Strategic Development Tools: SWOT, PESTEL, Porter's Five Forces, and Resource-based View

This document provides an overview of strategic development tools such as SWOT analysis, PESTEL analysis, Porter's five forces, and resource-based view. It explains how these tools can help organizations plan and predict the market environment, identify internal and external factors, and gain a competitive advantage. Examples from McDonald's, Amazon, and Honda are included to illustrate the application of these tools. The document also discusses the importance of basing strategic objectives on the analysis provided by these tools.

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Competitive Strategy
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Table of Contents
Introduction.................................................................................................................................................3
SWOT analysis.............................................................................................................................................3
PESTEL analysis............................................................................................................................................4
Porter’s five forces......................................................................................................................................5
Resource-based view...................................................................................................................................6
Conclusion...................................................................................................................................................7

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Introduction
Strategic development tools are considered for the development of the
operations of an organization. It involves the consideration of internal and external
factors that may impact the organization and developing an approach on how to deal
with these factors. It is important for business whether large or small to develop these
tools for success in the ever-changing business environment.
SWOT analysis
The SWOT analysis is a development tool used in planning to investigate the
strength, weakness, opportunities, and threats of an organization. SWOT is an acronym
that stands for all these elements. Strength and weakness are considered as internal
factors that affect the organization (Syazwan and Bakar, 2014, pp.340). Examples
include the workforce, patent and intellectual property of the organization and the
location of the organization.
A SWOT analysis establishes the strength, weakness, opportunities, and threats
of a business and organizes them into a list. This enables the organization to identify a
working strategy that will prioritize what needs to be done to grow the business. (Abdel,
Mohamed and Smarandache, 2018, pp.118). The analysis should be carried out as a
team effort and incorporate people with different ideas and perspectives.
McDonald is a fast-food establishment that operates more than 31,000
restaurants in over 120 countries. The organization carries out SWOT analysis for
strategic development (Phadermrod, Crowder and Wills, 2019, pp.200). The strengths
of McDonalds are; large world market share, embracing technology and innovation
specialized training for the managers, and good advertisement campaigns. The
weakness of the company are high employee turnover rate, junk food image,
dissatisfied franchisees and environmentally related issues. McDonald company
opportunities lies in the fast growth of the fast food industry, globalization, and entry into
new markets, diverse consumer needs, and offering discounts and freebies. Lastly, the

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threat that faces McDonald's is intense competition from other brands, economic
recession, public health crisis, and environmental related issues.
PESTEL analysis
A PESTEL analysis is a strategic tool that monitors factors existing outside the
business (Kolios and Read, 2013, pp.5040). PESTEL is a mnemonic for political,
economic, social, technological, environmental and legal factors.
The political factors include government intervention into the business
environment. They include political situations, government policies, tax policy, labor
laws, and trade policies among others.
Economic factors are those that affect the financial equity and assets of the
business. They include inflations, interest rates, economic growth or recessions,
exchange rates and disposable income of the consumer.
Socio-cultural elements are those that deal with beliefs and way of life of the
population. examples include health related issues and increase in population.
Technological factors involve the advent of innovation and new technology and
how they affect the business. They include new ways of production, placement of the
products, and communicating with the target market.
Environmental factors have increased due to the continuous environmental
awareness by the communities. These factors have also been necessitated by factors
such as scarcity of raw materials, environmental degradation, and sustainable business
operations.
Legal factors are the laws and policies formulated to govern business operations.
These factors involves product safety, equal opportunities, health and safety,
advertising standards, consumer protection, among others.
Amazon Inc. effectively applies PESTLE analysis in its e-commerce operations.
Politically the company is affected by political stability or instability, government support

