Tools of Strategic Development: PESTEL, SWOT, and Porter's Five Forces Analyses

Running head: TOOLS OF STRATEGIC DEVELOPMENT 0
COMPETITIVE STRATEGY

TOOLS OF STRATEGIC DEVELOPMENT 1
Introduction: Strategic development is the process in which, managers find long term
directions of their organisation, set specific standards for their performance, formulate
strategies to attain these objectives and execute the selected action plans with managing all
external and internal circumstances. By setting targets, management finds easy to review their
accomplishments. By analysing the current market situation, businesses can ultimately avoid
the errors other organisations made and reconsider their strategy without any difficulty.
Development of business strategies enables the managers to know about the competitive
advantages and risks, which is helpful to operate business successfully. Strategic
development contributes to the corporate strategy of the company, which directly controls
leadership style of the company’s management. This essay explains the various tools for
effective strategic development within the organisation (Wirtz, et al., 2010).
There are various tools for analysing internal and external environmental factors which helps
developing strategy of the firm. Some of the main tools includes, PESTEL analysis, Porter’s
Five Forces Model and SWOT analyses.
PESTEL analysis: PESTEL analysis is a reliable and majorly used tool for evaluating
strategic risk factors. The process of analysing firm’s external environment includes five
stages: finding PEST issues, identifying its effects on the organisation, classifying into threats
and opportunities, arranging factors on the basis of priority and taking corrective strategic
actions (Song, et al., 2017).
Example: Tesco is a multinational company having headquarter in United Kingdom with its
stores in 12 countries. Tesco has diversified its operations in mobile, finance, hardware
services, insurance and many other sectors. Study of its risk factors through PESTLE analysis
will provide more information about the strategy of the firm.
Political factors: These contain taxation system, stability of the market and acts of
regulations of the country in which it operates. Government of many countries inspire
retailers to introduce jobs for the local population because of constant financial stability. For
this purpose, Tesco is creating job opportunities and diversifying its functions and products.
It is resulting in increase in demand for the products and services of TESCO.
Economic factors: Since economic factors are most likely to demand, leverage cost, prices
and profits, company should be alert of even small changes in guidelines which may affect
the accountability of finance. It is a considerable factor that, while rising internationally, UK

TOOLS OF STRATEGIC DEVELOPMENT 2
market alone holds around 30% of the total market share of TESCO. The major reasons of its
success are its two key strategies: Diversification and internationalization.
Social factors: A number of social changes shifted the customers towards one stop shopping
and bulk purchasing. As an impact of this, TESCO has also enlarged the amount of non-food
products. The products and services claimed by the customers are influenced by their social
beliefs. Food demands of the customers are continuously changing because they are
considering the health issues. Tesco is constantly adopting these changes by providing
organic products to consumers.
Technological factors: These includes introduction and development of online shopping,
facility of home delivery, and introduction of self-service points. Tesco has financed a
significant amount in these areas to fulfil long term goals and operate the business functions
successfully.
Environmental factors: Government of many countries is increasing pressure on the
organisations to pay attention towards environmental issues and to implement ways of
production that are beneficial for the society. Tesco is committed to dropping its carbon
footprint by 50% till 2020. Tesco is also minimizing the amount of waste production in stores
by enhancing social awareness in customers.
Legal factors: Government legislations and policies directly affect the performance of Tesco.
For example: according to the suggestion of Food Retailing Commission, all organisations
should introduce a code of practice which may result in banning current practices like
changes in price without prior notice or demand for the payment form suppliers. To enable
these changes, Tesco offers its consumers price deductions on the fuel purchased by them in
accordance with the expenses made by them on grocery stores (Srdjevic, et al., 2012).
SWOT analyses: This is a business analysing technique that an organisation can perform for
its services, products, and markets while deciding the best possible way to attain growth and
success. The process of SWOT analyses involves identifying the weaknesses and strength of
the firm, and threats and opportunities exist in the market where it operates (Ayotunde &
Cheshmehzangi, 2017).
Example: This example contains the SWOT analyses of Audi, a well-known international
four wheeler manufacturer. Each categories of SWOT includes a list of main facts, which
helps in explanation of each category.