Strategic Management Tools: PESTLE Analysis, SWOT Analysis, Porter's Five Forces, and Generic Strategies

This document provides an overview of strategic management tools such as PESTLE analysis, SWOT analysis, Porter's Five Forces, and Generic Strategies. It explains how these tools evaluate internal and external factors affecting a business and shape business decisions for success. Examples of these tools are provided for companies like Apple Inc., Coca-Cola, and Emirates airline.

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Competitive Strategy
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Executive summary
The strategy management tools are key criteria for evaluating the internal and
external factors that may affect a business process. The internal factors are those within
the scope of the business and the business can use them for competitive advantage.
Additionally these factors may also be the one impacting negatively to the business
requiring the organization to overhaul them. The PESTLE analysis, and porter’s five
forces evaluate the macro environment. SWOT analysis, and generic strategies gives
an insight of both the micro and macro environment. For the success of a business, it is
important to analyses these factors and understand the position of the organization.
This factors shape the path through which an organization take to achieve business
success.

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Table of Contents
Executive summary.........................................................................................................................2
Introduction......................................................................................................................................4
PESTLE analysis.............................................................................................................................4
SWOT analysis................................................................................................................................6
Porter’s five forces...........................................................................................................................8
Generic strategies...........................................................................................................................10
Conclusion.....................................................................................................................................11
Bibliography..................................................................................................................................12

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Introduction
Strategic management tools are instruments that measures the micro and macro
environment of an organization. They are used to predict the trends that an organization
has to follow for future success. They are the most important thing for a business to
consider during the planning process. Examples include PESTLE analysis, SWOT
analysis, porter’s 5 forces and generic strategies.
PESTLE analysis
PESTLE analysis is often known as PEST analysis and it is marketing principles
that seek to evaluate the external environment of a business. PESTLE is a mnemonic of
political, economic, social, technological, legal and environmental factors. The political
factors involve the government influence on the operations such as fiscal policies, tax
regulations, and trade tariffs, among others (Ho, 2014, pp.6480). Economic factors
include the rates of foreign exchange and inflation, economic situations, and interest
rate. Social factors include all factors that scrutinize the social environment of the
markets such as cultural trends, population and demographics, and customer beliefs
(Aithal, 2017, pp.45) Technological factors involve how the advent of technology such
as automation and innovation affects the organization. Legal factors encompass laws
and policies that organization have to follow in their operating environment. Lastly,
environmental factors involve aspects such as environmental offsets, global changes,
geographical locations, and climate
Apple Inc. is one of the most visible and recognized brand worldwide. In its
PESTLE analysis, Apple is affected by political factors through improved trade policies
and a stable political environment in developed countries. Economically, Apple is
affected by stable economies in developed countries and rapid economic growth in
developing countries. Socially, the increasing use of mobile devices and the use of
social media provides the opportunity for Apple due to the increasing demand for mobile
devices. In the technological facets, the rise of technological integration, cloud
computing, and growth of app markets give Apple the opportunity of growing its product
mix (Khan, Alam and Alam, 2015, pp.960). Legally, Apple is affected by an increase in
privacy and telecommunications regulations. Finally, the environmental factors affecting

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Apple include the trend of business sustainability, energy efficient products, and labor
rights trends. Apple is involved in the recycling and production of a new technological
solution to improve energy conservation.
Example of PESTLE analysis factors that affect Apple Inc.
Apple.
high consumer
purchasing power
stable economies
government policies
tax
cloud computing
services
advent of technology
increase in social
media usage
demand for mobile
deveices
privacy and
telecommunication
regulations
laor rights

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SWOT analysis
SWOT analysis is a framework used to analyze the competitive position of an
organization and develop strategic planning. SWOT analysis investigates the internal
factors such as strength and weakness and external factors which are opportunities and
threats for the business. The strengths give an overview of what the organization excels
at. It can be a strong brand image, loyal customer base, good location or unique
products. The weakness are those factors that negatively impact the performance of an
organization. These are areas where the business needs to improve. Examples include
a weak brand, high turnover rates, and inadequate capital (Bull, et al., 2016, pp.100).
Opportunities are external factors that can offer a business advantage. If governments
reduce labor regulations or open up bilateral agreements, businesses can take
advantage of these to increase sales. Threats are other external factors that impact
negatively the business. Some examples of threats include, rise in operation cost,
economic recessions, increase in competition and rise in labor cost.
Coca-Cola is a global brand that has position itself in the market. The following
SWOT analysis will identify the strategic management of the business. In strength,
Coca-Cola is a recognized brand worldwide and boast of a huge customer following. In
the weakness, most consumers are concerned by the health issues imposed by
carbonated drinks such as obesity and diabetes (Hassan, Amos and Abubakar, 2014,
pp.8). The opportunities of Coca-Cola lies on the potential consumer base in developing
countries. The company can venture into this new market and increase its sales. The
threat facing Coca-Cola is increased competition from companies such as Pepsi and a
limited supply of water due to climate change.

