Tools For Strategy Development: SWOT, Porter’s Five Forces, And Resource-Based View Model

Overview of Strategy Development Tools

Discuss about the SWOT Analysis Construction Management.

The management of a company is responsible for assessing the business environment and implementing strategies in order to increase its profitability and expand its operations. However, the management faces a number of external and internal issues which affects its operations and profitability. In order to address these issues, the management uses different strategy management tools while implementing business policies. A strategy development tool helps management in collecting necessary information regarding internal and external factors in an organisation which can be used by them while implementing business strategies (Kunc and Bhandari, 2011). This essay will focus on three strategy development tools which include SWOT analysis, Porter’s five forces and Resource-based view model. This essay will examine the functionality of each model and discuss how they are used in an organisation. Examples of different corporations will be analysed in the essay in order to ascertain the role of each model.

SWOT analysis is defined as a process that identifies a company’s strengths, weaknesses, opportunities and threats. It is an analytical framework for assessing what actions can be taken by a business based on internal (strengths and weaknesses) and external (opportunities and threats) factors (Sevkli et al., 2012). A SWOT analysis is used by senior executives in an organisation such as Chief Executive Officer, Chief Operating Officer and senior level executive in order to determine what assists the company in achieving its corporate goals and what obstacles are necessary to be overcome in order to achieve desired results. It assists management in understanding where the organisation is today and where it will be in the future, and they can use this information to implement strategic policies that focus on sustaining its growth (Yuan, 2013).

For example, the Coca-Cola Company noted that its strengths include vast distribution network situated across the globe and a well-known brand name that is recognised by people worldwide. It opportunities include business expansion in developing and emerging markets and diversification of products. The company’s weaknesses include competition with PepsiCo, the absence of healthy beverages and lack of product diversification (Baah and Bohaker, 2015). Threats include growing popularity of “healthy” beverages, subsequent competition and foreign currency fluctuations. In order to address these issues, Coca-Cola increased its investment in marketing and expands its other beverages categories which result in increasing company’s profits and making it the largest soft drink manufacturer.

SWOT Analysis

The five forces model is substantially popular among companies since it assists them in analysing different external factors that influence their profitably. The tool was given by Michael Porter, and it focuses on evaluating various strengths and weaknesses of a sector. The five forces which were given by Porter include competition in the industry, the potential of new entrants into the industry, power of suppliers, power of customers, and the threat of substitute products. Generally, the tool is used by senior level managerial personnel in an organisation to search for attractiveness and profitability (Mathooko and Ogutu, 2015). It is used by management while entering into new markets or launching new products or services to ascertain an industry’s profitability and attractiveness.

The senior level management uses this model before launching a new product or entering a new market, so they are able to evaluate its attractiveness which enables them to form strategic policies (Vining, 2011). General Motors (GM) is a good example. The company operates in the automobile industry, and it offers its products across the globe. The competition in the automobile sector is high because a large number of companies operate in the industry such as Ford, Honda, Toyota and others (Acharya, Schaefer and Zhang, 2015). Buyers’ power is moderate due to high switching costs and small size of individual buyers. Suppliers’ power is weak because there are a large number of suppliers available and GM did not face high switching costs. The threat of substitutes is moderate because there is a low variety of substitutes and moderate switching costs available. The threat of new entrance is low because of high capital requirements, fierce competition and moderate switching costs (Cooley and Cooley, 2011). These factors enable top-level management of GM to implement appropriate policies for sustaining their future growth.

The Resource-based view (RBV) is an approach to generating competitive advantage in a corporation. It is a managerial framework that is used in order to identify strategic resources that have a potential to deliver competitive to an enterprise. A corporation exploits these resources in order to sustain competitive advantage (Nath, Nachiappan and Ramanathan, 2010). In order to generate a competitive advantage based on a resource, it is necessary that such resource shows attributes of the VRIO model. The VRIO model analyses a resource based on value, rarity, inimitability and organisation. This model is based on both tangible and intangible assets in a company. Tangible assets include plant, machinery, cash and other physical assets. Intangible assets include trademarks, copyrights, patents, and other intellectual rights. Generally, the senior level management uses this model by consulting with experts from different departments who have knowledge of specific resources (Wong and Karia, 2010).

