Strategic Tools For Environment Industry

RUNNING HEAD: STRATEGIC TOOLS
STRATEGIC MANAGEMENT IN A DYNAMIC ENVIRONMENT

STRATEGIC TOOLS 1
Strategic tools
In order to understand the internal and external environment of the industry, Porters Five-
Force Analysis and PESTLE analysis will be best suitable.
Porter’s Five Force Analysis
Porters Five Force Analysis is a strategic model that assists in understanding the
company’s internal competitive environment. It helps in identifying the level of competition
prevalent within the industry. Thus, it determines the potential strengths and weakness of the
company. It consists of five forces including supplier’s power, customer’s power, the threat of
new entrants, the threat of identical products and competition prevailing in the industry. The
number of suppliers and switching cost usually determines the supplier’s power in an industry.
Customer’s power is determined by the ability they attain to drive the price. The threat of new
entry arises when there are low barriers to entry in the market. Additionally, the Threat of
identical product arises when there is easy availability of similar products in the market. Lastly,
competition in the industry is determined by the number of rivals exists in the industry
(Margretta & Porter, 2012).
PESTLE Analysis
PESTLE Analysis is also a strategic tool used to analyze the macro environment of a
company. PESTLE is an abbreviation that stands for Political, Economic factors determine the
financial performance of the country. It mainly includes factors such as GDP rate, Inflation rate
and unemployment level. Social factors determine the customs, norms, attitude, social behavior
and distribution of income and demographics trends prevailing in the particular country. It is
usually beneficial in ‘targeting’. Technological factors determine the level of technology