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SWOT analysis of Coca-Cola diagrammatical representation.
Strength
 Global brand
 Huge customer following
Weakness
 Health issues posed by
carbonated drinks
Opportunities
 Potential market in developing
countries
Threats
 Presence of strong competition
 Shortage of water due to climate
change

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Porter’s five forces
This model looks at the competitive forces shaping any industry. The model uses
five forces that shape the competitive landscape in any industry. These forces are:
Competition rivalry in the industry. This refers to the number of the organization
offering similar services. High competition in the industry negatively affect the
operations of the business (Dobbs, 2014, pp.40). Another force is the threat of new
entrants in the market space of the business. If it is relatively easier for new companies
to enter the market, the position of the organization is weakened. The power of
suppliers is another force which deals with the ability of the suppliers to dictate the
terms of operations. The consumer power is yet another force that takes a look at the
ability of the customers to affect the prices (Porter and Heppelmann, 2014, pp.73). The
last force is the threat of substitutes. This means whether the organization faces the
threat of consumers moving to other organization providing the same services.
Emirates airline is among the leading airline service provider in the world. The
following are ways in which Porter's five forces affect Emirates airline.
Emirates airline faces a low threat of new entrants because it is relatively
expensive to establish an airline company due to the strict requirements (Redpath,
O'Connell and Smith, 2017, pp.130). The airline is not affected by the bargaining power
of the customer since the company has already established itself as a quality brand and
customers are willing to pay high prices for the services. Emirates airline is affected by
the bargaining power of the suppliers. This is because there only exist two global
supplies of airlines; which are Boeing and Airbus (Huggins and Izushi, 2015, pp.460).
Emirates airline faces a moderate threat of the substitute product this is because most
travelers prefer air transport for international travels. Lastly, Emirates faces high
competition from Qatar Airways, British Airways, and Air France.

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Chart of Porter’s five forces in Emirates Airways.
high
bargaining
power of
suppliers
low power of
substitute
product
low
bargaining
power of the
consumer
strong
competition
rivarly from
other airlines
low threat of
new entrants

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Generic strategies
These strategies were developed by Michael Porter to help a company gain a
competitive strategy. It helps an organization to get an edge in the sales department in
relation to the competition. They include cost leadership, differentiation, and focus.
Cost leadership strategy involves instituting measures for a low cost of inputs.
There are two ways of achieving cost leadership. One is through increasing profits by
cutting on the costs and increasing the share of the market by charging lower prices
than the competitor. The product can be then put in the same category as the
competition and generate huge profit margins (Tanwar, 2013, pp.15). An example of
this is the TPS system that is being used by Toyota motor company. The system cuts
the cost of production of motor vehicles, but the vehicles are priced within the same
margin as other American and Japanese cars. Cost leadership involves being amongst
the lowest-cost producers in the industry.
The differentiation strategy involves the creation of multiple products which are
promoted differently. It also ensures that the product are more attractive by engaging in
research and development and improving the production means. This strategy ensures
a constant flow of cash even though sales in other product have declined. An example
of this is in Hindustan lever which primarily makes FMCG, while also incorporating itself
in another product mix such as the production of soap and other products.
The focus strategy includes focusing on a narrow and well-defined segment of
the market, commonly known as the ‘niche’ segment. It involves understanding the
dynamics of the market and the unique needs of the consumer. For example,
Lamborghini markets to a particular client base that like fast and expensive cars and
they can afford them. This makes the customers able to pay premium prices for the
product.

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Chart of Porter’s generic strategies.
Conclusion
The above strategic management tools are essential for the crafting and implementation
of business plans. The tools evaluate the internal and external factors affecting the
business and offer critical insight that will shape the business decision an organization
has to take to achieve business success.
generic
strategies
cost
leadership
focusdifferentiation

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Bibliography
Aithal, P.S., 2017. ABCD Analysis as Research Methodology in Company Case
Studies. International Journal of Management, Technology, and Social Sciences
(IJMTS), 2(2), pp.40-54.
Bull, J.W., Jobstvogt, N., Böhnke-Henrichs, A., Mascarenhas, A., Sitas, N., Baulcomb,
C., Lambini, C.K., Rawlins, M., Baral, H., Zähringer, J. and Carter-Silk, E., 2016.
Strengths, Weaknesses, Opportunities and Threats: A SWOT analysis of the ecosystem
services framework. Ecosystem services, 17(3), pp.99-111.
E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of
industry analysis templates. Competitiveness Review, 24(1), pp.32-45.
Hassan, D.N., Amos, A.A. and Abubakar, O.A., 2014. An evaluation of marketing
strategies undertaken by Coca Cola Company as a multinational corporation in
Nigeria. Journal of Business and Management, 3(2), pp.5-10.
Ho, J.K.K., 2014. Formulation of a systemic PEST analysis for strategic
analysis. European academic research, 2(5), pp.6478-6492.
Huggins, R. and Izushi, H., 2015. The Competitive Advantage of Nations: origins and
journey. Competitiveness Review, 25(5), pp.458-470.
Khan, U.A., Alam, M.N. and Alam, S., 2015. A critical analysis of internal and external
environment of Apple Inc. International Journal of Economics, Commerce and
Management, 3(6), pp.955-961.

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O’Reilly | Safari. (2019). The Strategy Book, 2nd Edition. [online] Available at:
https://www.oreilly.com/library/view/the-strategy-book/9781292084411/html/40_chapter-
28.html [Accessed 22 Apr. 2019].
Porter, M.E. and Heppelmann, J.E., 2014. How smart, connected products are
transforming competition. Harvard business review, 92(11), pp.64-88.
Redpath, N., O'Connell, J.F. and Warnock-Smith, D., 2017. The strategic impact of
airline group diversification: The cases of Emirates and Lufthansa. Journal of Air
Transport Management, 64(2), pp.121-138.
Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of business and
management, 15(1), pp.11-17.