Key Strategy Development Tools

This article discusses key strategy development tools including SWOT analysis, Porter's Five Forces, PESTEL analysis, and Porter Generic Strategies. It provides examples and action steps to consider when using these tools. The article also includes references for further reading.

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KEY STRATEGY DEVELOPMENT TOOLS
STUDENT’S NAME
UNIVERSITY
DATE

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Key Strategy Development Tools
SWOT Analysis tool
This is a simple and widely yet a powerful tool in business development; it is used to
guide an existing or in a startup business. SWOT stances on strengths, weaknesses,
opportunities, and threats. The risks and opportunity are usually the external analysis
while the weakness and strength typically the internal analysis factors. It’s a tool that
quickly expands easily and opens up the possibility of franchising (Brooks, Heffner, and
Henderson, 2014).
These should be encountered when using the SWOT model analysis tool:
- The used statement should be only variable and specific. For instance, the price can
be $ 1.50 per unit, which is lower than rivalry, but it’s a good value of money.
- A mixture of generating tool should be used.
- The analysis of business activity is at an angle, which may be less tortious, rather
than at a whole business side by side.
- The issues analyzed are kept for the future in the process of strategy formation.
- There should be an arrangement of internal and external factors to have time in
engaging in the essential feature.
Example
The following is UPer Crust Pies SWOT analysis (Alam, 2015).
Strengths Opportunities
- The downtown is a busy area.
- It’s a marginal to fast food.
- The establishment of the business
has not met
- startup coffers from finances and
stakeholders.
Weakness Threats
- The town is growing by 8.5% yearly.
- There are many working families.
- There are issues with the opening
days since the customers might not
return.
- Similar shops have loyal customers

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Porter's Five Forces tool
Michael Porter developed his Five Forces Model and presented it to the world in 1980 in
his first book, "Competitive Strategy." This model offers a foundation for organizations
involved in strategic development to deliberate the dangerous forces that impact on it.
These forces include the risk of new entrants to the marketplace, the current rivalry
between traders and the bargaining power of customers, the supplier's power and the
threat of competitive products/services (Dobbs, 2014). The following are the five forces:
Supplier power - in the business it is easy for the suppliers to increase the prices. And
this assessment is driven by the;
- The individuality of their product and services
- Number of dealers of each vital input
- Virtual power and dimensions of the supplier
- The cost of the switch from one supplier to another
Buyer power – in the business it is easy for the buyer to decrease the prices. And this
assessment is driven by the;
- Number of the customers in the market
- Buyer’s cost of interchanging from suppliers to one another
- Importance of individual buyer to the organization
Competitive rivalry – in the business many competitors in the market offers the same
services and product, thus reduces the attractiveness of the market. The quantity and
ability of the competitors is the only strategy for the carter.
The threat of substitution – in the market, there is a close substitute product present.
In the business, this reduces the suppliers’ power and desirability of the market.
The threat of new entry – new entrants attracts and makes the market more profitable;
the business should incumbent and have a durable and robust barrier to the entrance.
For example; scale economy, patents, capital requirement then the profit will decline to
a competitive rate.
Action to consider on the five forces analysis
- Consider the characteristics change of industry.
- Consider the life cycle stages of the industry.

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- Consider the impact that government has on the industry.
- Use the model where there are at least three competitors
Example
We look at the United State Airline industry. The company is extremely competitive due
to the entry of low-cost carriers and tight regulation of the sector (Flouris, and Oswald,
2016).
New entrants threats – low-cost carriers entry
Suppliers bargaining power – the tight regulation of the industry
Buyers bargaining power – switching cost for customers, becomes low and difficult
Threat substitute product/services – safety becomes paramount that leads to high fixed
cost and high barriers to exit
Rivalry among the competitors – there are many players in the industry thus leading to a
new fierce competition in the firm.

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PESTEL analysis tool
PESTLE breakdown tool is a probe of the external macro-environment in which a
business survives. This is a useful tool in the market for understanding the political,
economy, and social, technology, environment, and clean surroundings that an
organization functions. In this business, the four paradigms of PEST differ depending on
the type of business (Sohel, Rahman, and Uddin, 2014).
Political factors – these are governmental regulations, political stability, and trade
restrictions.
Economic factors –these factors affect the power of purchasing and capital cost of the
organization. These factors are such as interest rate and exchange of currency rate.
Social factors – these factors impacts on the customer's need and potential size of an
organization. These include the attitude toward the health, demographics of age and
population age.
Technological factors – these factors impacts barriers to entry such as automation
and rate of technological change.
Example
This method has successfully applied by Pepsi (Muzumdar, 2014).
Political – the delivery, manufacture, and use of Pepsi product are subjected to federal
regulations. The business is under the rules of the foreign and government.
Economic – all the distribution of Pepsi products is affected by the fuel cost. The
economic impacts in such movement unpredictable thus affect the market growth.
Social – the introduction of Pepsi product is designed accordingly and requires a depth
study of the local structure.
Technology – Pepsi is influenced by the modern manufacturing technique, and the
company has to focus on the latest technological advances in the industry.
Environment – this is a customary environmental which impacts on governmental and
liability laws. Pepsi gives a health tax break because it operates in the renewable
sector. The leadership of Pepsi should consider some legal factor before entering in the
market.

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Porter Generic Strategies
This tool is used to govern the path of your business. There is believed that there are
four strategies that an organization should choose to be a competitive essential in the
market (Brenes, Montoya, and Ciravegna, 2014). The following are the strategies to
choose from:
Cost leadership – this is for aiming at abroad market and keep the price as low as
possible.
Differentiation – this is where you target a broad market, but the product or services has
a unique feature.
Cost focus – you offer the lowest price as possible, and then have little competition in a
niche market.
Differentiation focus – you target a niche market, you're the product, and services have
exclusive structures.
Example
Wal-Mart, the most well-known company, uses (Tanwar, 2013):
Cost leadership – with a lot of tasks, they offer low price thus enabling the savings on to
the customers, which results in a higher number of customers.
Differentiation strategy – created an operating system platform and designed the
product uses the system.

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Reference
Alam, U., 2015. The Foodscape: Tejgaon, Dhaka.
Brenes, E.R., Montoya, D., and Ciravegna, L., 2014. Differentiation strategies in
emerging markets: The case of Latin American agribusinesses. Journal of Business
Research, 67(5), pp.847-855.
Brooks, G., Heffner, A., and Henderson, D., 2014. SWOT analysis of competitive
knowledge from social media for a small start-up business. The review of Business
information systems (Online), 18(1), p.23.
E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of
industry analysis templates. Competitiveness Review, 24(1), pp.32-45.
Flouris, T.G., and Oswald, S.L., 2016. Designing and executing strategy in aviation
management. Routledge.
Muzumdar, P., 2014. A Study of Business Process: Case Study Approach to
PepsiCo. Available at SSRN 2392611.
Sohel, S.M., Rahman, A.M.A. and Uddin, M.A., 2014. Competitive profile matrix (CPM)
as a competitors’ analysis tool: a theoretical perspective. International Journal of
Human Potential Development, 3(1), pp.40-47.
Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of business and
management, 15(1), pp.11-17.