Strategy Development Tools

This essay discusses four strategic development tools necessary for the competitive advantage of a business firm: Porter's Generic Strategies, PESTEL Analysis, Porter's Five Forces Framework, and Resource-based View. It explores the concepts, applications, and examples of each tool.

Running head: STRATEGY DEVELOPMENT TOOLS
STRATEGY DEVELOPMENT TOOLS
Name of the Student
Name of the University
Author Note

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Introduction
The following essay sheds light on four strategic development tools that are necessary for
the development of the competitive advantage of a business firm in a given business market. The
essay opens with the description of the Porter’s Generic Strategies Framework used for
determining the direction of the organization as well as the strategies for the overall development
of the organization. the essay proceeds to discuss the PESTEL Framework and the Porter’s Five
Forces Framework. The essay concludes with the discussion on the Resource-based View model
of strategic development.
Generic Strategies
Figure 1: Porter’s Generic Strategies
Source: (Author Note)

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The generic strategies as put forth by Michael Porter assists in the determination of the
direction of the organization as well as helps in the determination of the strategies that need to be
followed for the overall development of the concerned organization. The propounder of the
strategic theory states that the model tends to assist the organization in the choices made by the
organization in terms of the strategies that are presented to the business organization. The
companies that implement the generic strategies are known to be capable of choosing from four
different strategies. These strategies are the cost leadership strategy, the differentiation strategy,
the cost focus strategy and the differentiation focus strategy (Bell, Dyck and Neubert 2017). The
experts often refer to the cost focus and the differentiation focus strategies as the focus strategy.
The cost leadership strategies are implemented by the business organizations in cases wherein
the cost of the company is kept low while operating in a broad market. The main focus in this
strategy lies on the internal processes of the organization. the differentiation strategy is helpful in
case of the introduction of the unique and novel products in a broad market. The successful
implementation of this strategy requires a greater deal of research, innovation and development
on the part of the concerned business organization. The cost focus strategies tend to focus on a
particular niche market and aims to provide the concerned clientele of the market with the lowest
possible prices. The focus differentiation strategy is implemented to create a strong brand loyalty
among the clients of the organization (Mungai and Ogot 2017). The Australian retail
organization, Aldi, is known to have implemented the generic strategies in order to put forth a
proper growth within the given market.
PESTEL Analysis

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Figure 2: PESTEL Framework
Source: (Author Note)
One of the most commonly used strategic management tools, the PESTEL Analysis finds
a proper utilization in the macroenvironmental analysis of a given business organization. The
PESTEL Analysis helps in the analysis of the issues that have been presented due to the various
external environmental factors that affect the business organization. The PESTEL Analysis
model discusses six major external environmental factors that have been affecting the overall
operations of the company. these include the political, economic, social, technological,
environmental and legal factors (Aithal 2016). The political factors that affect the organization
take into account the ways in which the governmental bodies would affect the business
operations within a given market. The political factors also consider the level of intervention that
is maintained by the governmental bodies within the given organization. The economic
environment of a business organization further affects the organizational performance. These
factors include the inflation rates, interest rates, exchange rates as well as the economic growth

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that is faced by the concerned company in the given markets. The social factors like age
distribution, health consciousness and population growth have also been affecting the
performance of the company. The performance of a business organization is further affected by
the technological factors like the new products and the services that are launched by the
concerned company. The overall performance of the business organizations is also affected by
the environmental factors like the sustainability of the various environmental factors that have
been affecting the organization. The business organizations should also maintain and abide by
the various legal factors like the various governmental and trade laws that are followed within
the given country (Ahmadi, Maleki and Ahmadi 2019). The Australian retail chain, Aldi, is
known to have been implementing the PESTEL Analysis model in order to assess the
macroenvironment and its effect on the operations of the company.
Porter's Five Forces Framework
Figure 3: Porter’s Five Forces Framework