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for e-commerce and government effort in cyber security (Ho, 2014, pp.6480).
Economically, Amazon takes significance in the economic stability of its markets,
increase in spending capacity of consumers and the threat of economic recession in
China. Socially, increased consumerism, increase online buying trends and increase
wealth disparity is among the issues affecting Amazon. In the technological aspect,
Amazon is affected by increasing efficiency in IT, rapid technological obsolesce and
increasing threat of cybercrime. Environmentally, Amazon is at the forefront in
advocating for sustainable business models, popularizing low carbon lifestyles and
participating in environmental programs. Lastly, the legal factors affecting Amazon
include- easing of export and import regulations and rising product regulations.
Porter’s five forces.
The five forces model is a simple but very effective tool in analyzing the
competitive ability of the business and understanding the potential profitability strategy
(Dobbs, 2014, pp.40). The forces are the competitive rivalry, supplier power, buyer
power, threat of substitution, and the threat of new entry
Competitive rivalry focuses on the numeracy of the competitors. In the airline
industry in the US for example, there is a lot of competition occasioned by many players
in the industry.
Supplier power deals with issues such as the number of suppliers the business
has, the uniqueness of the products they supply and their pricing. (Tansey, Spillane and
Meng, 2014, pp.720). In the airline industry, the suppliers have high bargaining power.
The inputs needed the industry are impacted by the external environment of which the
airline companies have little control over. There are only two aircraft suppliers: Boeing
and Airbus. The suppliers are able to influence bargaining power on the prices.
Buyer power deals with the relation between the business and the consumer.
(Tanwar, 2013, pp.16). The power of bargaining for the buyer in the airline scope is
high. This is because customers have the option of comparing prices from different
players in the industry.

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The threat of substitution is the likelihood of consumers finding an alternative to
what the business is providing. There is high threat if substitute product in the airline
industry because of many alternatives to air travel.
The threat of new entry involves the position of the organization in relation to
upcoming competition. Threat of new entrants in the airline industry is minimal because
the company requires intensive startup capital to start. Additionally, qualifications such
as operation licenses, insurances, and distribution channels are not easily obtained.
Resource-based view
This model interprets and analyzes the resources existing in the organization
while seeking to establish ways through which the organization can achieve a
sustainable competitive advantage. This model focuses on the resources that are
difficult to be imitated and facilitates competitive advantage for an organization (Lin and
Wu, 2014, pp.410). This includes resources that are not easily transferrable and require
an extended learning period that involves overhauling of the culture in the organization.
Such resources are difficult to be copied by competing organizations.
Resources that are rare, cannot be imitated, and are non-substitutable enables
the business to maintain a competitive advantage. The resources, therefore, have to
fulfill the VRIN criteria. These criteria stipulate that resources have to be valuable, rare,
imperfect imitability, and non-substitutable.
Valuable resources are those that provide strategic value to an organization by
creating market opportunities and minimizing threats.
Rare resources, on the other hand, are difficult to find among the existing
competition. Organizations must establish resources that are rare and unique in order to
gain a competitive edge.
Imperfect imitability explains that resources should be ideal and cannot be
imitated by the competition. This means that those organizations without these
resources cannot acquire them.

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Lastly, non-sustainability entails these resources should not be replaced by any
other alternative resources.
Honda is among the leading engine manufacturer in the world. The company
follows a resource-based strategy in its business. The company began with developing
small clip engines for bicycles before moving to motorcycles engines and then venturing
into water vessels engines, cars, and jet planes (Bromiley and Rau, 2016, pp.100).
Each of the product manufactured in the company competes in unique product verticals
and maintain their resource standards.
Conclusion
The strategic management tools help the organization to plan and predict the
market environment. It enables the organization to look into both internal and external
environment and identifies issues that may hamper the progress of the organization or
result to competitive advantage. It is important for the organization to base their
strategic objectives on the above analysis.

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Bibliography
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Ho, J.K.K., 2014. Formulation of a systemic PEST analysis for strategic
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Kolios, A. and Read, G., 2013. A political, economic, social, technology, legal and
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Tansey, P., Spillane, J.P. and Meng, X., 2014. Linking response strategies adopted by
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