or technological factors so that the firm could identify
its effect on its business. The tool is beneficial for a new
company while entering into a new foreign market. PESTLE
is a tool to analyze strategic business planning. The tool
provides an answer to the questions of what factors will
affect the company (Fozer et al., 2017).
Political factors determine the government policies that will
impact the business such as tax rate or fiscal policy.
Economic factors refer to the performance of the economy
which influences the profitability of the business such as the
rate of foreign exchange or rate of interests. Social factors
help in determining the emerging trends of the customers
such as education levels or lifestyles (Kara, 2018).
Technological factors determine the innovation or
development of technologies that may impact the market of
the company. Legal factors help the firm to understand the
legal changes in the country such as customer law.
For example, Nike is an international company that deals in
clothing, footwear or other services. The firm requires to
consider the export and import laws as it impacts the
distribution of the product. It also needs to focus on the
economy to find out the customers easily. Nike produces
high-quality sports shoes which are useful for health
conscious people. The company requires to focus on
technology as it helps in the competitive market (Racz et al.,

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2018). It should follow the rules of health and safety. It also
requires to produce eco-friendly products as it is a leading
brand and environment becomes the major concern in the
world.

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Porter’s Five Forces Model
Porter’s Five Forces is a tool used by the firms to evaluate
the competitive position as well as strength. It helps in
analyzing the five competitive forces of the company. The
tool also helps in increasing the competitive advantage by
analyzing the five forces (O'Hara et al., 2017). The five
forces play an active part in shaping the market of the firm.
The tool is also used for analyzing the strategy as well as the
structure of the company.
The five forces are the competitive rivalry, the power of
consumers, threat of new participants, a power of dealers
and threat of alternative products (Mathooko and Ogutu,
2015). These are used to measure the profitability,
attractiveness, and intense competition of the company. The
tool is being used where there are more than two
competitors of the company. The analysis of five forces
helps the company by providing valuable information that
addresses the relevant problems in the environment of the
firm. The tool helps a business to adjust the strategies for
generating high revenue for the investors of the company
(Zhao et al., 2016).
For instance, the Coca-Cola Company is a leading brand of
beverages. The threat of new entrants is medium in the case
of Coca-Cola as it has reliable consumers who are not
probable to try an innovative brand. The threat of substitute
products is likely to be high as there are various types of
drinks available in the market with a variety of excellent
flavors. The force of power of buyers is comparatively low for
Coca-Cola as it has customer brand loyalty. The power of
suppliers is also for Coca-Cola because it is the largest
customer of the suppliers. The competitive rivalry is
comparatively high for the company because there are top

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competitors who are producing a variety of products with
unique flavors. The Coca-Cola Company using Porter's five
forces for analyzing the risk that may arise in the market.

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SWOT Analysis
The SWOT analysis is a strategic tool used by the
organizations to create strategic planning as well as assess
the competitive position of the firm (Bull et al., 2016). The full
form of SWOT is Strength, Weaknesses, Opportunities, and
Threats. The tool is used for evaluating the risk, performance
or competition of the company. It determines the strength,
weakness, opportunity, and threat of the business. It could
also tell a firm the place where it needs to be improved by
using both internal and external data. The SWOT analysis
can also be used by non-profit organizations, governments
or entrepreneurs.
SWOT can be used by a firm for the overall strategy of the
business like sales, marketing or production (Phadermrod,
Crowder and Wills, 2019). It acts as guidance for meeting
the business strategy. The weaknesses, as well as strength,
are the internal factors of the firm that it could control with
itself. The threats, as well as opportunities, are the external
factors that could not be changed by the company. But it
could take the opportunities and protect the business from
threats. The SWOT analysis could be done by the effective
leaders of the company by forming a team.
For example, the SWOT analysis is used by Wesfarmers to
evaluate its strength, weaknesses, opportunities, and
threats. The strength of the company is that it offers
discounts to customers and provides high-quality services or
products. It is also one of the old brands which have a large
number of stores across the country. But it experienced low
geographic presence in the country which is the weakness of
the company. Wesfarmers may get an opportunity to expand
its business outside the country and has a customer as well
as employee loyalty. It faced a threat from its top competitors

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such as Woolworths or Myer, as they are providing
specialized services or products to the customers at a
reasonable price.

