Evaluating Strategy Development Tools for Competitive Advantage

This essay provides an overview of various strategy development tools crucial for businesses to identify and address internal and external factors impacting their operations. It delves into PESTEL analysis, which assesses political, economic, social, technological, environmental, and legal factors affecting market growth. The essay also examines SWOT analysis, a technique for identifying strengths, weaknesses, opportunities, and threats within a business. Furthermore, it discusses Porter's Five Forces, a tool used to evaluate competitive intensity and market attractiveness, and the PROFIT (VRHN) analysis, which helps companies gain a competitive advantage by focusing on valuable, rare, hard-to-imitate, and non-substitutable factors. The essay emphasizes the importance of these tools in strategic planning and decision-making for businesses operating in competitive markets.

Running head: STRATEGY DEVELOPMENT TOOLS
STRATEGY DEVELOPMENT TOOLS
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1STRATEGY DEVELOPMENT TOOLS
This essay aims to discuss various types of Strategy Development Tools that help the
business to identify and consider all the potential internal as well as external impacts on the
business. Strategy analysis is the process of researching the external business environments
within which the organizations operates and the internal atmosphere of the business itself.
This is the reason why the strategy development tools are important. For effective strategy
analysis help the companies to facilitate, research, analyze and map their abilities so that
these organizations can achieve future envisioned status. These tools help the organizations
understand their processes, technology, people’s capabilities thus develop their business
(Malysheva et al. 2016).
PESTEL
This particular tool is useful to the external environment of the business in which it
exists. It is useful for judging the political, economic, social, technological, environmental
and legal atmospheres of the business. This toll is mainly used for evaluating the market
growth of the region in one hand and disclose the position, direction and potential of the
market. The political factors include the regulations and policies of the government of that
particular market. These regulations include employment laws, tax policies, import export
facilities and environmental regulations. These factors actually affect the business of the
international firms as well as the domestic SMEs. The firms can only operate when the
country has political stability and trade restrictions.
The economic factors include the purchasing power and cost of capital of any
organization. The economic factors include the interest rates, economic growth, and
purchasing power of the customers, inflation, currency exchange rates, demand and supply,
and recession in the market. The economic factors if the market decides what type of
businesses will be taking interests to enter the market. This factor is also closely related with
the global economy as due to globalization, the exchange rates, GDP growth and other
monitory policies of a country depend upon the rise and fall of the international economy
which affect the inner workings of the companies also.
The social factors include the potential size of the market, the needs and demands of
the customers, their lifestyle and buying capacity matching with the product and service e of
the companies. In addition to this, the age demographics, population growth and health
awareness are also the factors involving the social factors affecting the business of a market.

2STRATEGY DEVELOPMENT TOOLS
In this social media era the business organizations are reaching the customers and identifying
their needs on the basis of the gaining popularity in the social media.
The technological factors involve the support of the governments of the countries to
develop the technological support to business in the market. Technological support of the
government aims to introduce automation, investment incentives and other technological
advancement so that both the companies as well as the potential customers can identify their
needs and buy products more easily than before. These advancements influence the barriers
to entry a new market and the buyer’s decisions effectively. The more markets are
technologically advanced, the more the government can attract the companies to do business
in the market. With globalization and 4thindustrial revolution, most of the international
business organizations are making themselves digitized to reach more customer bases within
limited time.
In PESTLE analysis the legal factors include the legal system of the market where the
business is operating. These legalities create issues in the independence of the businesses as
well as the behaviors of the customers (Klettner, Clarke and Boersma 2014). Product
transportation, viability of the markets and profit margins depend upon legal factors of the
country. The laws include, consumer laws, copyright laws, health and security laws., import
export laws, employment laws and fraud law. These laws play a big role in the operations of
the business and their profits from the market.
The environmental factors mainly refer to the ecological factors and this aspect is
growing immense popularity because of climate change, weather change, pollution,
availability of the non-renewable goods and global warming, many countries are prohibiting
usage of toxic elements in the production process of the firms (Yunna and Yisheng 2014).
This is the reason why they are issuing some legislation aiming to protect the environment of
the region. This also relates to the availability of the renewable materials used for production,
workplace efficiency, and existence of required biological species.
These factors of PESTLE directly affect the business of a certain market starting from
the entry to the market to successful operation in that market catering all the needs of the
stakeholders associated with them. Before entering a new country, therefore, the business
judge how the situation of that market is or how they can utilize the demand of that particular
market in their profit-making processes.

