HI6006 Competitive Strategy: Essay on Strategy Development Tools

This essay delves into the realm of competitive strategy, examining key models used for business analysis and development. It begins with an overview of Porter's Five Forces model, illustrating its application in assessing industry structure. The essay then explores SWOT analysis, dissecting an organization's strengths, weaknesses, opportunities, and threats. Following this, PESTLE analysis is discussed, focusing on macro-environmental factors influencing business performance. Furthermore, the essay includes VRIO analysis, a tool for evaluating internal resources and capabilities. The assignment includes real-world examples, and the essay concludes by providing valuable insights into strategic decision-making and its impact on business success.

CO MPETITIVE STRATEGY

Contents
Porter five forces model........................................................................................................................2
SWOT analysis......................................................................................................................................3
Pestle analysis.......................................................................................................................................5
Resource based capabilities...................................................................................................................6
References.............................................................................................................................................9

Porter five forces model
Porter five forces model is a framework that analyses the industry structure with the help of
give underlying variables i.e. bargaining power of the customers, bargaining power of
suppliers, threat of substitutes, threat of new entrants, and rivalry against competitors (Alan,
2012).
Rivalry against the competitors- The competition in furniture industry is moderate. There
are number of retailers such as Walmart, Argos, Galiform, who sells furniture at low cost and
provide customers with discount. IKEA remains the market leader in regards to consumer
discount and low cost.
Threat of substitutes- This threat is nearly low because there are many products and services
that are available for satisfying demands for home appliances and furniture. For instance-
developing and emerging popularity of e-books decreases the demand for IKEA books (Team
FME, 2013).
Bargaining power of suppliers-, it is important to control the suppliers as suppliers have
huge control over the raw materials. Change in the prices of raw materials can affect the
pricing strategy of IKEA.
IKEA`s power of suppliers is low because the company has an established relationship
between every supplier in the world. The company has its own manufacturing unit
“Swedwood Manufacturer. With its own manufacturer, the organisation can produce low
cost. CBA profitability will reduce if the supplier has crucial position in the market.
Bargaining power of customers- There are various banks like CBA who offers same
services. This indicates that bargaining power of customer is high.

On the other hand, many retailer are involved in war price against one another. Most of the
importers like IKEA buys their inventory from china, which gives direct competition to
IKEA. The consumer have lot of options.
Threat of new entrants- the threat is significant to furniture and home appliances industry.
Entering organisation will require legal and regulatory barriers in order to enter the market.
The new market will not get the benefit from the economies of scale as IKEA enjoys.
On the other hand, this threat for CBA (common wealth of Australia) is low because it has
maintained a central position in the market with strong financial capital.
SWOT analysis
SWOT analysis is a tool that analyses the potential strengths and weaknesses in the
organisation. Whereas, threats and opportunities are the external components that affect the
business operations (Team FME, 2013).
Strengths Weaknesses
CBA (common wealth bank of Australia)
has strong market position.
CBA offers diverse products and services in
its portfolio
CBA is restricted to certain area
The bank has various allegations and
accusations in previous times
Opportunities Threats
Various opportunities are developed in
Asian and emerging economies.
Line of native customer assistance
APRA upsurges the minimum capital
requirements
The bank is facing phasing out of
government assurance
Example-

SWOT of IKEA
Strengths
The company has been positioned at 46th in the world in the name of brand value. In 2015, the
revenue of the organisation reflected euro 32.7 billion. The main strength lies in the product,
which it produces and designs. The company`s products are cost effective and gives value for
money. Customers derive high ROI on money that they spend on the furniture (Team FME,
2013).
Weaknesses
IKEA operates in various countries and it faces local trouble. Recently, the company has
faced corruption issues in Russia. The main concern is to keep minimal cost but at the same
time, this does not ensures high quality every time. The company is not able to comply with
all the legal standards.
Opportunities-
Certain growth in eco-friendly products among the consumers improves the growth strategy.
Countries with low capita income also started preferring the products. Places such as China
and India prove to be great places with huge population prefer unique solution to the space
problems and IKEA targets to focus on it (Alan, 2012).
Threats-
Several companies have copied IKEA products. The company suffers from the threat of
copycats that trade through their revenues. The changing government tax policies and laws
have negative impact on prices of IKEA products (Team FME, 2013).

