Analyzing Competitive Strategy: PESTEL, Five Forces Framework, SWOT, and Resource-Based View

This document provides an analysis of competitive strategy using key tools such as PESTEL, Five Forces Framework, SWOT, and Resource-Based View. It explores how these tools can help companies evaluate external and internal factors to make informed business decisions. Examples of Tesco PLC, Netflix, Samsung, and Zara are used to illustrate the application of these tools.

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Competitive Strategy

1
PESTEL
PESTEL is one of the most famous macro analysis tools that are used by companies
across the world to evaluate key external forces that affect their operations. Through this
model, companies analyse the impact of political, economic, social, technological,
environmental and legal factors on their business (Song, Sun and Jin, 2017). The
evaluation of these factors is crucial while developing business strategies in the company
to make sure that companies remain agile and they are able to adapt as per changing
market requirements. Changes in these factors create opportunities or challenges for a
company that are necessary to be addressed to make sure that the company sustains its
profitability in the market. Example of Tesco PLC can be analysed in this report that can
assist in understanding the role of this model. Tesco is the second largest retailing
company from the United Kingdom that and it has established its operations in 13
countries (Tescopoly, 2019).
The political changes which are a result of Brexit resulted in creating challenges for Tesco
since the company operates in the UK as well as the European Union. Economic instability
in the UK due to Brexit is likely to increase tax and tariff rates which will create challenges
for the company (Connelly, 2017). Social factors include customer perception and people
in the UK prefer to buy groceries in bulk which benefits Tesco by increasing its sales.
Changes in technological factors also create challenges and opportunities for Tesco; for
example, the company stated to offer online shopping facilities to its customers along with
home delivery. Environmental factors are necessary to be taken into consideration by
companies while conducting their business. Tesco has also implemented a strategy to
reduce its carbon footprint by 50 per cent by 2020 (Osborne, 2012). Legal provisions also
influence the performance of Tesco. The company has to comply with guidelines given by
the Food Retailing Commission (FRC) while making changes in prices of its products to
avoid legal penalties.

2
FIVE FORCES FRAMEWORK
When operating in an industry, there are various industrial factors that create opportunities
and problems for companies which are necessary to be taken into consideration by them
while developing strategies policies. In this regards, companies can rely on five forces
framework that was developed by Michael Porter to evaluate five key forces in their
respective industry which affects its attractiveness such as competitive rivalry, the threat of
substitute, the bargaining power of customers, the threat of new entrants and the
bargaining power of suppliers (Yunna and Yisheng, 2014). An example of Netflix can be
used to apply this framework; Netflix is currently the world’s largest digital distribution
company. The threat of new entrants in the industry is low because companies have to
make a contract with a large number of production companies to make sure that they offer
a wide range of choices to their customers which increases their initial investments (Ellis,
2015).
The bargaining power of suppliers is high in the entertainment sector because Netflix has
to rely on rights of different production houses to offer their movies and television series on
its platform and these corporations can increase their prices or take back their rights
(Jenner, 2016). The bargaining power of customers is medium because they have to pay a
subscription fee which makes it difficult for them to switch between companies and Netflix
original shows are only available on the company’s platform which customers cannot
access anywhere else. The threat of substitute is low because the use of substitute
products such as CDs and DVDs has decreased substantially. Competitive rivalry in the
industry is high because there are major players in the market such as Amazon, Hulu and
Disney which also invests in original content to attract customers that create challenges for
Netflix (McDonald and Smith-Rowsey, 2016).

3
SWOT
While developing business strategies, companies have to take into consideration external
as well as internal factors that create opportunities or problems for them. In this regards,
they can rely on SWOT analysis to evaluate their strengths, weaknesses, opportunities
and threats to make sound decisions that enable them to sustain their profitability in the
market (Agarwal, Grassl and Pahl, 2012). This framework enables companies in ensuring
that they rely on their internal strengths to exploit external opportunities while preparing
themselves for potential threats while working on their weaknesses. The example of
Samsung is selected to understand how this tool can be applied to the company. Samsung
is a conglomerate that offers a wide range of electrical products, devices, life insurance, IT
and consumer electronics products across the globe. Its strengths include a wide
distribution network, effective marketing strategy and high investment in research and
development (R&D) process; for example, the company made a budget of US$15.3 billion
for its R&D spending in 2018 (Jaruzelski, Chwalik and Goehle, 2018).
Weaknesses of the enterprise include negative market image due to the explosion of its
smartphones and high prices of top models (Business Today, 2018). Opportunities
available for Samsung include expansion of the smartphone industry in developing
markets such as Bangladesh, Thailand, Indonesia and India that gives it the opportunity to
expand its customer base. The company also enter into digital payment industry by
launching Samsung Pay services that become popular in many markets (Djatmiko and
Pradana, 2016). Threats faced by the company include fierce competition from
competitors such as Apple Incorporation and Google and reduced profitability due to slow
growth in sales. In order to increase its customer base in emerging markets, the company
should rely on its strengths such as strong distribution channels and effective marketing
which will increase its profitability and sales.

4
RESOURCE-BASED VIEW
The Resource-based view (RBV) is a popular tool that enables companies to stay relevant
in a competitive environment by using their resourcing to generate and sustain a
competitive advantage in the industry. Through this tool, companies evaluate their
resources on VRIO model which identify whether the resources meet four criteria including
valuable, rare, inimitable and organised (Bromiley and Rau, 2016). Through this model
companies, can generating a competitive advantage in their respective industries. For
example, Zara is a leading fast fashion retailer that is more successful than compared to
its competitors due to its competitive advantage which it generates through its responsive
supply chain. The company is able to change 75 per cent of its display merchandise
across the globe within a period of 3-4 weeks; this resulted in encouraging the customers
to purchase new and trendy clothes in bulk which drives the sales of Zara (Crofton and
Dopico, 2012).
As per the VRIO model, this resource is valuable because it resulted in increasing the
sales of Zara on a global stage. This is a rare resource because other competitors such as
H&M and GAP require around six months changing their offerings around the world. This
resource is also inimitable because other competitors require to made substantial
investment in order to create a responsive supply chain as Zara (Taplin, 2014). The
company uses both in-house and outsourcing facilities to manufacture its products which
enable to quickly offer new and trendy clothes to its customers which are not possible for
other competitors without substantial investment. Lastly, this resource is organised
because Zara is able to expand its operations at an international stage through its supply
chain. The company also saves its costs since it did not invest in marketing strategy which
leads to expand its profits.

5
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