Strategic Development Tools for Business Growth and Analysis

This report provides a comprehensive overview of strategic development tools, focusing on PESTLE analysis, Porter's Five Forces model, and the Ansoff Matrix. It explains how these tools are used to understand the external business environment, assess competitive forces, and identify growth opportunities. The report delves into the practical application of these tools through case studies of companies such as PepsiCo, Coles, and Woolworths, demonstrating how they have been affected by political, economic, social, technological, legal, and environmental factors. The analysis includes market share, supplier power, customer negotiation, and industry rivalry, illustrating the importance of strategic tools for business activities and decision-making.

RUNNING HEAD: STRATEGY DEVELOPEMENT TOOLS
Strategic Development Tools

STRATEGY DEVELOPEMENT TOOLS 1
Introduction
The essay is prepared on ‘Strategic Development Tools’. It comprises of various tools that can
benefit the business. It emphasized on the role of PESTLE Analysis, Porters Five Force
Analysis and Ansoff matrix model. Additionally, it comprises of the practical examples of the
recognized companies that are affected by the factors of strategic tools. The key purpose of
the discussion is to gain an effective knowledge of the strategy development tools through
practical application.
Meaning
Strategic development tools assist in identifying and researching the opportunities, threats
prevailing in the business environment (Verlag, 2017).
Role of strategic tools
They attain a high significance as they provide direction to the business. It assists in
determining the impact of the environment forces on the performance of the business.
Through its application, the business can avail benefits in the competitive business
environment (Verlag, 2017).
It provides skill and knowledge to the higher management in respect to achieving
organizational goals. With its usage, a business can be proactive rather than reactive. It
assists in enhancing market share and profit. It allows the business to create effective
planning to foster organizational growth. Thus, it can make the business more durable
(Birkinshaw, 2016). Some of the recognized tools are PESTLE Analysis, SWOT Analysis and
Porter’s Five Force Analysis (Insight, 2019).
PESTLE Analysis
PESTLE Analysis is an effective instrument used for understanding the outward business
environment of a business. It assists in analyzing the macro-environment factors that have a
major influence on business execution in the market. It is mainly useful for the new business
to determine a suitable business environment or entering a foreign market. It deals with
understanding the Political, Economic, Social, Technological, Legal and Environmental factors
in respect of a country (Parera , 2017).

STRATEGY DEVELOPEMENT TOOLS 2
Political environment deals with the government actions that have an effect on the operations
of the business (Humphreys , 2015). Economic environment refers to the external monetary
factors that impact the purchasing behavior of the consumer. It includes GDP, Inflation, and
Per capita income of the country. These factors have a direct effect on business profit
(Robertson , 2015).
Social environment includes factors such as cultural norms and values of a country. In order
to sustain longer in a country, a business must align with the religious norms and customs
(Humphreys , 2015). Additionally, Technological environment determines the availability of
technology progress in the country. It includes factors such as internet speed and innovation
level (Parera , 2017).
Environmental factor deals with climate and natural vegetation of the country that can
influence the business environment of a company. Moreover, the Legal environment refers to
the attitude of the government towards the business in a country (Robertson , 2015).
Example: PepsiCo is an American multination company. It is a globally recognized beverage
brand (Forbes, 2019). Previously, it had faced an impact on its business with respect to
Economic, Social, Technological and Legal factors. It can be assessed from the factors
described below:
Political factor
As mentioned above, Pepsi is an international brand. It has its consumer market in various
countries including China, Australia, India and Japan (PEPSICO, 2019). Thus, to understand
the cross border situations, it has to align with the political factors of each of the countries
mentioned above.
Economical factor
It has analyzed that because of the fall in GDP and Economic growth (Economic Downturn), it
had led to the enhancement of sale. It is because a large section of people was jobless and
was spending time with peer groups resulted in high Pepsi consumption in the year 2008
(Capital, 2019).