3STRATEGY DEVELOPMENT TOOLS
SWOT-
SWOT analysis or SWOT matrix is mainly the technique to identify the strengths,
weaknesses, opportunities and threats of the internal setting of the business organizations.
SWOT actually aims to specify the goals of the project or business ventures and identify
internal as well as external factors whether they are favorable or unfavorable to achieve those
goals. The business leaders use sword for identifying their competitive advantages by
questioning some of the factors to generate meaningful information (Aarons et al. 2015).
Strength and weaknesses are internally related where does opportunities and threats are
focused on the environmental placements.
Strengths of the organizations depend on the characteristics of the business which
give them advantage over the others. The weaknesses on the other hand are the characteristics
which place the business at disadvantages in comparison to others. The opportunities at the
elements presented in the environment which those business organizations can exploit in
gaining competitive advantage. Threats on the other hand are the elements presented in the
environment which can cause trouble to that business. Proper identification of SWOT is very
much important for the business organizations because these can inform them the gaps and
help to take necessary steps in the planning process for achieving the objectives effectively
(Leiber, Stensaker and Harvey 2018).
SWOT can help the planners or decision makers to identify the gap so that they can
consider the objective to be attainable. In case those objectives and not attainable in applying
in the organizational settings then they need to change those objectives and make a set
supported by the SWOT matrix. There are mainly four usage of SWOT in the business
context. These are strategy building, corporate planning, marketing and converting and
matching. In the business world, SWOT is mainly used to explore the solution of problems,
identifying barriers which may limit the growth, revealing possibilities and choosing the best
direction (Peng and Vlas 2017). Through this tool, the organizations produce practical as well
as efficient results and maximize their potential.
Five Forces-
Porter’s five forces analysis aims to identify the power lying in the situation of the
business. These five forces determine comparative intensity as well as the attractiveness of
the market. Porter's five forces is useful in understanding strengths of the competitive

4STRATEGY DEVELOPMENT TOOLS
position of the organization in one hand and also the strength which it is aimed to reach in
future. This strategic tool helps the business to understand whether the new products or
services can be put in should profitable in the new market. As this tool identifies the strength
of the organization it can improve the weaknesses and helps the business to avoid making
mistakes. Porter's five forces are supplier power, buyer power, threat of substitution, threat of
new entries and competitive rivalry. The first four forces directly contribute to the rivalry
among the companies.
There are some factors in each of the forces which determine the strength of the
company to survive in the competition. Threat of new entry the factors are switching costs,
learning curve, economics of scale, patents and capital requirements. The second force is
buyer power which includes the buyer information, volume, and price, sensitivity, switching
costs and bargaining leverage (Darkow 2015). Similarly, in the supplier power the factors are
the supplier concentration cost relative selling price and importance of volume. Threat of
substitution includes the switching cost of the buyers, propensity to the substitution and
product differentiation. Competitive rivalry includes industry growth rate differentiation size
of the competitors’ number of the competitors and exit barriers. The supplier Power Analysis
shows how easy the suppliers can drive up the prices. These drivers depend upon the number
of suppliers in each essential input, the uniqueness of products and services, the cost of
switching from one supplier to the other and the strength and size of the suppliers.
On the contrary the buyer Power drives the prices down (Porter and Heppelmann
2014). It depends on the number of buyer present in the market, the importance of individual
buyers for the organization and the cost of the buyers for switching from one supplier to the
other. The rate of substitution increases when the close substitute of the products exists in the
market. This enhances the customers benefit to switch to the alternatives when the price
increases. This however reduces the power of suppliers and attractiveness of market (Dobbs
2014).
The threat of new entry implies the decrease of profitability when the new companies
enter the market. The policies of the Government and other business factors will remain in
support of business then the competitors increase in the market. There are some barriers to
entry such as patents capital requirements government policies economies of scale and
profitability this reduce the threat of entrants and the Business can operate successfully like
before (Mathooko and Ogutu 2015). The competitive rivalry is another factor which reduces

5STRATEGY DEVELOPMENT TOOLS
profitability. This also depends upon the size and capability of the competitors in the similar
market many competitors can offer and differentiated products or services which can reduce
the market attractiveness.
PROFIT-
The PROFIT or VRHN analysis helps the company to beat the competitors and gain
competitive advantages in the highly competitive international market scenario. This analysis
can help the firms in assessing everything which they mark to differentiate themselves from
their competitors. VRHN stands for valuable, Rare, hard to imitate and non-substitutable
factors (Marttunen, Lienert and Belton 2017). The valuable factor undermines all the
necessary and important resources of the company based on which it does the business. For
example, the human resources, firm infrastructure, procurement and technological equipment
are the valuable resources for the company. Through these factors the companies show their
possessions and differentiate themselves from their competitors and gain more competitive
advantage. The second factor is rarity that defines that the product and service that the
company provides to its customer must be rare. They must have rare combinations for
making them unique and attractive to the new customers as well as the existing customers.
This will create differentiation in their offerings of the company.
Along with the products’ quality, the packaging in many cases has proved to be rare
which are capable to attract the new customers so that they can easily switch from other
substitutes. The products and services which the company will provide to its customers must
be hard to imitate. This may be through patent or copyright (Afonina 2015). The products or
services must be prevented from imitation or piracy this will eventually reduce the
profitability of the products and the company will not be able to survive in this highly
competitive market. The last factor is the non-substitutability which gives the firms
uniqueness and helps to differentiate themselves from the other competitors in the aspects of
operations, management, production process, marketing and customer satisfaction. This tool
helps the business organizations to understand the importance of innovation in their products
or services so that they can gain profit.
Therefore, it can be concluded that the companies operating in the competitive market
need to have proper tools and techniques so that they can understand the environment where
they are doing their business. The SWOT and PESTLE analysis help the business to
understand the external and internal business situation of the organizations. On the other

6STRATEGY DEVELOPMENT TOOLS
hand, the Porter’s Five Force analysis and PROFIT help them to enhance the quality of their
products and services so that the external factors and most importantly the competitors cannot
affect their business.

7STRATEGY DEVELOPMENT TOOLS
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8STRATEGY DEVELOPMENT TOOLS
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