Competitive Strategy: Analysis of Strategy Development Tools Essay

This essay provides a comprehensive overview of key strategy development tools essential for competitive strategy. It begins with an explanation of PESTLE analysis, detailing its application in evaluating political, economic, social, technological, legal, and environmental factors. The essay then explores SWOT analysis, outlining how organizations assess their internal strengths and weaknesses alongside external opportunities and threats. Furthermore, it delves into Porter's Five Forces analysis, examining competitive rivalry, supplier power, buyer power, the threat of substitutes, and the threat of new entrants. Finally, the essay discusses input/output analysis, explaining its role in assessing economic fluctuations. Each tool is presented with practical business examples, demonstrating their relevance and utility in strategic decision-making. This analysis is crucial for understanding how businesses can effectively analyze their environment and develop robust strategies.

Strategic Management

Contents
PESTLE Analysis...........................................................................................................................................3
Political....................................................................................................................................................3
Economic.................................................................................................................................................3
Social.......................................................................................................................................................3
Technological...........................................................................................................................................3
Legal........................................................................................................................................................3
Environmental.........................................................................................................................................3
SWOT Analysis.............................................................................................................................................4
Strengths.................................................................................................................................................4
Weaknesses.............................................................................................................................................4
Opportunities..........................................................................................................................................4
Threats.....................................................................................................................................................4
Five Forces Analysis.....................................................................................................................................5
Competitive Rivalry.................................................................................................................................5
Supplier power........................................................................................................................................5
Buyer Power............................................................................................................................................5
Threat of Substitutes...............................................................................................................................5
Threat of New Entrants...........................................................................................................................5
Input/output Analysis..................................................................................................................................5
References...................................................................................................................................................6

Strategy development tools play a very important role in the accomplishment of goals and objectives of
the organization. There are various tasks that have to be done in a proper way and for the same; there is
a requirement of strategy development as well as implementation in a proper way. Many internal and
external factors affect the organization in positive as well as negative way so these tools help in
analyzing the same. Some of the tools are elaborated below-
PESTLE Analysis
It is also known as PEST analysis which helps in analyzing various environments that impact the business
operations. It is also used when a company tries to launch a new product or start any new operation.
Political - Political environment includes political factors like government rules, policies and
procedures related to any industry. There are some more policies that create a major impact like tariffs,
Fiscal policies and tax structure.
Economic - Economic factors are related to the interest rates, foreign direct investment and repo
rate. Such factors create a very high impact on an organization because cost of production varies due to
economic changes.
Social- Social factors are related to the society and it includes taste, preference and buying patterns of
the customers.
Technological- Technological factors create a high impact on an organization because technology
keeps on changing and due to the introduction of new technology, competition in the market increases.
Legal- Legal factors can be internal as well as external. There are different type of laws in different
countries and it affect the business operations because organizations has to ensure comply with the
laws like labor laws, employee safety laws and consumer laws.
Environmental- Environmental factors include the natural happenings that can’t be controlled like
climate, weather and climate.
There are many big organizations and multinational companies that use Pestle analysis as a strategic
management tools. These organizations include BMW that is a very big car manufacturer and it only
produces high- performance cars. It has its operations all over the world. BMW has analyzed that there

are certain political factors like corruptions, policies, currency fluctuations and rules that create a high
impact on the organization.
SWOT Analysis
SWOT analysis is a very strong strategic management tools that includes internal as well as external
scanning of the organization. IT also helps in building the strategic capability of the organization.
Internal scanning includes the scanning of strengths and weaknesses and external scanning include
threats and opportunities. An organization can know the strategic advantages and resources of the
organization and assist them to sustain in the strong market competition.
Strengths- Every organization possess some strong qualities like the good brand image, reputation,
high quality of resources and strong relationship with suppliers and distributors All these are considered
as strengths.
Weaknesses- Weaknesses refers to the areas where an organization lacks and it includes no patent
protection, lack of resources and bad brand image.
Opportunities- Opportunities refers to the options that can be converted into advantages. It
includes satisfy customer needs and demands, new technology and expansion of operations.
Threats- Threats includes introduction of new government regulations, change in customer’s
preferences and introduction of new trade barriers (Muzumdar, 2013).
SWOT analysis has also been used by many big organizations like Coca Cola, Walmart, Microsoft and
Google. SWOT analysis helped much organization and has proved an effective strategic management
approach. McDonald’s has analyzed that it has created a very strong brand image by acquiring high
number if customers. McDonald’s has always assured quality and food safety standards while catering
to the customers. On the other hand, it has a weakness that there is a high employee turnover.
Five Forces Analysis

Five Forces analysis is a very effective approach or strategic management tool that emphasize on making
everything effective. It is created by a professor of Harvard business School professor Michael porter.
This tool has been created to analyze the industry effectiveness and profit.
Competitive Rivalry- There is different competitors in the market that impact the organization’s
operations. It also affects the policies of the organization.
Supplier power- Supplier power refers to the areas where an organization bargains with suppliers
on many areas like prices. It includes the major suppliers in the industry. If the number of supplier in the
market is high then it becomes easy for the organization to select the cheaper one.
Buyer Power- It includes the lever where a buyer can negotiate with the organization. When there
are many sellers or few buyers in the market then buyer power is mostly high (Grebenshchikova and
Yakushev, 2017).
Threat of Substitutes- There is always a substitute of the products in the market. Large number of
substitutes can hamper the organization’s position in the market.
Threat of New Entrants- Organizations keeps on entering with latest technology and new
business ideas. High number of new entrants impacts the position of the organization in existing market.
McDonald’s utilize Five Forces analysis and came to know that external factors create a high impact on
the organization due to the many things happening all around the world.
Input/output Analysis
Input – Output analysis is a method that is used for finding out the impacts of negative as well as
positive economic fluctuations and analyzes the effect of the economy. It includes input- output tables
that contain rows and columns of data related to supply chain of different factors. Industries are listed in
headers of rows and the columns. Data in columns reflect the level of inputs used in the production
activities. I-O model also include some tables showing the level of labor requirement per dollar unit
invested in production activities. This tool is not used by neoclassical economics. There are three types
of economic impacts- direct, indirect and induced. These basically show the initial, secondary and
tertiary impacts that go when there is a change in input level. With the help of I-O model, an

organization can estimate the variation in output across industries because of the change in input of one
or more than one industry. This analysis can be done in reverse as it can show the impact on inputs due
to change in outputs.
References
Grebenshchikova, L. and Yakushev, N. (2017). Definition of Competitiveness of the Enterprise Using the
Five Forces of M. Porter. Bulletin of Kalashnikov ISTU, 20(3), p.51.
Muzumdar, P. (2013). Business Model Development Through Corporate Strategy Design: IBM SWOT
Analysis. SSRN Electronic Journal.