STRATEGY DEVELOPEMENT TOOLS 3
Social factor
It is a non-alcoholic brand. Therefore, it has been able to successfully establish its market in
countries with low alcoholic consumption. It has successfully understood the cultural
importance of religious countries like India. Hence, it resulted in a large consumer base for
Peps in India (Gupta , 2014).
Technological factor
Pepsi has inclined as per new technological up-gradations in the technological environment. It
has followed the trend of social media advertisement. It had befitted the company in gaining
consumer engagement for the brand (Hardy, 2011).
Legal factor
Pepsi has also faced a legal implication in India. Previously, it was accused of using
contaminated water. It has led to a fall in product demand and resulting in high cost (Bushan
& Malviya , 2018).
Environmental factor
It is assumed that Environmental factors have an indirect effect on Pepsi but do not have the
power to alter its sales and profit.
Porter’s Five Force Model
Porter’s Five Force model is also a significant tool used for evaluating the company’s
competitive environment in the market (Magretta, 2011). It analyzes the market based on five
factors. It includes negotiating power of buyer, bargaining power of suppliers, the threat of
substitutes, threat of new entry and industry rivalry (E. Dobbs, 2014).
Bargaining power of customer deals with the ability of the consumer to drive down the price.
The threat of substitutes arises from competitors that rival’s product can be used in place of
determines the. Bargaining power of suppliers states how easily suppliers can drive up the
cost of inputs. The threat of new entry is the potential of new competitors into an industry.
Lastly, industry rivalry determines the competition prevailing in the industry. It includes the
number of competitors and their ability to undercut a company (Magretta, 2011).

STRATEGY DEVELOPEMENT TOOLS 4
Example: Coles is an Australian company that has a high number of supermarket retail store.
Coles faces high competition from the rival firms including Woolworths, Tesco and Walmart
(Keith, 2012). It is assessed that it had befitted with the effective usage of Porter’s five-force
model in the real world. It can be examined from the factors described below:
The threat of new entrant
Coles attain low threat from the new entrant in the hypermarket industry because the large
capital is required to enter the Australian supermarket. It has established goodwill, patents
and trademarks that generate the least threat from the new competitors. It also attains loyal
customers as it has a share of 30.3% in the Australian market (Morwood, 2018).
Figure 1: Coles market share
Source: (Retail World , 2019)
Suppliers bargaining power
Coles attains strong bargaining power, as there are few suppliers in the Australian market.
Additionally, there are enormous numbers of buyers in the market (Worldometers , 2019).
Negotiating power of customers
Coles had been successful as the negotiating power of its consumers is low. It is because
there are large numbers of buyers and there is less availability of alternative products
(Worldometers , 2019).
Industry rivalry
It is assessed that Coles faces high competition from the existing players such as Target and
Woolworths. It is because competitors are of bigger size and attain a fine share of consumer

STRATEGY DEVELOPEMENT TOOLS 5
strength in the market (Woolworths, 2019). Additionally, Coles offers identical products as its
rivals.
The threat of substitute product
Coles attain intermediate threat of substitute. It is because rival firms are offering attractive
discounts to gain potential customers (Khalil, 2019).
Ansoff Matrix Model
Ansoff matrix model is used to identify the growth opportunities of a business. It provides four
diverse growth strategies. It includes market penetration, product development, market
expansion and diversification. Market penetration emphasis on enhancing the sale of the
enduring product in the existing market. Product development emphasizes on presenting new
products in the existent market. Moreover, market development laid attention on the entrance
for the new market using enduring products. Lastly, Diversification focuses on entering a fresh
market with the introduction of new merchandises (Hussain, 2013).
Example: Woolworths is a recognized Australian company (Keith, 2012). It had adopted the
three strategies of Ansoff matrix model including market penetration, product development
and market development.
Market Penetration
As per market penetration, it had taken the use of subtle advertising messages to enhance
the sale of its products in Australia (Mitchelson , 2018).
Product development
It has also adopted the product development strategy by selling households products, pet
supplies and stationery items in the Australian home market (Moving, 2012).
Market development
Additionally, it has followed market development strategy as it had established the retail
stores in a new market including New Zealand, Europe and Africa with the enduring products
(Khumalo, 2016).

STRATEGY DEVELOPEMENT TOOLS 6
Conclusion
The essay is summarized on ‘Strategy development tools ’. It includes the major aspects of
strategy development. Thus, the above discussion concludes that PESTLE Analysis, Porter’s
Five Force Model and Ansoff matrix are significant tools that have a major impact on business
activities. Additionally, PepsiCo, Woolworths and Coles are the practical examples that prove
the significance of strategy development tools in the market.

STRATEGY DEVELOPEMENT TOOLS 7
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STRATEGY DEVELOPEMENT TOOLS 8
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