Strategy Development Tools for Competitive Advantage

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Competitive Strategy

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Strategy development tools assist companies in evaluating internal and external factors
that affect their business operations to make sure that they remain agile in the ever-
changing market. They have to implement business strategies that are targeted towards
generating a competitive advantage in the industry which is crucial to sustain their success
in the market (O’Brien and Meadows, 2013). This essay will evaluate four strategy
development tools include PESTEL, five forces, SWOT and Resource-based view to
understand how they assist companies in developing business strategies. This report will
evaluate examples of different companies to apply these models to understand their
effectiveness.
PESTEL
PESTEL is a popular strategy development tool that assists the management in identifying
key external factors that affect the operations of the company to prepare for changes in the
environment (Yuksel, 2012). This model evaluates different factors such as political,
economic, social, technological, environmental and legal. In order to understand the role of
this model, an example of IKEA can be evaluated.
Political
The changes in political policies and parties resulted in affecting the business of a
corporation that is operating in the country. IKEA is a multinational corporation that
operates in different countries; therefore, the changes in the political environment of
different countries affect the operation of IKEA. For example, the recent trade ban imposed
by Donald Trump affected the operations of the company in the United States (Jamrisko
and Uyen, 2019).
Economic
The economic factors are determinants of the specific economic performance of a country
which include factors such as interest rates, economic growth, exchange rate,
unemployment rates and others. The operations of IKEA are affected by the change in
currency rates because it brought foreign income to its headquarters (Hultman et al.,
2012).
Social
Social factors also affect operations of a company which include career attitudes, lifestyle
attitudes, pollution growth rate, cultural barriers and others. The profitability of IKEA

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suffered because of its decision to remove a lesbian couple form its product magazine
while issuing it in Russia and Saudi Arabia which reduced its profitability (Hansegard,
2013).
Technological
Rapid changes in technology affect operations of companies; for example, IKEA invests in
augmented reality to improve its customer services.
Environmental
Organisations are expected to take steps towards protecting environmental resources and
reduce their carbon footprint. IKEA has made a pledge to use 100 per cent renewable
energy by 2020 (Hultman et al., 2012).
Legal
Companies have to adhere to local and international laws while conducting their
operations to avoid legal consequences; for example, IKEA complies with customer safety
laws in the US while offering its products (Hultman et al., 2012).
Resource-based view (RBV)
The RBV tool is used by the management of companies while developing long term
strategies in the business by making sure that they rely on key resources that provide a
competitive advantage to the enterprise. In this tool, the management uses the VRIO
model which evaluates resources based on four criteria including valuable, rare, inimitable
and organised (Lin and Wu, 2014). The application of this model can be understood by the
example of Amazon which is a multinational e-commerce retailing company that offer its
products on a global stage. Due to its tangible resources, the company has generated a
competitive advantage since it has created an effective distribution infrastructure that
enables it to offer the one-day or same-day delivery option to its customers (Yu et al.,
2016). The company uses robots to manage its distribution supply chain. As per the VRIO
model, the distribution network is valuable since other companies did not have similar
resources to make sure that they offer an efficient delivery option to its customers. This
distribution chain is rare because no other leading e-commerce company relies on similar
practices while conducting their business in the US. This resource is inimitable because it
requires high initial investment costs incurred by the companies which reduce their initial
profits (LeBlanc, 2018). This resource is organised as well because Amazon uses similar