Strategic Management Tools: PESTLE, Porter's Five Force Model, and SWOT Analysis

This report discusses three of the most widely used strategic management tools - PESTLE, Porter's Five Force Model, and SWOT Analysis - and how they can help organizations gain a competitive advantage in their industry. PESTLE analysis helps organizations gain insight into the political, economic, socio-cultural, technological, legal, and environmental factors that impact their business. Porter's Five Force Model helps organizations understand the level of competition in their industry. SWOT analysis helps organizations gain a deeper insight into their internal and external environment. Examples of each tool are provided, along with their application in real-world scenarios.

Strategic management tools

Contents
Introduction................................................................................................................................1
PESTLE......................................................................................................................................1
Political...................................................................................................................................1
Economic................................................................................................................................1
Socio-cultural.........................................................................................................................2
Technological.........................................................................................................................2
Legal.......................................................................................................................................2
Environmental........................................................................................................................2
Porter’s five force model............................................................................................................2
Bargaining power of suppliers................................................................................................3
Bargaining power of buyers...................................................................................................3
Threat of new entrants............................................................................................................3
Threat of substitution..............................................................................................................3
Competitive rivalry.................................................................................................................3
SWOT analysis...........................................................................................................................3
Strengths.................................................................................................................................4
Weaknesses.............................................................................................................................4
Opportunities..........................................................................................................................4
Threats....................................................................................................................................4
Conclusion..................................................................................................................................4
References..................................................................................................................................6

Introduction
Management plays a pivotal role in the success of any business. This includes management of
financial, knowledge, strategic and human resources (Hitt, Ireland & Hoskisson, 2012).
Through the entire business process, marketers use various strategy development tools which
are aimed at assisting organizations in enhancing productivity and attain a deepened insight
about their environment. This includes the company’s internal as well as external
environment. Various organizations have been known to apply these tools in order to gain a
competitive advantage in their industry of operation (David, 2011). This report throws light
on three of most widely used and renowned strategic tools that have proven to be highly
effective in ensuring business efficiency.
PESTLE
The first tool discussed is PESTLE analysis. PESTLE stands for Political, Economic, Socio-
cultural, Technological, and Legal and Environmental analysis. As the name suggests,
through this tool, marketers aim to analyse various factors that directly or indirectly impact
the organization (Hill, Jones & Schilling, 2014). This study enhances an organization’s
insight about various factors that affect the growth and development of the business. For
example, a PESTLE analysis of McDonalds in Asia would include the following details:
Political
Political stability of Asian countries provides a smooth entry to McDonalds. The policies
enforced by every country largely impact McDonalds and its business model.
Economic
Economically, leading countries of Asia are developing. They are facing balanced inflation
and the purchasing power of consumers is on a rise. The large population of China and India
is a massive potential market for McDonalds. Therefore, this makes a good opportunity for
McDonalds to create its demand within the Asian subcontinent.

Socio-cultural
India is a Hindu dominated country and hence McDonalds has changed its menu and
introduced vegetarian options. On the other hand, spice consumption of China is much lesser;
hence the menu has been customized as per their needs.
Health consciousness among people in also increasing and hence people are switching to low
calorie snacking options. Therefore, McDonalds must introduce healthy meals, multigrain
bun burgers and gluten free as well as vegan products.
Technological
Increasing usage of internet and advancement of technology has resulted in McDonalds
developing its mobile application through which people can place orders and get food
delivered at their doorstep. This has increased customer convenience and led to increased
demand.
Legal
Laws pertaining food quality, safety and hygiene at restaurants are getting stricter in every
country. Therefore McDonalds would have to ensure that the brand abides to these laws
effectively to avoid business slow down. McDonalds had to shut over 300 stores in India due
to inability to meet food safety standards.
Environmental
McDonalds need to adhere to environmental standards of the country that it operates in. This
involves reduced use of plastic and competent waste management systems in place.
Porter’s five force model
Porter’s five force model is a crucial tool in analysing competition that is faced by any
organization in an industry (Eden & Ackermann, 2013). This model helps in gaining insight
upon five factors that collectively determine the level of competition within the industry. It
provides a real picture to marketers in order to keep them on foot regarding the existing
competition. For example, Porter’s five force model for Qantas Airlines would include the
following details.

