Key Strategy Development Tools in Business

This paper explains the four strategy development tools used in business along with practical examples from industry. It discusses PESTEL analysis, SWOT analysis, Ansoff Matrix, and Porter's Generic Strategies and their relevance in evaluating organizational performance.

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Essay-Key Strategy
Development Tools
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Competitive Strategy
Introduction
The primary purpose of the paper is to explain the four strategy development tools
used in business along with practical examples from industry. It will discuss the
tools or framework that helps an organization to evaluate their performance.
Therefore, the paper will help in relating the tools with current practical business
examples.
PESTEL Analysis
A PESTEL analysis is determined to be a tool which is utilized to monitor as well as
analyze the macro-environmental factors that put an impact on the performance of
an organization. This particular tool is useful when entering into a foreign market or
starting a new business. It provides a clear understanding of the related and
situational external and internal factors. PESTEL refers to an acronym that stands
for Political, Economic, Social, Technological, Environmental and Legal factors.
Political factors determines to be the impact of administration and its policy on an
organization. Whereas, Economic factors put an impact on the performance and
economy of a firm that affects the profitability of an organization. On the other
hand, social factors help in identifying emerging trends and focuses upon the social
environment. Moreover, Technological factors determine the rate of development
and technological innovations that impacts an industry or market (Song, Sun and
Jin, 2017). Moreover, the environmental factors related to the impact of ecological
aspects and influence of the surrounding environment. While the legal factors
comply with the government policy that needs to be acknowledged by the
organizations.
For example, Woolworths Supermarkets is an Australian retail business and
grocery chain founded in 1924, in South Wales, Australia. It operates 1000 stores
across Australia where it specializes in selling grocery products. The company
operates its business in an energetic environment where it is impacted by weak
trajectory growth due to the unstable political environment and increased
liberalization of trade policy because of lower economic performance. Whereas,
consumer spending behavior and collective social trends are impacted by social
factors while the environmental factors lead to increasing regulatory framework
(Woolworths.com.au, 2019).

Competitive Strategy
Figure: PESTEL Analysis
(Source: Aithal, 2017)

Competitive Strategy
SWOT Analysis
SWOT (Strengths, weaknesses, opportunities, and threats) analysis is determined
to be a framework used to analyze the competitive position of a company. It is also
used to develop the strategic planning of an organization. It assesses the external
and internal factors along with future and current potential. It is designed to
evaluate a data-driven, fact-based and a realistic overview of strengths and
weaknesses of an industry, initiatives or an organization. Avoiding gray areas or
pre-conceived beliefs helps an organization to keep the analysis accurate and
focus upon real-life contexts. It is significant for companies to use as a guide
instead of a prescription.
Strengths explain the facts in which the organization excels at and differentiates
themselves from the rivals such as, loyal consumer base, robust brand, exclusive
technology and robust balance sheet. Whereas, weaknesses protects a company
from performing at its optimal level. Shortage of capital, inadequate supply chain,
high-level of debt and weak brands are the portions where the organization is
required to improve its competitiveness (Gupta and Mishra, 2016). Moreover,
opportunities facilitate suitable external factors that provide a competitive
advantage to the organizations. While threats determine the factors that are
harmful to an organization.
For example, Coca-Cola is an American retailer, manufacturer and a multinational
company that sells nonalcoholic syrups and concentrated beverages. The value
line SWOT analysis of the company noted significant strengths like a vast
distribution network and globally famous brand name. Coca-Cola also
acknowledged significant opportunities in evolving markets. The company also
faced threats and weaknesses like competition from healthy beverage providers,
increasing public interest in healthy drinks and fluctuations of foreign currency
(Coca-cola.com, 2019). As per the analysis, Coca-Cola will always remain a
leading beverage provider that offers conservative investors a few capital gains
exposure and a reliable source of income.
Figure: SWOT Analysis
(Source: Bell and Rochford, 2016)

Competitive Strategy
Ansoff Matrix Model
Ansoff Matrix is also known as, Market or Product Expansion Grid which is a tool
utilized by the organizations to plan and evaluate their strategies for growth. The
matrix presents four strategies such as, market penetration, market development
product development, and diversification that helps organizations to analyze the
risk as well as grow with each strategy.
Market Penetration concentrates on maximizing sales of existing goods into the
current market. Meanwhile, product development concentrates on launching new
offerings into the current market. On the other hand, market development mainly
focuses upon entering into a new market by utilizing existing products (Bang, Joshi
and Singh, 2016). Likewise, diversification concentrates towards entering a new
market by launching new products.
For example, McDonald is a market leader in the fast food industry founded in
1948, which specializes in serving burgers. Based on the Ansoff matrix the market
penetration strategies of McDonald is to serve happy meals, drive-thru portion of
fast food restaurants and provide McDelivery service to its customers. Whereas,
McDonald’s market development strategies is to create franchise opportunities for
more outlets and innovate and adapt fresh services and products. Moreover, the
product development strategies helped the company to identify the changing needs
of customers and create new innovative products with the help of research and
development. For example, McArabia in the Middle East and McAloo Tikki in India.
Based on diversification strategies McDonald opened the Golden Arch Hotel in
Switzerland to offer unbeatable price-valued preposition and world class customer
service (Mcdonalds.com, 2019). It also opened McCafe in Australia to compete
with other premium coffee manufacturers.
Figure: Ansoff Matrix Model
(Source: Salavou, 2015)

Competitive Strategy
Porter’s Generic Strategies
Porter's Generic Strategies demonstrates how a company receives a competitive
advantage across its selected market. There possess three strategies such as cost
strategy, differentiated strategy, and focus strategy. The strategies are based on
the scope of business activities to which an organization wants to differentiate its
products. There comprised of two major types of competitive advantage an
organization can own they are, differentiation or low cost (Salavou, 2015). While
the focus strategy has two alternatives such as the differentiation focus and costs
focus.
In cost leadership, an organization seeks to become a low-cost producer among
others. This includes special access to raw goods, exclusive technology and
search of financial prudence. Furthermore, in differentiation strategy, an
organization wants to be unique among its competitors by understanding customer
needs.
For example, Unilever is a transnational consumer goods company founded in
1929 in the UK. It sells cleaning, personal and beauty care along with refreshments
and food products. Unilever’s uses broad differentiation generic strategy to develop
a competitive advantage by meeting customer needs. It focuses upon the
characteristics and features of the products that differentiate itself from its
competitors. For instance, Unilever manufacturer’s personal care products such as
Dove Cream Bars to fulfill customers need for soaps (Unilever global company
website. 2019). As a result, Unilever uses the generic strategy to increase vitality
and support global sustainability in customer’s lives.
Figure: Porter’s Generic Strategies
(Source: Bang et al., 2016)
Conclusion
The paper demonstrated an understanding of four strategy development tools such
as PESTEL, SWOT, Ansoff Matrix and Generic strategies along with real-life
examples. It has been observed that the tools help the organizations to analyze
their performance and succeed in order to become a leader within the marketplace.

Competitive Strategy
References
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