Porter’s Five Forces

For example, Zara is a Spanish fast fashion retailing brand which is a subsidiary of Inditex. The company is one of the largest apparel brands in the fashion industry, and it has gained the position by generating a competitive advantage over its competitors. One of the major resources of the enterprise is its responsive supply chain which delivers the latest fashion clothes to its retail stores in just 5-6 weeks after they are launched (Fernie and Sparks, 2014). The management has hired a team of specialised fashion hunters who visit fashion shows to collect information about the latest trends and send such information to the firm’s headquarters. After that, the in-house manufacturing team creates new clothes by using a wide variety of materials which are available in the warehouse. Mainly, the production facilities of Zara are situated in-house because it increases their production capabilities than compared to outsourcing (Mefford, 2011). It provides a value to the corporation which is rare in the fashion industry because other manufacturers outsource their operations to save costs and it took them 4-5 months to launch new products. The supply chain of Zara is inimitable, and it is effectively organised by the company to generate a competitive advantage.

Conclusively, there are a number of tools used by the management of an organisation while creating business strategies. These tools enable the management to evaluate internal and external strengths of an environment that influence a company’s operations. This report analysed SWOT, Porter’s five forces, and Resource-based view model. Each model analyse different factors and provide critical information to the management which is used by them for generating a competitive advantage. The SWOT analysis evaluates internal strengths and weaknesses of a corporation for creating business policies based on external opportunities and threats. Management uses Porter’s fives forces framework for analysing competitiveness and profitability in an industry. The Resource-based view model enables management to determine internal assets that generate a competitive advantage in the enterprise. Each strategy development tool is used for different purposes by management, and it assists companies in sustaining their future growth.

References

Acharya, V.V., Schaefer, S. and Zhang, Y. (2015) Liquidity risk and correlation risk: A clinical study of the General Motors and Ford Downgrade of May 2005. The Quarterly Journal of Finance, 5(02), p.15.

Baah, S. and Bohaker, L. (2015) The Coca-Cola Company. Culture, 16, p.17.

Cooley, S.C. and Cooley, A.B. (2011) An examination of the situational crisis communication theory through the General Motors bankruptcy. Journal of media and communication studies, 3(6), p.203.

Fernie, J. and Sparks, L. (2014) Logistics and retail management: emerging issues and new challenges in the retail supply chain. London: Kogan page publishers.

Kunc, M. and Bhandari, R. (2011) Strategic development processes during economic and financial crisis. Management Decision, 49(8), pp.1343-1353.

Mathooko, F.M. and Ogutu, M. (2015) Porter’s five competitive forces framework and other factors that influence the choice of response strategies adopted by public universities in Kenya. International Journal of Educational Management, 29(3), pp.334-354.

Mefford, R.N. (2011) The economic value of a sustainable supply chain. Business and Society Review, 116(1), pp.109-143.

Nath, P., Nachiappan, S. and Ramanathan, R. (2010) The impact of marketing capability, operations capability and diversification strategy on performance: A resource-based view. Industrial Marketing Management, 39(2), pp.317-329.

Sevkli, M., Oztekin, A., Uysal, O., Torlak, G., Turkyilmaz, A. and Delen, D. (2012) Development of a fuzzy ANP based SWOT analysis for the airline industry in Turkey. Expert systems with Applications, 39(1), pp.14-24.

Vining, A.R. (2011) Public agency external analysis using a modified “five forces” framework. International Public Management Journal, 14(1), pp.63-105.

Wong, C.Y. and Karia, N. (2010) Explaining the competitive advantage of logistics service providers: a resource-based view approach. International Journal of Production Economics, 128(1), pp.51-67.

Yuan, H. (2013) A SWOT analysis of successful construction waste management. Journal of Cleaner Production, 39, pp.1-8.