Holmes Institute HI6006: Competitive Strategy & Development Tools

This essay provides a comprehensive discussion of key strategy development tools used in competitive strategy, including Porter's Generic Strategies (Cost Leadership, Differentiation, Focus), Porter's Five Forces, SWOT Analysis, and PESTEL Analysis. Each tool is explained with relevant examples, such as Hotel Corallo for Generic Strategies, Toyota Motor Corporation for Porter's Five Forces, Samsung for SWOT, and Amazon India for PESTEL. The essay highlights how these tools can assist companies in formulating plans to address changing customer needs, legal requirements, and competitive pressures. The document is contributed by a student and available on Desklib, a platform offering study tools and resources for students.

Running Head: Competitive Strategy
Competitive Strategy
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Competitive Strategy
Competitive strategies are used to explore the most suitable position in the industry in
order to operate both efficiently and effectively in a competitive environment. There are
different tools for strategy formulation, some of them are discussed as follows:
Generic Strategies
There are three Generic strategies which were developed by Michael Porter in 1980 to
help the companies know what different they can do for enjoying the profitability. The
strategies are:
Cost Leadership- The companies can get competitive advantage by focussing more on
efficiency and less on product/service quality. The firm may focus on lowering the variable
cost like salaries which can be done through reducing the permanent staff, training the
employees to work efficiently etc.
Differentiation Strategy- Here, companies have different products for different segments.
Here imitating the products become difficult for the competitors. It also involves high
switching cost to customers hence enhancing their loyalty towards the company. The
focus of the company in this case is on Research and development, Updated technology
and creating a unique product.
Focus- The companies focus more on a small segment of the population which can be
senior citizen group, youth etc. The aim is to serve the best of the products to the targeted
group.
Example: Hotel Corallo- It is situated in Italy and is in the hospitality industry from the last
50 years and still is in the industry performing well. It was incorporated in the early 1960s’.
i. Cost Leadership- Hotel Corallo had the option of switching from 3 star to 4 star
hotel, but it continued as a 3 star hotel, enabling it to provide the best quality food
and lodging at a lower price as compared to other 5 star hotels. Thereby, the hotel
continued to make a good amount of profit.
ii. Differentiation Strategy- This hotel also offers Entertainment in form of live music,
games etc. which use to be organised at hotel and also at the sea beach area. It
has been done for the first time in hospitality industry.
iii. Focus- Hotel focuses on that segment of population who prefer to carry pets with
them. Soundproof rooms, dog baskets, bowls for dog feeding etc are provided by
the Hotel Corallo (Bertozzi, Ali and Gul, 2017).
Porter’s Five Forces
This model was designed to uncover important insights relating competition.
The five forces are as follows:
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Competitive Strategy
Competitive Rivalry- This force helps the company to know how severe the competition
is in the market. This force is considered to be strong if there are many competitors and
customers can easily switch to the other competitor and vice versa.
Bargaining Power of Supplier- This force examines the power of suppliers and examines
how much suppliers are actually there.
Bargaining Power of Customers- Under this force, the power of consumer is low if
sellers enjoy the monopoly the power is high if there are many sellers and less consumers.
Threat of New Entrants- This force concentrates on how easy it is for the prospect
competitors to join the market.
Threat of Substitute product/service- How convenient and easy it is for the consumers
to switch for the substitute product is studied under this force.
Example: Toyota Motor Corporation.
Porter’s Five Forces of Toyota Motor Corporation
i. Competitive Rivalry(Moderate)-
 Automobile industry has already reached to its maturity though it
is wide.
 Greater customer loyalty
ii. Bargaining Power of Supplier(Weak)- The power of suppliers is weak because:
 There are many suppliers
 Required inputs are readily accessible
iii. Bargaining Power of Customers(Strong)-
 Buyers have enough substitutes and can easily switch to other
car brands.
 Customers do not have fear of backward integration
iv. Threat of New Entrants(Weak)-
 Amount of capital required is really high
 Getting economies of scale proves to be tough for new
companies
v. Threat of Substitute product/service-Substitutes available are bicycles, trains,
buses etc. which cannot offer the same kind of comfort (Harvard, 2013).
SWOT Analysis
SWOT framework is prepared to evaluate the external and internal environment of the
organization.
The SWOT stands for:
Strength: It includes the internal factors which act as an asset to the company and could
assist in grabbing the chance and could aid in overcoming threats.
Weakness: These are in house factors resisting an organisation from taking the
opportunities.
Opportunity: The uncontrollable aspects which prove to be beneficial either tangible or
non-tangible are opportunities for the company.
Threats: The threats are the elements that are detrimental and uncontrollable for the
company.
