Evaluation of Strategy Development Tools for Competitive Advantage

This essay evaluates four strategy development tools, namely SWOT, PESTEL, RBV and Five Forces, and their role in generating competitive advantage for businesses. Examples of companies like BHP Billiton, Wesfarmers, Honda and Qantas Airways are used to illustrate the use of these tools.

Competitive Strategy

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The objective of this essay is to evaluate four strategy development tools and their role in
businesses while forming strategies. This essay will take examples of different companies to
understand how they use these tools while developing strategic policies in order to generate a
competitive advantage in the industry.
SWOT Analysis
The SWOT analysis is a popular strategy development tool which is used by corporations
across the globe. This tool evaluates strengths, weaknesses, opportunities and threats of a
company. Both internal and external factors that influence businesses are evaluated through
this tool which helps corporations in increasing their organisational performance (Bull et al.,
2016). Based on the existing opportunities, the corporation can leverage its strengths to form
business strategies which assist in achieving effectiveness in the market. For example, BHP
Billiton is an Anglo-Australian corporation which operates in mining, metal and petroleum
industry. The senior level management of BHP uses SWOT analysis to form business
strategies. Strengths of the company include a diverse range of revenue streams, strong
position in the market, well-established brand image, strong international presence, effective
corporate social responsibility model, and highly skilled workforce.
Weaknesses of the company include intervention of the government in the operations and
negative reputation due to accidents in the workplace. Opportunities of the corporation
include association with other leading brands, acquiring the smaller enterprises, and
expansion of the business in other sectors such as coal and copper sector (Bellis, 2016).
Threats faced by the enterprise include intense competition in the industry and reduction in
foreign demand with the popularity of in-house production. The corporation should invest in
improving its marketing strategy to create a positive brand image and associate with other
established brands to diversify its business in other streams.
PESTEL Analysis
The PESTEL analysis is referred to a strategy development tool which is used by the top-
level management to evaluate key external factors which influence the operations of an
organisation. These factors include political, social, economic, technological, legal and
environmental. Based on comparison between these factors, the company can become aware
regarding potential opportunities and threats in the industry and the management can

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strategically prepare them changing the business as per these factors to gain a competitive
advantage (Rastogi and Trivedi, 2016). For example, Wesfarmers Limited is an Australia
based conglomerate company which is currently the biggest organisation in terms of revenue
in the country. The political environment in Australia is stable which the biggest market is for
the company which is suitable for the growth of the enterprise. The stable growth in the
economy of Australia is also beneficial for Wesfarmers for development; however, the
increased wage costs create challenges for the company.
The social perspective of customers towards unhealthy food is changing, and they prefer to
pay higher costs for products which are manufactured sustainably. It creates challenges for
Wesfarmers since Woolworths is its biggest competitor which is offering healthy and fresh
food products to its customers, whereas, Coles (Wesfarmers’ owned brand) did not offer any
healthy options to customers. Wesfarmers is serious about using technological advancements
to improve its operations in different countries. For example, the company uses drone
technology to improve safety in CSBP which is a fertilizer and chemical company
(Wesfarmers, 2018a). Wesfarmers has implemented as sustainability policy in the
organisation to ethically source its materials and protecting environmental resources. In 2018,
the corporation reduced 6 percent of its carbon emissions by using energy efficiency projects
(Wesfarmers, 2018b). Compliance with legal regulations such as employment laws, trade
policies, mandatory reporting requirements and taxation laws are important for the company
to ensure that it avoids legal consequences.
Resource-based View (RBV) model
The RBV model is a popular tool which is applied by the senior management for analyses
and interpretation of key resources of the enterprise. This evaluation is conduct to find those
resources which enable the company in generating a competitive advantage. These resources
are customised by the corporation as per its requirements, and due to an extended learning
curve, it becomes difficult for competitors to imitate these resources (Ferlie et al., 2016). The
VRIO model is used by corporations while implementing this model to find those resources
which provide a competitive advantage to the enterprise. VRIO is an acronym for valuable,
rare, inimitable and organised. Those resources which pass these criteria assist the
corporations in generating a competitive advantage in the industry and sustain their future
growth in the market. For example, Honda is a global brand which operates in the automotive
industry, and it is one of the biggest engine manufacturers.

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Its business strategy focused on building petrol based engines and its operations were started
by building clip-on engines for bicycles. The corporation started to expand its operations by
manufacturing scooter and motorcycle engines and establishing its operations in developing
markets. Due to this extended learning curve, the corporation used this resource to expand its
operations. It started manufacturing engines for scooters, automobiles, motorcycles, marine
engines, jet place and garden equipment’s engines (Honda, 2018). These resources are
valuable since they increase profitable of the company and the capabilities of the company
are extremely rare due to long learning curve. The company has effectively organised these
resources by establishing different plants and providing engines to major corporations across
the globe. Due to these factors, this resource passes on the VRIO model based on which the
management of the company relies on RBV model to gain a competitive advantage in the
industry.
Five forces framework
Michael Porter developed the five forces framework which is a valuable tool that is used by
corporations to evaluate the competitive environment in a particular industry. As per Porter,
there are five key forces which influence the profitability of a company by increasing or
decreasing competition in the market (Greiner and Julian, 2017). The five forces include
competitive intensity, bargaining power of customers, bargaining power of suppliers, threat
of new entrants and threat of substitution. The top-level management uses this model to
determine the attractiveness of the industry in which they operate or want to expand their
operations. For example, Qantas Airways is a learning airline company which operates in
aviation, travel and tourism industry. The bargaining power of customers is considerably high
in the industry because there are no switching costs and customers can easily compare
between prices of different airlines through online services.
The bargaining power of suppliers is high because there are only two suppliers, Airbus and
Boeing, and they can increase the prices of aircraft. The threat of substitute is low because
alternative options include traveling by bus or train which are not as efficient or comfortable
as flight (Sarina and Wright, 2015). The threat of new entrants is low due to high entry
barriers such as high initial investment, competition from well-established brands, complex
operations, low profitability in the beginning and others. The competitive intensity is high in
the industry because there are many competitors who offer competitive prices to customers
and a comfortable journey such as United Airline, Singapore Airline and others.

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In conclusion, evaluation of strategy development tools assists companies in developing
business strategies which are focused on achieving effectiveness in their respective industry.
The management can evaluate both internal and external elements through these tools to
ensure that they are able to change their policies as per market and sustain their business in
the competitive business environment.

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References
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Ferlie, E., Crilly, T., Jashapara, A., Trenholm, S., Peckham, A. and Currie, G. (2016)
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