Business Strategy: PESTLE & Porter's Five Forces Model Application

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This report provides a competitive strategy analysis using the PESTLE framework for Australian Pharmaceutical Industries Ltd and Porter's Five Forces model for St. George Aged Care Centre. The PESTLE analysis identifies political, economic, social, technological, legal, and environmental factors affecting API Ltd, including trade regulations, economic cycles, social attitudes, technological reforms, legal frameworks, and environmental concerns. Porter's Five Forces model assesses the bargaining power of suppliers and buyers, threats from new entrants and substitute products, and competitive rivalry within the aged care market, highlighting the factors influencing profitability and strategic decision-making for St. George Aged Care Centre. The analysis aims to provide insights into the external macro factors impacting these businesses and inform strategies to enhance their competitive positions. Desklib offers a range of study tools and resources, including solved assignments and past papers, to support students in their academic endeavors.

Competitive Strategy
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Contents
Introduction................................................................................................................................ 3
PESTLE Analysis of Australian Pharmaceutical Industries......................................................3
Porter’s Five Force Model of St. George Aged Care Centre.....................................................4
Conclusion..................................................................................................................................5
References.................................................................................................................................. 6
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Introduction
Australian Pharmaceutical Industries Ltd is one of the prominent Australian pharmaceutical
distributors with the highest growth. However, being a parent organisation of Priceline
Pharmacy, Pharmacist Advice, and Soul Pattinson Chemist, the company deals in the
wholesale delivery of the products, marketing, retail, and business advisory services. At
present, the company is linked with more than 4000 independent pharmacies across Australia.
Talking about the St. George Aged Care Centre, it is a 111 bedded aged care centre in
Australia. The home is operated by a dedicated team of specialist and nursing staff. The
vision of the care centre is to deliver the best quality living within a family-oriented,
comfortable, person-related home-like environment.
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PESTLE Analysis of Australian Pharmaceutical Industries
PESTLE Analysis will detail out the operating challenges API ltd will encounter in the macro
environment (Aithal, 2017).
Political Factors: Political factors can affect the long-term profitability of API ltd while
operating in a different market or nations. The major dealing of the company is in healthcare
equipment and services in Australia and other countries as well. This increases the exposure
to a wide range of political risks. These may include trade regulations, political instability and
the importance given on health care sector by the nation, Anti-trust law, and taxes on import
and export of drugs (Ho, 2014).
Economic Factors: These factors have two classifications, namely macro environment, and
microenvironment. The former comprises interest rate, inflation rate, foreign exchange rate,
economic cycle. All these factors affect the demand for services and investment of API ltd in
a country. The micro factors include the competition, growth rate, inflation, consumer
spending, etc., can affect the organisation’s strategy (Peng and Nunes, 2017).
Social Factors: Society can affect the modus operandi of API ltd. Since it has to operate in
Australia, the Affordable Care Act can increase the cost of providing services. If it happens,
then the company may lose its customer base. Shared beliefs and people's attitude also play a
significant role in influencing the marketing message for the customer. These factors
comprise culture, leisure interest, education level, attitude towards health consciousness,
demographic, etc.
Technological Factors: The market is constantly changing and to cope with the challenges,
the API ltd is bringing certain technological reforms. This would affect the product offering
and impact the cost structure of the organisation. The company has established an R&D
department that analyses the current market demand and develops a product in accordance
with it (Peng and Nunes, 2017).
Legal Factors: The legal framework and rigid legalities in countries like the USA are
affecting the organisation’s strategies. The legal factors include discrimination law, contract
law, employment law, data protection, consumer protection, health and safety laws,
copyright, etc.
Environment Factors: Being a drug-dependent industry, the API ltd should understand the
impact of each drug and their waste products on the environment. Every market whether local
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or international has its norms liabilities for environmental protection. Some of the
environmental factors that API should consider are waste management, use of renewable
energy, recycling principles, environmental protection and impact assessment.
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Porter’s Five Force Model of St. George Aged Care Centre
Porter’s five force model can be used to analyse the profitability and create a strategy to
enhance it (Aithal, 2017).
Bargaining Power of Supplier: The organisation purchases a wide range of raw material
from its suppliers. This makes the suppliers a dominant force. Bargaining power of supplier
can reduce the margin of the aged care centre significantly. Suppliers can negotiate the prices
and influence the pricing strategy of the long-term care facilities (E. Dobbs, 2014).
Bargaining Power of Buyers: The potential of the customers to make a purchase also affect
the pricing strategy of a company. The customer base of St. George Aged Care Centre is
small but powerful. This gives them a large bargaining power. This forces the organisation to
offer discounts and rebate on regular bases. It also includes rapidly launching new services
for the customers in order to bring the uniqueness. This would reduce the bargaining power
up to some extent.
Threats from New Entrants: Being a renowned organisation and major player in aged care
market, the force of new entry is dull. However, if a new entrant comes up with an innovative
strategy and a large amount of funds, then it can be a real problem for the organisation. A
new entrant is considered to be a weak force because of the high scale of economies of
existing firms and the high cost of brand development and entry. If the company wants to
curb the new entrants, then it should work on innovate its services.
Threats of Substitute Product: Substitute services can strongly reduce the profitability as
customers can avail similar services at a low price. The threat is also considered to be high
when the value proposition is offered. Since the switching cost is very moderate, there are
high chances for the customer to avail substitute. However, the quality of substitute service is
poor. Therefore, the company can increase its quality in order to discourage customers to go
with the substitute. The organisation has to be service-oriented instead of product-oriented (E.
Dobbs, 2014).
Competitive Rivalry: The rivalry among the key players in the aged care market can
significantly decrease the prices, thereby affecting the overall profits. St. George Aged Care
Centre operates in a competitive market. This competition affects the long-term profitability
of the company (Adi, 2015). This is considered to be a strong force because the cost of
switching is moderate and large aggressiveness of the firms. This can be tackled by
establishing a scale and sustainable differentiation so that the company can compete better.
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Conclusion
For the Australian Pharmaceutical Industries Ltd, the PESTLE analysis is used as the aim
was to understand the external macro factors affecting the business. Porter's five force model
can be greatly affected by the macro factors. Therefore, five force models cannot be used for
API ltd. PESTLE Analysis detailed out the operating challenges API ltd encounters in the
macro environment. By analysing Porter's five forces, the organisation could gain a clear
picture of how profitability gets affected. This way they can take measures in order to make
those forces favour them.
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References
 Adi, B., 2015. An Evaluation of the Nigerian telecommunication industry
competitiveness: Application of Porter’s five forces model. World, 5(3).
 Aithal, P.S., 2017. An Effective Method of Developing Business Case Studies based
on Company Analysis.
 E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of
industry analysis templates. Competitiveness Review, 24(1), pp.32-45.
 Ho, J.K.K., 2014. Formulation of a systemic PEST analysis for strategic
analysis. European academic research, 2(5), pp.6478-6492.
 Narayanan, V.K. and Fahey, L., 2015. The relevance of the institutional
underpinnings of Porter's five forces framework to emerging economies: An
epistemological analysis. Journal of Management Studies, 42(1), pp.207-223.
 Peng, G.C. and Nunes, M., 2017. Using PEST analysis as a tool for refining and
focusing contexts for information systems research.
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