The industry can be explained as the group of organizations which are able to provide similar types of products and services to the customers in an effective manner. The services or products which are thereby offered by the organizations are considered to be the close substitutes of each other. In comparison to general environment of the organizations, industry environment plays an important role in affecting the competitiveness of the companies. However, the analysis of external environment is also important for the proper operations of the modern organizations. The strategies which are developed by the companies are also based on the ways by which internal environment is analysed (Demir, Wennberg and McKelvie 2017).
The internal and external environment of the companies can be analysed with the help of different frameworks or models. The different frameworks which can be used for the analysis of internal and external environment include, SWOT analysis, PESTLE analysis, Porter’s Five Forces analysis, Porter’s Generic Strategy analysis. These models and their advantages and disadvantages will be analysed in the discussion.
SWOT analysis tool is mainly used for the purpose of analysing the internal environment of the modern organizations which is based on their strengths, weaknesses, opportunities and the threats. The different factors which are a part of the internal environment of the organizations are based on the achievement of effective objectives which have been set by the management. The strengths and weaknesses are an important part of the internal environment of the company and on the other hand, opportunities and the threats are based on its placement in the industry (Durand, Grant and Madsen 2017).
Advantages – The SWOT framework can be used for the purpose of supporting the project based objectives. This framework can be used for gaining valuable information based on different aspects of the organizations. The integration of data is an important part of the SWOT based framework. The simplicity which is related to the proper application of implementation of SWOT framework is an important advantage (Ethiraj, Gambardella and Helfat 2017).
Disadvantages – The one dimensional nature of the model is a major disadvantage of the SWOT framework. The strengths, weaknesses, opportunities and threats of the organization are analysed with the help of this framework. However, it is not possible to analyse the changes which can take place in these factors due to external factors. The subjective nature of SWOT framework is thereby able to affect the ways by which the data is analysed with the help of this framework (Frynas and Mellahi 2015).
Example – The SWOT analysis of Woolworths is able to provide the strengths that are held by the company and the major weaknesses that is faces in the industry. On the other hand, the opportunities and threats are based on ways by which the company is placed effectively in the industry of its operations (Woolworths.com.au 2018).
PESTLE analysis is a tool which is can be used by the organizations in order to analyse the environment in which they are planning to start their operations. The analysis of external environment is thereby based on the six most important factors which include, the political factors, the economic factors, social factors, technological factors, legal factors and the environmental factors. This can be used by the organizations in order to keep a track of the changes that take place in the external environment (Hill, Jones and Schilling 2014).
Advantages – The cost effective and straightforward nature of PESTLE framework is an important advantage which is provided to the modern organizations. The companies can also gain a deeper understanding of the environment in which they operate with the help of this framework. Management of the organization further becomes alert about the external environment based factors which can affect the operations in new areas (Michael, Storey and Thomas 2017).
Disadvantages – The PESTLE analysis based framework requires constant review by the management of the organizations in order to improve the operations of the company according to the external environment. The analysis also requires huge number of people for conducting the entire process in an effective manner (Morschett, Schramm-Klein and Zentes 2015).
Example – Domino’s Pizza needs to analyse the external environment in an effective manner with the help PESTLE framework in order to start its operations in new countries. This will help the company to develop its strategies for operations in the areas (Dominos.com.au 2018).
Porter’s five forces is mainly used for the analysis of the industry in which the organizations operate. The levels of competition are thereby identified with the help of high intensity levels of competition which is thereby faced by the organizations in the market. The five forces which are analysed with the help of this model include, the levels of competitive rivalry in the industry, the threats that are faced based on entry of new companies, the threats experienced from substitute products, the bargaining based power of the customers and the suppliers (E. Dobbs 2014).
Advantages – The levels of understanding which are provided by the model based on the industry of operations is a major strength. The simplicity based on proper usage of the model is also an important advantage that is offered by Porter’s model. The competitive strategies can be easily with the help of results which are provided by the analysis based on Porter’s model (E. Dobbs 2014).
Disadvantages – The theoretical base and static character of the model is an important factor that can act as a disadvantage or major weakness as well. The fast changes which can take place in the industry dynamics is a major disadvantage of using the results of Porter’s analysis (Wheelen et al. 2017).
Example – Telstra Corporation can thereby use this model for the purpose of analysing the telecommunications based industry of Australia. This will help the company to bring effective changes in the operations and strategies to operate in a profitable manner (Telstra.com.au 2018).
Porter’s generic strategies are based on the four major approaches which have been suggested for the purpose of gaining competitive advantage in the industry. The companies can thereby implement any one of the strategies in order to attain the desired objectives.
Cost leadership strategy can be implemented by the company in order to gain a competitive position in the industry with the help of low prices of the services and products. This strategy is implemented by organizations which target larger areas of market (Moon et al. 2014).
Cost focus strategy which is suggested by Porter is related to the lower cost production based process in the smaller market segments.
Differentiation focus based strategy is implemented by organizations in order to create an effective differentiation in the industry with the help of the quality of its products and is target towards a niche market.
The differentiation leadership strategy is also implemented by the business organizations which target a larger market area as compared to the differentiation focus strategy (Moon et al. 2014).
Example – The differentiation focus strategy has been implemented by Apple Inc. in the industry. The company thereby focuses on the quality of products rather than the price. The products are thereby offered to the premium group of customers who are highly concerned about the quality (Apple.com 2018).
Conclusion
The discussion can thereby be concluded by stating that the internal and external environment of organizations and the industry can be analysed in an effective manner with the help of the above mentioned strategic tools. The companies which have been used as examples have used these tools in an effective manner.
References
Apple.com 2018. Apple. [online] Apple. Available at: https://www.apple.com/ [Accessed 31 Aug. 2018].
Demir, R., Wennberg, K. and McKelvie, A., 2017. The strategic management of high-growth firms: a review and theoretical conceptualization. Long Range Planning, 50(4), pp.431-456.
Dominos.com.au 2018. Domino’s Pizza | Order Pizza Delivery Online | Food Delivery & Takeaway. [online] Dominos.com.au. Available at: https://www.dominos.com.au/ [Accessed 31 Aug. 2018].
Durand, R., Grant, R.M. and Madsen, T.L., 2017. The expanding domain of strategic management research and the quest for integration. Strategic Management Journal, 38(1), pp.4-16.
Ethiraj, S.K., Gambardella, A. and Helfat, C.E., 2017. Reviews of strategic management research. Strategic Management Journal, 38(1), pp.3-3.
Frynas, J.G. and Mellahi, K., 2015. Global strategic management. Oxford University Press, USA.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.
Michael, S., Storey, D. and Thomas, H., 2017. Discovery and coordination in strategic management and entrepreneurship. Strategic entrepreneurship: Creating a new mindset, pp.45-65.
Moon, H.C., Hur, Y.K., Yin, W. and Helm, C., 2014. Extending Porter’s generic strategies: from three to eight. European Journal of International Management, 8(2), pp.205-225.
Morschett, D., Schramm-Klein, H. and Zentes, J., 2015. Strategic international management (pp. 978-3658078836). Springer.
Telstra.com.au 2018. Telstra – mobile phones, prepaid phones, broadband, internet, home phones, business phones. [online] Telstra.com.au. Available at: https://www.telstra.com.au/ [Accessed 31 Aug. 2018].
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic management and business policy. pearson.
Woolworths.com.au 2018. [online] Woolworths.com.au. Available at: https://www.woolworths.com.au/ [Accessed 31 Aug. 2018]
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