Pestle analysis
Under the influencing factors, the company suffers from macro and microenvironment, which
affect the business performance. This tool is used to analyse the macro environmental factors
of the organisation. The purpose of this model is to make long-term planning and it is used
when business wants to expand overseas into the new market (Alan, 2012).
Political factors- This factor defines the extent to which the government of the country
affects the business operations. It includes taxation policies, trade tariffs, and fiscal policy.
Common wealth bank of Australia builds positive relation with China and other Asian
countries. Further, it will help the company to diversify and expand its business overseas
(ProcessPolicy, 2018).
Economic factors- this factor recognises the economic performance of the country with the
help of certain economic indicators such as inflation rate, GDP of the country, exchange
rates, interest rates, and change in the demand and supply. It has been observed that economy
of Australia is stable and strong. Whereas, with the increase in the ageing issue of population,
there are some negative effect of having such a significant result in the business practises
(ProcessPolicy, 2018).
Social factors- This factor determines cultural trends, population analytics, and
demographics. Cosmopolitan culture is affected by the variety of products it offers to public
Technological factors- it is important to consider the investment in the financial security as
cyber threats have been increasing and will threaten the personal information of the clients. It
has negative effect on business especially in regular business activities (ProcessPolicy, 2018).
Legal factor- the company faces several accusations of laundering and allegations for the
bank.

Environmental factors- the company has taken several steps not to disclose the risk
associated with climate change.
Example
PESTLE of IKEA
Resource based capabilities
VRIO analysis is a tool that evaluates the organisation’s internal weaknesses and strengths.
This framework asks four questions considering value, imitability, rarity, and organisation.
Pestle analysis
political factors
effect of political
controversies that affect IKEA
economic factors
negative impact of brexit msy lead to
increase n prices
Social factors
started with the local organisations to
create jobs and train people
change in the preferneces of thed
customers asffect the demand of the
customers
environmental factors
The company focus on social and
sustainability responsibility
the company should be committed to
renewable energy
Legal factors
entry barriers and rules in new
developing market
criticism above tax avoidance in several
countries
Technological factors
Investment in reality and VR so that it can
transform sales
use oif data analytics imn order to shape
customer`s journey in the retail sector

VRIO analysis of IKEA
Valuable- it permits IKEA to opt for product differentiation from its competitors as it brings
out an innovative business model. This value chain allows the organisation to develop such
democratic design (Contributor, 2011).
Inimitable- it is quite visible that competitors will always be far behind the experience curve.
In case, competitors have right combination of time, skills, money, and the corporate culture
then there is a possibility to imitate in long term.
Rare- no of the industry members manage to design such easy processes that actually make
its customers enjoying its working life. It is quite rare to find a combination of price, design,
and the quality of any other competitor`s in-store that also includes shopping experiences.
Organisation applicable- it is there in the market for long time and that have strong presence
and renowned brand recognition, which has assisted the company to become successful in
numerous countries (Contributor, 2011).
VRIO analyses of Amazon
Valuable Rare
 Increasing brick and mortar presence
 Diversity in online services
 Grand portfolio of labelled products
 Excess delivery networking includes
regional and domestic partnership
 Strong Distribution channels and
strategic warehouses
Inimitability Organisation
Huge brand equity
Market capitalisation is high
Market reach of international affiliation
AI capabilities
Well established brand

References
Alan, S. (2012) A useful guide to SWOT analysis. Nottingham: Pansophix online sterling
house.
Contributor, P. (2011) PESTLE Analysis: Business Environmental Analysis. [online]
Available from: http://pestleanalysis.com/pestle-analysis-business-environmental-analysis
[Accessed 23/05/18]
Hutchens, G. (2014) Amazon is biggest threat, says Wesfarmers' Richard Goyder. [online]
Available from: https://www.smh.com.au/business/companies/amazon-is-biggest-threat-says-
wesfarmers-richard-goyder-20140805-100oad.html [Accessed 23/05/18]
ProcessPolicy, (2018) WHAT IS PESTLE ANALYSIS?. [online] Available from:
https://processpolicy.com/pestle-analysis.htm [Accessed 23/05/18].
Team FME (2013) PESTLE ANALYSIS: Strategy Skills. [online] Available from:
http://www.free-management-ebooks.com/dldebk-pdf/fme-pestle-analysis.pdf [Accessed
22/05/18].