assignment on | PESTEL analysis

Management
Name of the student
Name of the university
Author Note

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Table of Contents
Introduction......................................................................................................................................2
Porter’s five analysis........................................................................................................................2
SWOT analysis................................................................................................................................5
PESTEL analysis.............................................................................................................................7
Conclusion.....................................................................................................................................10
Reference.......................................................................................................................................11

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Introduction
 In the modern world, it is necessary for every company to gain a strategic as well as
competitive advantage in the market. According to Bock et al. (2016), the manner in
which such advantages can be gained in a market can be analysed via the application of
different tools.
 As stated by Papulova and Gazova (2016) these tools provide an opportunity to
understand the strengths and opportunities that exist in the market along with that
possessed by the organisation itself. At the same time, weaknesses and threats that are to
be mitigated are analysed via the implementation of these tools.
 The essay analyses the main strategy development tools and its applicability in business.
The tools analysed include Porter’s five forces, SWOT analysis and PESTEL analysis.
Porter’s five analysis
Industryrivalry

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Figure 1: Porter’s five forces
(Source: Carraher 2018)
Porter’s five-force analysis is a tool that is used for conducting an analysis of the
competition in the business. The Porter’s Five Forces helps in referring to number of the
competitors along with their ability that can provide the company with the competitive edge. In
the event of many organisations, competing within the same market share it has been found that
the profits of a company start to fall.
 An organisation should create the high barriers that can be instrumental in deterring the
new entrants. The suppliers of the raw materials along with the components can act as a
source of power for a firm in the event of having less number of the substitutes. The
intensity pertaining to the competitive rivalry can help in determining the
competitiveness of an industry.
 The determinant factor is that of the industrial organisation economics. In the words of
Michalak, Rahwan and Wooldridge (2017), Porter’s five forces help in determining the
competitive intensity and hence, attract the attention of the industries in terms of the
profitability derived. According to Booth (2016), the reference of the factors identified is
the microenvironment so that a difference can be made about the macro environment.
 The analysis of the figure shows that three of the five forces are from the horizontal
competition, while the other two are from the vertical competition. The application of
Porter’s five-force model can help an organisation to identify forces, which can shape
competition in an industry. As stated by Phillips and Moutinho (2018) it can also be

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useful to adjust the strategies that exist and are adopted by an organisation so that it suits
the competitive environment and improve the potential profit.
Industry rivalry Bargaining power of
suppliers
Bargaining
power of
buyers
Threat of
substitutes
Threat of new
entrants
High
(Competition
from Pepsi)
Medium (Due to the
reputation)
Medium (Due
to the
popularity of
Pepsi)
Low (Difficult
to replace)
Low (Due to
the popularity)
Table 1: Porter’s Five forces of Coca Cola
(Source: Phillips and Moutinho 2018)
 In this regard, a limitation of Porter’s five-force model can be highlighted so that new
strategic tools can be adopted. Eisenberg, Johnson and Pieterson (2015) pointed out that
one of the biggest limitations is that it provides an analysis of a wider industry of the past.
The effectiveness of which can be applicable for short-term strategy. Hence, preference
of using SWOT analysis is made to gain a comprehensive analysis of the business.

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SWOT analysis
Figure 2: SWOT analysis
(Source: Bull et al. 2016)
The SWOT analysis is strategic planning techniques that can be help an organisation to
identify its strengths and weakness in the industry. The SWOT analysis is indicative of a
technique that helps a company in moving from the everyday problems to that of fresh
perspective. It can help a company in facing the greatest challenges and finding the promising
new market. The positive attributes of an organisation are the process capabilities, financial
resources along with the products of a company.
 The opportunities can arise for a company in the event of being careful about the
conditions prevalent in the environment that can act as a positive force for a company.
The conditions of the external environment can jeopardize the profitability of a business.
StrengthWeaknessOpportunityThreat

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According to Phadermrod, Crowder and Wills (2019), the intension of the application of
SWOT analysis is that it can help in the specifying the objectives of a business venture or
project.
 Bull et al. (2016) stated that the application of a proper SWOT analysis could help in
generating meaningful information for each category so that the tool can be useful.
SWOT analysis has been described as the tried and true tool used for analysis. The
application of SWOT analysis, for business can be identified via an example. As seen
from the figure, the application of SWOT identifies the strengths, weakness, threat and
opportunities.
 An example can be provided by analysing the SWOT of Samsung.
Strength
Most successful electronics manufacturer
Weakness
Heavy dependent upon consumers
Opportunity
Increased demand for tablet and smart phones
Threat
Emergence of Apple
Table 2: SWOT analysis of Samsung
(Source: Phadermrod, Crowder and Wills 2019)
 The limitation of the use of the SWOT analysis is that it holds limited coverage of the
issues faced by an organisation. At the same time, it fails to provide an alternative
solution to the weakness and threats identified of a business. As observed by Carraher
(2018) it also fails to prioritise the issues that exist in a business organisation.
 Hence, with limited information available it is most often considered as a not so useful
tool for the development of strategic analysis of an organisation. In this regard, Burns and

