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

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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).