HI6006 - Competitive Strategy: Development Tools for Two Firms

This essay examines competitive strategy through the lens of development tools, focusing on Porter's Five Forces and PESTLE analysis. It analyzes two companies: Estia, an aged care company, and Abbott, a pharmaceutical company, to illustrate the application of these tools. The Porter's Five Forces model is used to assess the competitive intensity within Estia's industry, considering threats of new entrants, bargaining power of buyers and suppliers, threats of substitutes, and rivalry among competitors. The PESTLE analysis evaluates the macro-environmental factors affecting Abbott, including political, economic, social-cultural, technological, legal, and environmental influences. The analysis concludes that these development tools are crucial for strategic decision-making, forecasting, and identifying strengths and weaknesses in the business environment, ultimately enabling companies to achieve growth and profitability.

Running head: Competitive Strategy
Competitive Strategy

Competitive Strategy
Introduction
In this paper, the discussion will be made on development tools. The development tools that will
be discussed in this paper are Porter five force analysis and Pestle analysis. It has been seen that
these tools help the company to identify the environment so that it can be simple to accomplish
goals and objectives in a proper manner. To achieve competitive advantage the company has to
focus on the development tools so that the operations can take place in a smooth manner. It is
essential for the company to consider these tools as it helps to complete the activities in the right
direction. There are two companies which are selected for the paper first is Estia which is Aged
Care Company and second is Abbott which is a pharmaceutical company. The proper discussion
will be made by considering these two companies for this paper.
It is important for the company to focus on these development tools as through this actual
position of the company can be evaluated. By focusing on these development tools companies
will be able to analyze the actual position which can help to compete with the other competitors
prevailing in the market.
Estia (Aged Care Company)
Porter Five force Model
This is one of the development tools which are taken into consideration so that proper focus can
be given to competitive forces so that growth and profits can be earned. This tool gives
emphasis on the overall activities of the company.
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Competitive Strategy
(Source: Porter five force analysis, 2018).
Threats of new entrants
There are many new companies who are entering the market by offering the same services. It can
be analyzed that when new companies enter into the market then the negative impact is seen on
growth. The pressure which company has to face is related to low price strategy. The level of
threat is high in this sector (Grant, 2016).
Bargaining power of buyers
Bargaining power of buyer is high in this sector as they get attracted towards the best and fewer
prices offered by the company. It can be seen that if the company is giving effective services
then it can be simple to attain a large market share and also through this goodwill can be
maintained. The bargaining power of buyers can be managed if the proper customer base is
maintained.
Bargaining power of suppliers
The companies who are in the healthcare sector can easily avail raw materials from their
suppliers and also the suppliers who are powerful in this sector can focus on the power of
negotiation. It is essential to create dedicated suppliers whose profits depend on the company.
The example can be taken of Wal Mart and Nike who have less bargaining power.
Threat of substitutes
The substitution rate is high in this sector as there are companies who are offering the same type
of services in the marker. The threat can be reduced by emphasizing on a service-oriented firm.
The company emphasizes on the need of the customers rather than focusing on what the
customer wants to purchase. The switching cost of consumers can assist in managing the threat
of substitutes (Rothaermel, 2016).
Rivalry among the competitors
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Competitive Strategy
Rivalry in this sector is high so it is important for the company to reduce the prices of the
products. It has been seen that a company can manage the competition level by creating
sustainable differentiation and also by creating the scale that can be completed in a proper
manner. Collaboration can also be the factor that can help to enhance the market share rather
than giving competition in the small market. Through this activities can be conducted in a proper
manner and by reducing the level of competition (Porter and Heppelmann, 2014).
Abbott (Pharmaceutical Company)
Pestle Analysis
Political factor
It has been analyzed that public expenditure on health is less if the comparison is made with
other countries and also the pharmaceutical company is more dominant in the private sector.
There are facilities of the government which help to attract foreign investors by focusing on
policies of investor-friendly and tax incentives. The government focuses on offering the drugs by
focusing on telemedicine in Australia. The emphasis of the government is also on boosting good
partnerships with the private and public sector. The medical tourism is also promoted by the
government (Ho, 2014).
Economic factor
The expenditure related to health care can be availed from the patient just due to high income. It
has been seen that the merger of pharmaceutical companies has projected the stock value growth
of 10.5% in the period 2003 to 2010. The spending behavior of the public in Abbott will enhance
as there are many cases of rising and lowering the income (Moutinho and Phillips, 2018).
Social-cultural factor
The main focus of the company is on offering good services to people so that their health can be
maintained. The rate of population in Australia is high so there is a high consumption of
medicines. The increase in the overall literacy rate has brought improvisation in the healthcare
sector.
Technological environment
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Competitive Strategy
The company is offering cost competitive medical treatment so that the satisfaction level of the
people can be satisfied. It is important for the company to focus on speeding up the technology.
If there is a slow speed of technology then it can take more time and of technology is fast then
profits can be increased. In Abbott, the technological impact is analyzed on product offering and
also on diffusion related to technology (Jarzabkowski and Kaplan, 2015).
Legal environment
The government focuses on employment law, data protection and also on safety law so that
people can easily avail the services. It has been seen that these laws are legal and it is considered
by the company so that growth can be achieved.
Environmental factor
To operate the activities in the market, the company focuses on various factors like weather,
climate, and change. It is important to focus on proper rules so that operations can take place in
the right direction. It has been analyzed that environmental factor has been an important aspect in
the present scenario. The health issues are raised because of the air pollution and water pollution.
So, the chance to earn a profit is more and also the focus is on managing the environment.
Conclusion
Therefore, by analyzing the paper it has been concluded that this development plays a great role
in accomplishing the goals and objectives of the company. It is important for the company to
focus on these tools so that accurate decision can be made. Without these development tools, the
company does not forecast their future. Forecasting of the future can be done with the help of
these tools. It is essential to emphasize proper growth so that the company can easily achieve
high profits. Through these tools, it can be simple for the company to analyze the competition
level in the market and also it will help to consider the strategies which will be beneficial for the
growth of the company. These tools have an important role in identifying the weakness and
strength present in the business environment. Without proper investigation, it is not simple for
the company to focus on the right direction and consider proper operations for the company. By
taking into consideration these tools it can be easy for the company to achieve positive results in
an effective manner.
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References
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Ho, J.K.K., 2014. Formulation of a systemic PEST analysis for strategic analysis. European
academic research, 2(5), pp.6478-6492.
Jarzabkowski, P. and Kaplan, S., 2015. Strategy tools‐in‐use: A framework for understanding
“technologies of rationality” in practice. Strategic Management Journal, 36(4), pp.537-558.
Moutinho, L. and Phillips, P., 2018. Strategic analysis. In Contemporary Issues in Strategic
Management (pp. 46-79). Routledge.
Porter five force analysis., 2018. edrawsoft. [Online]. Available at:
https://www.edrawsoft.com/five-forces-chart.php.[Accessed on 8 August, 2018].
Porter, M.E. and Heppelmann, J.E., 2014. How smart, connected products are transforming
competition. Harvard Business Review, 92(11), pp.64-88.
Rothaermel, F.T., 2016. Competitive advantage in technology intensive industries.
In Technological innovation: Generating economic results (pp. 233-256). Emerald Group
Publishing Limited.
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