HI6006 Competitive Strategy: An Essay on Strategy Development Tools

This essay provides an analysis of strategy development tools used in business, focusing on SWOT analysis, Porter’s Five Forces, and the Resource-Based View (RBV) model. It examines the functionality of each model and how they are applied in organizations, using examples from companies like Coca-Cola, General Motors, and Zara. The SWOT analysis helps in identifying a company's strengths, weaknesses, opportunities, and threats, while Porter’s Five Forces assesses the competitive intensity and profitability of an industry. The Resource-Based View focuses on identifying and leveraging strategic resources to gain a competitive advantage. The essay concludes that these tools are essential for management in creating effective business strategies and sustaining future growth.

Running head: COMPETITIVE STRATEGY 0
Competitive Strategy

COMPETITIVE STRATEGY 1
The management of a company is responsible for assessing the business environment and
implementing strategies in order to increase its profitability and expand its operations.
However, the management faces a number of external and internal issues which affects its
operations and profitability. In order to address these issues, the management uses different
strategy management tools while implementing business policies. A strategy development
tool helps management in collecting necessary information regarding internal and external
factors in an organisation which can be used by them while implementing business strategies
(Kunc and Bhandari, 2011). This essay will focus on three strategy development tools which
include SWOT analysis, Porter’s five forces and Resource-based view model. This essay will
examine the functionality of each model and discuss how they are used in an organisation.
Examples of different corporations will be analysed in the essay in order to ascertain the role
of each model.
SWOT
SWOT analysis is defined as a process that identifies a company’s strengths, weaknesses,
opportunities and threats. It is an analytical framework for assessing what actions can be
taken by a business based on internal (strengths and weaknesses) and external (opportunities
and threats) factors (Sevkli et al., 2012). A SWOT analysis is used by senior executives in an
organisation such as Chief Executive Officer, Chief Operating Officer and senior level
executive in order to determine what assists the company in achieving its corporate goals and
what obstacles are necessary to be overcome in order to achieve desired results. It assists
management in understanding where the organisation is today and where it will be in the
future, and they can use this information to implement strategic policies that focus on
sustaining its growth (Yuan, 2013).
For example, the Coca-Cola Company noted that its strengths include vast distribution
network situated across the globe and a well-known brand name that is recognised by people
worldwide. It opportunities include business expansion in developing and emerging markets
and diversification of products. The company’s weaknesses include competition with
PepsiCo, the absence of healthy beverages and lack of product diversification (Baah and
Bohaker, 2015). Threats include growing popularity of “healthy” beverages, subsequent
competition and foreign currency fluctuations. In order to address these issues, Coca-Cola
increased its investment in marketing and expands its other beverages categories which result
in increasing company’s profits and making it the largest soft drink manufacturer.

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Porter’s Five Forces
The five forces model is substantially popular among companies since it assists them in
analysing different external factors that influence their profitably. The tool was given by
Michael Porter, and it focuses on evaluating various strengths and weaknesses of a sector.
The five forces which were given by Porter include competition in the industry, the potential
of new entrants into the industry, power of suppliers, power of customers, and the threat of
substitute products. Generally, the tool is used by senior level managerial personnel in an
organisation to search for attractiveness and profitability (Mathooko and Ogutu, 2015). It is
used by management while entering into new markets or launching new products or services
to ascertain an industry’s profitability and attractiveness.
The senior level management uses this model before launching a new product or entering a
new market, so they are able to evaluate its attractiveness which enables them to form
strategic policies (Vining, 2011). General Motors (GM) is a good example. The company
operates in the automobile industry, and it offers its products across the globe. The
competition in the automobile sector is high because a large number of companies operate in
the industry such as Ford, Honda, Toyota and others (Acharya, Schaefer and Zhang, 2015).
Buyers’ power is moderate due to high switching costs and small size of individual buyers.
Suppliers’ power is weak because there are a large number of suppliers available and GM did
not face high switching costs. The threat of substitutes is moderate because there is a low
variety of substitutes and moderate switching costs available. The threat of new entrance is
low because of high capital requirements, fierce competition and moderate switching costs
(Cooley and Cooley, 2011). These factors enable top-level management of GM to implement
appropriate policies for sustaining their future growth.
Resource Based View
The Resource-based view (RBV) is an approach to generating competitive advantage in a
corporation. It is a managerial framework that is used in order to identify strategic resources
that have a potential to deliver competitive to an enterprise. A corporation exploits these
resources in order to sustain competitive advantage (Nath, Nachiappan and Ramanathan,
2010). In order to generate a competitive advantage based on a resource, it is necessary that
such resource shows attributes of the VRIO model. The VRIO model analyses a resource
based on value, rarity, inimitability and organisation. This model is based on both tangible
and intangible assets in a company. Tangible assets include plant, machinery, cash and other

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physical assets. Intangible assets include trademarks, copyrights, patents, and other
intellectual rights. Generally, the senior level management uses this model by consulting with
experts from different departments who have knowledge of specific resources (Wong and
Karia, 2010).
For example, Zara is a Spanish fast fashion retailing brand which is a subsidiary of Inditex.
The company is one of the largest apparel brands in the fashion industry, and it has gained the
position by generating a competitive advantage over its competitors. One of the major
resources of the enterprise is its responsive supply chain which delivers the latest fashion
clothes to its retail stores in just 5-6 weeks after they are launched (Fernie and Sparks, 2014).
The management has hired a team of specialised fashion hunters who visit fashion shows to
collect information about the latest trends and send such information to the firm’s
headquarters. After that, the in-house manufacturing team creates new clothes by using a
wide variety of materials which are available in the warehouse. Mainly, the production
facilities of Zara are situated in-house because it increases their production capabilities than
compared to outsourcing (Mefford, 2011). It provides a value to the corporation which is rare
in the fashion industry because other manufacturers outsource their operations to save costs
and it took them 4-5 months to launch new products. The supply chain of Zara is inimitable,
and it is effectively organised by the company to generate a competitive advantage.
Conclusively, there are a number of tools used by the management of an organisation while
creating business strategies. These tools enable the management to evaluate internal and
external strengths of an environment that influence a company’s operations. This report
analysed SWOT, Porter’s five forces, and Resource-based view model. Each model analyse
different factors and provide critical information to the management which is used by them
for generating a competitive advantage. The SWOT analysis evaluates internal strengths and
weaknesses of a corporation for creating business policies based on external opportunities
and threats. Management uses Porter's fives forces framework for analysing competitiveness
and profitability in an industry. The Resource-based view model enables management to
determine internal assets that generate a competitive advantage in the enterprise. Each
strategy development tool is used for different purposes by management, and it assists
companies in sustaining their future growth.

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