Example: SAMSUNG
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Competitive Strategy
SWOT Analysis of SAMSUNG
i. Strengths-
 Samsung enjoys a high reputation in respect of its brand
 Its product are manufactured in china but it is formulated in Korea
ii. Weaknesses-The prices of Samsung products are sometimes high as compared to
other competitors.
iii. Opportunities-It is expected that the market of china will grow at a pace of 40%
and more as compared to global speed.
iv. Threats-
 The speed at which innovation is going really fast
 Higher competition is prevailing in the industry (Omer, 2019).
PESTEL Analysis
It is carried out at the time of expansion, merger and acquisition and even at the time of
introducing a new product.
PESTEL stands for:
P (Political): Here, environment related to Government laws, rules, regulations, tax laws
etc. are studied.
E (Economic): The factors like interest rates, inflation rate, GDP, exchange rate, spending
capacity of the population etc. are examined.
S (Social): The focus here is on attitude, behaviour, and growth etc of the population.
T (Technology): The companies evaluate the changes in technologies, automation and
innovation
E(Environment): The emphasis is on natural calamities, weather, climate, seasonality etc.
affecting the company’s products/services.
L(Legal): The factors like legislations, international treaties, ethical issues, local laws are
studied before starting the operation.
Example: Amazon India. PESTEL is employed here to analyse the effects of India’s
recent external environment on Amazon.
Political- India is a democratic country, which works on the concept of giving equal
chance to all the business and in order to promote this a circular has been passed
restricting the Amazon from selling the goods of those companies in which it holds equity
shares.
Economic- After demonetisation in India, Amazon switched off its COD and enabled
wallets and electronic payment methods. This led Amazon to earn thrice of what it earned
before (NDTV, 2016).
Social- After analysing the increasing health consciousness among the population
Amazon is planning to open Medplus in India (Economic Times, 2018).
Technology- With the advent of Jio, Internet became cheap and accessible after which
Amazon launched Echo Plus, Alexa, kindle etc. (Economic Times, 2018).
Environment- During Indian festivals people found congested to shop from retail outlets.
Amazon provided an online platform to facilitate shopping at discounted rates during
festivals. Therefore, it increased the sales (Indus Net, 2015).
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Competitive Strategy
Law- Amazon’s sales can be hampered by $250Million because of the new Indian circular
which restricted Amazon from selling the products of those companies in which it holds the
equity shares (CNBC, 2019).
So now we know well that with the help of different competitive strategies, a company can
easily frame out the plans to deal with the changing requirements of customers, law,
competitors etc.
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Competitive Strategy
References:
Bertozzi, F., Ali, M.C. And Gul, F. A. (2017).Porter’s Five Generic Strategies; A case Study
from the Hospitality Industry. International Journal For Research In Mechanical & Civil
Engineering, [online] 3(2), p. 2-18. Available 5 April, 2019
https://gnpublication.org/index.php/mce/article/view/533
Biswas, M. (2015). Why Is Ecommerce So Successful In India?.[online] Indus Net
Technologies. Available 5 April, 2019 https://www.indusnet.co.in/ecommerce-successful-
india/
Choudhury, S.R. (2019).If you hold Amazon shares, here's what you need to know about
India's e-commerce law. [Online] CNBC. Available 5 April, 2019
https://www.cnbc.com/2019/02/05/amazon-how-india-ecommerce-law-will-affect-the-
retailer.html
Economic Times, (2015). Ease of doing business: Only 3 documents needed for imports
exports. [Online] Available 5 April, 2019
https://economictimes.indiatimes.com/news/economy/policy/ease-of-doing-business-only-
3-documents-needed-for-imports-exports/articleshow/46545405.cms?from=mdr
Economic Times, (2018).E-commerce players brace for big battle over online pharma.
[Online] Available 5 April, 2019
https://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/e-
commerce-players-brace-for-big-battle-over-online-pharma/articleshow/65062615.cms?
from=mdr
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Competitive Strategy
Economic Times, (2018).Jio’s entry led to $10billion annual savings for India: Report.
[Online] Available 5 April, 2019 https://economictimes.indiatimes.com/tech/internet/jios-
entry-led-to-10-billion-annual-savings-for-india-report/articleshow/63637786.cms
ndtv.com, (2016).Demonetisation Helped Clock Triple-Digit Growth, Amazon India Says.
[Online] Available5 April, 2019 https://gadgets.ndtv.com/internet/news/demonetisation-
helped-clock-triple-digit-growth-amazon-india-says-1635120
Nkomo, T. (2013).Analysis of Toyota Motor Corporation. [Online] Harvard. Available 5
April, 2019 https://scholar.harvard.edu/files/tnkomo/files/analysis_of_toyota.pdf
Omer, K. O. (2017). SWOT Analysis Implementation’s Significance on Strategy Planning
Samsung Company as an Example. Journal of Process Management-New Technologies
International, [online] 7(1), p. 60-61. Available 5 April, 2019 https://scindeks-
clanci.ceon.rs/data/pdf/2334-735X/2019/2334-735X1901056O.pdf
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