Evaluating Business Strategy using PESTEL, SWOT, and Porter’s 5 Forces

This essay provides a comprehensive analysis of competitive strategy using various frameworks including PESTEL, Porter's Five Forces, and SWOT. The PESTEL model examines the political, economic, social, technological, environmental, and legal factors affecting businesses like Wesfarmers and Woolworths. Porter's Five Forces model assesses the competitive intensity and profitability of an industry by analyzing the threat of new entrants, bargaining power of suppliers and buyers, threat of substitutes, and rivalry among existing competitors. The essay also discusses profit strategies, including cost-cutting and revenue enhancement, and concludes with an overview of SWOT analysis, which evaluates internal strengths and weaknesses alongside external opportunities and threats. The document uses examples to illustrate the application of these models in real-world business scenarios.

Competitive Strategy
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Table of Contents
Introduction.................................................................................................................................................3
PESTEL model:...........................................................................................................................................3
Five forces model:.......................................................................................................................................5
Profit strategy:.............................................................................................................................................7
SWOT analysis:...........................................................................................................................................9
Conclusion.................................................................................................................................................10
References.................................................................................................................................................11
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Introduction
There are many strategy development tools that are used in business. Some tools are discussed
below in this assignment:
PESTEL model:
Before the explanation of model firstly it is required to know the expanded form of PESTEL.
PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal elements
of a business. This model is comparatively easy to implement and understand. This model helps the
management in decision making and aids in future predictions for the business so that proactive
actions can be taken for grasping the opportunities available in the market and removing the threats
present in the market (Richard Lannon). Factors of PESTEL analysis are discussed below:
Political factors: A political factor includes tax policies, laws, monetary policies, fiscal policies
etc. these factors determine the current economic policies of Australia and influence the business
operations also in formation of business plans and strategies (Mäkinen & Dedehayir,2014). For
Example companies like Wesfarmers are getting good political support because of the stable
political structure in Australia.
Economic factors:Economic factors had a great impact on the successfulness of the business.
These factors are economic situation, unemployment rates, inflation rates, current interest rates
etc.
Social factors: Social factors are also important for consideration for planning the policies of the
business. This factor includes demographic conditions, consumer buying habits, religious and
cultural factors, lifestyles etc.
Technological factors: Technological factors are changes very fluently time to time so business
has to follow and upgrade the business according to the changes in the technological factors.
These factors can be as opportunity for the business or can be as a threat for the business.
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Environmental factors: These factors also affect the business and its operations for the smooth
running and efficient working.This factor includes environmental issues, power consumption,
insurance policies, safe waste disposal, dealing with hazardous material.
Legal factors: These factors are compulsory to follow for the continuous running of the business
operation.This factor includes business laws, environmental laws, health and safety guidelines,
regional laws and international trade agreements.
For Example: Accoding to PESTEL, an Industry may be significantly advantageous with a
strong improvement heading anyway it won't be any helpful for Woolworths Limited if it is
masterminded in uncertain political condition.
According to PESTEL, an Industry may be profitable with a strong improvement heading
anyway it won't be any helpful for Wesfarmers Limited in case it is orchestrated in wobbly
political condition.
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Five forces model:
Porter’s five forces model is used five forces of industry to determine the power or force of
competition in the industry and its level of profitability. This model is created by M. Porter to
understand the five major competitive forces that affect the industry. These forces analyze the
level of competition and determine the structure of the industry (E. Dobbs, 2014). Higher the
competition forces results less profitability and lower the competitive forces results higher
profitability in the business.
The M. Porter’s five forces models are discussed below:
Threat of new entrants: This force analyzes that how much it is easy to enter in the particular
industry. If there is less barriers in the industry and industry is profitable then it is easy to enter in
that industry of any rival of the product.
Bargaining power of suppliers: this force affects the business directly because businesses have
to pay higher amount for the raw material of the product. Strong bargaining power enables the
supplier to ale the material on high amount.
Bargaining power of buyers: when the bargaining power is in the hands of consumers then they
demand higher quality product on low prices. Lower prices means the revenue generation of the
business will also low so this will give loss to the business.
Threat of substitutes: This force create threat when substitutes are available in high quantity
amount in the market at lower price and at high quality then the customers can easily switch
from one product to another which offer less price (E. Dobbs, 2014).
Rivalry among existing competitors: this force is a determining factor for analyzing the
profitability and competitiveness of the industry in the market. In this force business gets low
profit due to high competitions.