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Input / Output
Input-Output analysis is a tool used by the companies to
analyze the relationship of inter-industry so that it could
understand the complexities of the economy. An input is
something that is obtained by the firm whereas output is
something that is sold by the firm. The analysis of input and
output signifies the expenses as well as revenues of the
company. The tool is used to investigate the technical issues
of production. I-O analysis helps in identifying the inter-
dependencies as well as the inter-relationship of the
company in the economic system (Chen and Chen, 2015).
There are various benefits of input-output analysis such as –
it helps in evaluating the need for skilled workers, it can be
used to estimate the requirements of capital, it facilitates the
needs of imports by using the materials of import, and it
helps in estimating the national income accounting (Su and
Ang, 2015). The tool helps a firm in evaluating the
necessities of required materials to produce output for
meeting the desires of the consumers. Examples of input
can be money, labor or supplies and examples of output can
be finished goods. It means the tool represents the
relationship between components that needed to enter into
the firm for making output.
For instance, David Easton used the tool of input-output
analysis for making policies for society. Two sets of input
and one output are determined through the use of this tool.
The inputs are demand and support and outputs are the
policy or decision. Demand refers to the pressure which
flows to the political system to bring changes and support
refers to the actions for promoting the political system to
produce outputs. Hence, it also required to know that society
supports the policies or not. Therefore, Easton makes an

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analysis of input-output for policy-making decisions by the
authorities.

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References
Bull, J.W., Jobstvogt, N., Böhnke-Henrichs, A.,
Mascarenhas, A., Sitas, N., Baulcomb, C., Lambini, C.K.,
Rawlins, M., Baral, H., Zähringer, J. and Carter-Silk, E.,
2016. Strengths, Weaknesses, Opportunities and Threats: A
SWOT analysis of the ecosystem services
framework. Ecosystem services, 17, pp.99-111.
Chen, S. and Chen, B., 2015. Urban energy consumption:
different insights from energy flow analysis, input–output
analysis and ecological network analysis. Applied
Energy, 138, pp.99-107.
Fozer, D., Sziraky, F.Z., Racz, L., Nagy, T., Tarjani, A.J.,
Toth, A.J., Haaz, E., Benko, T. and Mizsey, P., 2017. Life
cycle, PESTLE and multi-criteria decision analysis of CCS
process alternatives. Journal of cleaner production, 147,
pp.75-85.
Kara, E., 2018. A Contemporary Approach For Strategic
Management in Tourism Sector: PESTEL Analysis on The
City Muğla, Turkey. İşletme Araştırmaları Dergisi, 10(2),
pp.598-608.
Mathooko, F.M. and Ogutu, M., 2015. Porter’s five
competitive forces framework and other factors that
influence the choice of response strategies adopted by
public universities in Kenya. International Journal of
Educational Management, 29(3), pp.334-354.
O'Hara, N.N., Nophale, L.E., O'Hara, L.M., Marra, C.A. and
Spiegel, J.M., 2017. Tuberculosis testing for healthcare
workers in South Africa: A health service analysis using
Porter's Five Forces Framework. International Journal of
Healthcare Management, 10(1), pp.49-56.

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Phadermrod, B., Crowder, R.M. and Wills, G.B., 2019.
Importance-performance analysis based SWOT
analysis. International Journal of Information
Management, 44, pp.194-203.
Racz, L., Fozer, D., Nagy, T., Toth, A.J., Haaz, E., Tarjani,
J.A., Andre, A., Selim, A., Valentinyi, N., Mika, L.T. and
Deak, C., 2018. Extensive comparison of biodiesel
production alternatives with life cycle, PESTLE and multi-
criteria decision analyses. Clean Technologies and
Environmental Policy, 20(9), pp.2013-2024.
Su, B. and Ang, B.W., 2015. Multiplicative decomposition of
aggregate carbon intensity change using input–output
analysis. Applied Energy, 154, pp.13-20.
Zhao, Z.Y., Zuo, J., Wu, P.H., Yan, H. and Zillante, G., 2016.
Competitiveness assessment of the biomass power
generation industry in China: A five forces model
study. Renewable Energy, 89, pp.144-153.