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Dewhurst (2016) defended the application of PESTEL for identifying opportunities and
threats that persist in business.
PESTEL analysis
Figure 3: PESTEL analysis
(Source: Pan, Chen and Zhan 2018)
The PESTEL analysis provides a description of the macro environmental factors that can
be used for scanning the market. David, David and David (2017) stated that the PESTEL
analysis could be conducted as a part of external marketing analysis while conducting a strategic
search for opportunities in the business. PESTEL Analysis is a cost-efficient means that can help
in focussing on the issues facing a company.
PESTELPoliticalEconomicalSocialTechnologicalEnvironmentalLegal

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 The economic factors have a great amount of effect on how a company carries out the
business that can ensure the profitability of a company. The governments make use of the
interest rate control along with the taxation policy, which are the mechanisms with the
help of which it can control the operations of a company. The growth of the population
along with the age distribution can have an effect on how the marketers understand the
customers.
 The consumer rights and the laws can have an effect on the revenues that are earned by a
company. It helps in providing an overview of the different macro environmental factors
that is needed to be taken into consideration. As stated by Pan, Chen and Zhan (2018) the
application of PESTEL analysis can be used as strategic tool, which can help in
understanding the growth or decline that a market can endure during its tenure.
 The figure provides an overview of the factors that can be considered for the analysis of
the market. It can be seen that several important elements of the environment are taken
into consideration for the analysis of the market so that proper application of strategies
can be undertaken. An example can be provided in this case to understand the manner in
which implementation of PESTEL analysis can help an organisation understand the
external threats in business.
 The example includes analysing the external environment of Toyota
Category Political Economic Social Technological Legal Environment
Impact on
business
Unfriendly
political ties
leading to
loss of
Difficulty to
cope with
international
Customer
satisfaction
Technical
innovations
Legality of
the product
Effects of
pollution and
wastes

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business market
Time
frame
Indefinite Maximum
for 3
months
About 3-5
months
Till technical
update
6-12 months Cannot be
applied
Type of
impact
High High Medium High Medium Medium
Rate of
impact
Increasing As per
overall
economy of
country
Cannot be
determined
May cause
damage
Undesirable Harm
Importanc
e
Unfamiliar Important Critical Essential Severe Unknown
Table 3: PESTEL analysis of Toyota
(Source: Bock et al. 2016)
 Bock et al. (2016) stated that the limitation of PESTEL analysis is that the data required
for conducting the analysis could not be obtained easily. At the same time, the factors
may be subjected to change and hence the analysis made using the model may not be
useful while developing proper strategies for business growth. Along with this risk may
exist of mishandling information.

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Conclusion
 Therefore, based on the analysis of the essay it can be seen that each of the strategic
development tool can have a significant impact on the development and growth of an
organisation. The application of these tools and its results may change depending upon
the type of organisation and the type of culture that is followed in these organisations.
 Along with these it can be also be seen that effective application of these tools can lead
an organisation to understand the suitable strategies that can be implemented. In this
regard, it can be said that the effective application of these tools along with other strategic
tools can be effective for organisational growth.

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Reference
Bock, A., Frank, U., Bergmann, A. and Strecker, S., 2016. Towards support for strategic decision
processes using enterprise models: a critical reconstruction of strategy analysis tools. In IFIP
Working Conference on The Practice of Enterprise Modeling (pp. 41-56). Springer, Cham.
Papulova, Z. and Gazova, A., 2016. Role of strategic analysis in strategic decision-
making. Procedia Economics and Finance, 39, pp.571-579.
Michalak, T.P., Rahwan, T. and Wooldridge, M., 2017, February. Strategic social network
analysis. In Thirty-First AAAI Conference on Artificial Intelligence.
Booth, D., 2016. Strategy Journeys: A Guide to Effective Strategic Planning. Routledge.
Phillips, P. and Moutinho, L., 2018. Strategic analysis. In Contemporary Issues in Strategic
Management (pp. 46-79). Routledge.
Eisenberg, E.M., Johnson, Z. and Pieterson, W., 2015. Leveraging social networks for strategic
success. International Journal of Business Communication, 52(1), pp.143-154.
David, M.E., David, F.R. and David, F.R., 2017. The quantitative strategic planning matrix: a
new marketing tool. Journal of strategic Marketing, 25(4), pp.342-352.
Pan, W., Chen, L. and Zhan, W., 2018. PESTEL analysis of construction productivity
enhancement strategies: A case study of three economies. Journal of Management in
Engineering, 35(1), p.05018013.
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.

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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.
Carraher, S.M., 2018. An examination of an instrument to measure Porter’s Five Forces Model.
In International Journal of Arts & Sciences Conference at Harvard University.
Burns, P. and Dewhurst, J. eds., 2016. Small business and entrepreneurship. Macmillan
International Higher Education.