Bargaining power of suppliers
There are a number of suppliers supplying to Qantas airlines. The airline has not signed any
long term contracts with either of the suppliers therefore the bargaining power of these
suppliers is very less as the airline can switch suppliers with little additional cost.
Bargaining power of buyers
Bargaining power of buyers on the other hand is moderate. The buyer cannot refuse to pay
the fare charged by the airline and the demand for the airline is also higher. But the increasing
competition in the industry allows buyer to switch from one airline to another with no
additional cost.
Threat of new entrants
The cost of starting an airline brand is much higher and therefore the threat of new entrant
within the industry is really low.
Threat of substitution
The threat of substitution faced by Qantas Airline is also much lesser as alternative sources of
commuting like road and railways are far more time consuming than airlines.
Competitive rivalry
The level of competition in the Airline Industry in Australia is really high. There are
numerous airlines that have been active in the industry since long and there Qantas Airline
would have to put efforts in gaining a competitive advantage in order to survive the
competition (Kotler, 2015).
Porter’s five force model is crucial in helping organizations understand the level of
competition that currently exists within the industry and the level of competition that may
arise in the near future. This analysis helps organizations in ensuring that they put sufficient
efforts in differentiating themselves from the competitors and gaining an advantage over
them in the industry.

SWOT analysis
SWOT analysis is the most basic strategic management tool used by various organizations to
gain a deeper insight about their internal and external environment (Wilson & Gilligan,
2012). SWOT stands for strengths, weaknesses, opportunities and threats. Strengths and
weaknesses of the organization’s internal environment as well as opportunities and threats
existing in the organization’s external environment are discussed through this tool. This tool
helps organizations in identifying the rooms for improvements that exist within the
organization as well as the opportunities that can be leveraged by the organization (Lee &
Carter, 2011). This activity also helps businesses in being aware as well as prepared for the
threats posed to the business. For example, SWOT analysis of The Apple Inc. would be as
below:
Strengths
The biggest strengths of The Apple Inc. is the organizations’ strong brand value and fierce
customer loyalty. Apply consumers are rarely seen shifting to another brand which ensures
repeat sales for the organization (Coget, 2011). Apple’s premium targeting is also its
strengths and has helped the organization set the right positioning in the minds of consumers.
Weaknesses
One of the major weakness of The Apple Inc. is the premium pricing strategy adopted by the
brand. The products are priced much higher than competing brands and hence the
organization loses out of various potential consumers. The technology giant also has a
relatively less number of service centres which adversely impact customer service time.
Opportunities
Expanding into new markets is an opportunity that Apple must leverage. The brand must also
open more service centres across the globe to ensure increased customer satisfaction.
Threats
The increasing competition from other brands like Samsung, Motorola and HTC is posing a
threat to The Apple Inc. as they are also introducing high end models to target premium
customers of the industry. Moreover, the brand is also facing fierce price competition from

Chinese brands like MI, Gionee and Xiaomi which are introducing excelling quality
smartphones at dirt cheap prices.
Conclusion
Strategic management tools help marketers in getting a 360 degree picture of the industry that
they operate in. These tools also helps organizations in gaining a deeper insight about how
they can differentiate their products and services to fetch an advantage over their competitors
(Armstrong, Kotler, Harker & Brennan, 2015). SWOT, PESTLE and Porter’s five force
analysis collectively provide an organization with sufficient detail about intricacies of its
internal and external environment. They have been in use since a long time and continue to
guide leading organizations of the world through effective strategic management.

References
Armstrong, G., Kotler, P., Harker, M. and Brennan, R., 2015. Marketing: an introduction.
Pearson Education.
Coget, J.F., 2011. The Apple Store Effect: Does Organizational Identification Trickle Down
to Customers?. The Academy of Management Perspectives, 25(1), pp.94-95.
David, F.R., 2011. Strategic management: Concepts and cases. Peaeson/Prentice Hall.
Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management.
Sage.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an
integrated approach. Cengage Learning. United States.
Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2012. Strategic management cases:
competitiveness and globalization. Cengage Learning. United States.
Kotler, P., 2015. Framework for marketing management. Pearson Education India.
Lee, K. and Carter, S., 2011. Global marketing management. Strategic Direction, 27(1).
Wilson, R.M. and Gilligan, C., 2012. Strategic marketing management. Routledge.