For Example: Managers at Woolworths Limited can not simply use Porter Five Forces to
develop a key position with in Food and Staples Retailing industry yet likewise can explore
gainful open entryways in whole Food and Staples Retailing region.
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Wesfarmers Limited executives can use Porter Five Forces to see the effect advantage and
develop a framework for improving Wesfarmers Limited high ground and whole deal benefit in
Food and Staples Retailing industry.
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Profit strategy:
The profit strategy is implied when an organization wants to maintains profit in any manner by
using whatever efforts possible. If the firm gets less profit then it have to cut the costs, have to
deduct the investments, raise the prices of products, enhancing the productivity or it can adopt
any of the method to come out from the difficulties.
This strategy is followed when the issues are temporary in nature and will go out with time
duration. The main problems are inflation, worst market conditions, industry downsizing,
government policies, competitive pressures etc (E. Dobbs, 2014). The firm maintains its
profitable situation by adopting artificial measures to handle the problems.
If the problem exists for long time duration then this strategy will not able to give the right
financial position of the firm. It will only deteriorate the financial position of the firm. In this
type of crisis the companies handle these types of issues by selling the assets of the firm for
settling the debt amount by selling the assets of the one division in against the profit amount of
the other division. To increase the profit and generate more revenue in the business, firms have
to decrease the cost and do benchmarking for business and analyze that where the business firm
can save the money for beneficialness of the business.
Firms can earn profit by removing the unprofitable services and products from the business.
Firms can find new customers for expanding the market of the product for increasing the
revenue. Management should check the level of inventory on time so that idle stock will not
create extra burden on the business it will also help in reducing the overall expense of business.
So this is the profit strategy by which business can generate more and more profit at less cost.
For Example: Woolworths' increasing of improvement can be, as it were, credited to its
advancing framework for 2013. A champion among their most remunerating moves included
Aussie Animal trading cards, a huge hit with adolescents.
Retail total Wesfarmers has seen its first-half advantage drop 86.6 percent to $212 million, after
the $1.3 billion shortcomings hailed against its debilitated hardware UK experience and Target
discount retail foundations.
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SWOT analysis:
SWOT analysis includes the study and collection of information regarding to external and
internal factors which may influence the business concerns. This analysis is related to both the
factors internal as well as external (Sarjana & Pokok). SWOT analysis enables the managers of
the organization to analyze the external opportunities and threats present in the market with
relate to the internal weakness and strength of the organization. It is a tool for business analysis.
SWOT basically the acronym which stands for Strength, Weakness, Opportunity, and Threat.
Strength and Weakness:
This factor gives edge to the company for its competitors. This is an internal factor of the
business and can directly manage by the management. When considers the strength of the
company then the capacity to perform and quality maintenance of the product is analyzed with
compare to the competitors of the business (Yüksel,2012). When considers the weakness section
then the sectors that needs improvement with compare to the competitors are analyzed.
(Thompson, J. and Martin)It becomes tough to find which factors are strength or weakness for
the firm and to solve this problem company should rely on the clear definition of the problem,
benchmarking and on VRIO framework regarding to strength and weakness.
Opportunity and Threat:
Opportunities and threats are the external factors and they are not in control of the business.
They are influenced by the change in market forces and trend. Opportunities are the situation
which gives the company a chance to take the advantage of the market trend for earning the
profit and get the competitive advantage. Threats are the situations which damage the
companies’ structure and management. So companies have to analyze which situation is coming
as a threat for the business and tae the actions for removing these threats for smooth running of
the organization.
For Example: SWOT examination in a Woolsworth an enormously instinctive strategy and
requires ground-breaking coordination among various workplaces inside the firm, for instance, –
publicizing, support, errands, the officials information structures and key orchestrating.
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Conclusion
SWOT examination in a Wesfarmer an enormously keen system and requires suitable
coordination among various divisions inside the relationship, for instance, – advancing, cash,
errands, the officials information structures and crucial organizing.
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References
Mäkinen, S. J., & Dedehayir, O. (2014, July). Forecasting competition between disruptive and
sustaining technologies in business ecosystems. In Proceedings of PICMET'14 Conference:
Portland International Center for Management of Engineering and Technology; Infrastructure
and Service Integration (pp. 2867-2871). IEEE.
Sarjana, P. Pokok Bahasan: Techniques for Analyzing Line-of Business Strategy.
Yüksel, I. (2012). Developing a multi-criteria decision making model for PESTEL
analysis. International Journal of Business and Management, 7(24), 52.
E. Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), 32-45.
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