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Source: (Author Note)
The Porter’s Five Forces Framework is used to analyze and shed light on the major
competitions that are faced by the company in a given market. The Porter’s Five Forces
Framework is one of the major frameworks that is used in the analysis of the microenvironment
that is faced by the company. the framework majorly analyses the competition that is faced by
the concerned business organization in the given market. The framework was designed in 1979
by Michal Porter, a celebrated American theorist through a paper published under Harvard
Business Review (Mathooko and Ogutu 2015). The Porter’s Five Forces Framework discusses
two vertical and three horizontal forces that affect the competition in the given market. The
framework discusses the bargaining powers of the clients or the buyers of the organization as
well as the bargaining power as is implemented by the suppliers of the given business firm. The
framework also sheds light on the three major horizontal forces that affect the company. These
include the threats that are faced by the company due to the existent rivals in the concerned
market who have already been established, the rivals who might end up with products that would
substitute the products and services that are offered by the company and those that have been
entering the market with the similar products and services (Kabue and Kilika 2016). The
framework has been notably used by Woolworths, an Australian retail giant, in exploring the
establishment of the business activities in the Australian market.
Resource-based View

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Figure 4: Resource-based View Model
Source: (Author Note)
The Resource-based View model refers to a managerial framework that is used to
identify the various strategic resources that depict the potential that is required for gaining a
better competitive advantage within the given market. The business organization is expected to
exploit these resources in order to deal with the improvement of the competitive advantage
within a given market. The theory of the resource-based model was initially proposed through
"Firm Resources and Sustained Competitive Advantage" an article composed by Barney in the
year 1991 (Ferreira et al. 2016). The model attempts a discussion on the internal resources of the
firm. The major aim of the model lies in the identification of the competencies, capabilities and
the assets that would help the firm to attain the superior amount of competitive advantage over

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the other companies that have been featuring in the same market. The model is based on the
implementation of the interdisciplinary approach towards the development of a business
organization within a given market. The model states that the resources that have been chosen by
the company should be valuable, rare, hard to imitate and organized in order to help in gaining a
competitive advantage over the various other organizations that have been operating within the
given market (Steiner et al. 2017). A proper usage of the model can be found in the operations of
one of the popular financial organizations in Australia, ANZ Bank.
Conclusion
In lieu of the above discussion it might be noted that the improvement of the competitive
advantage of the company depends majorly on the various internal and external factors that are
known to have been affecting the organizational performance. The business organization is
expected to exploit these resources in order to deal with the improvement of the competitive
advantage within a given market. The frameworks discussed above helps the business
organization to deal with the development of the competitive advantage within a given market

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References
Ahmadi, M.R., Maleki, D. and Ahmadi, A., 2019. SMC-SPMV: A new strategic management
model for cloud computing based on SWOT/PESTEL multi view. African Journal of
Engineering Research, 7(1), pp.17-32.
Aithal, P.S., 2016. Study on ABCD analysis technique for business models, business strategies,
operating concepts & business systems. International Journal in Management and Social
Science, 4(1).
Bell, G.G., Dyck, B. and Neubert, M.J., 2017. Ethical Leadership, Virtue Theory, And Generic
Strategies. Radical Thoughts on Ethical Leadership, 113.
Ferreira, M.P., Serra, F.R., Costa, B.K. and Almeida, M., 2016. A Bibliometric Study of the
Resource-based View (RBV) in International Business Research Using Barney (1991) as a Key
Marker. Innovar, 26(61), pp.131-144.
Kabue, L.W. and Kilika, J.M., 2016. Firm resources, core competencies and sustainable
competitive advantage: An integrative theoretical framework. Journal of management and
strategy, 7(1), pp.98-108.
Mathooko, F.M. and Ogutu, M., 2015. Porter’s five competitive forces framework and other
factors that influence the choice of response strategies adopted by public universities in
Kenya. International Journal of Educational Management, 29(3), pp.334-354.
Mungai, E. and Ogot, M., 2017. Generic strategies and firm performance: An investigation of
informal sector micro-enterprises in Kenya. International Journal of Business and
Management, 12(3), p.148.

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Steiner, B., Lan, K., Unterschultz, J. and Boxall, P., 2017. Applying the resource-based view to
alliance formation in specialized supply chains. Journal of Strategy and Management, 10(3),
pp.262-292.