Main Strategy Development Tools And Their Use In Business

SWOT analysis

In the current time, there are number of strategic management tools are being used by the contemporary business organizations. The main objective of using these strategic management tools is to determine the market and business scenario of the organizations and initiate strategies accordingly. However, there are number of strategic management tools available for the organizations and each one of these tools are having different utilities (Jarzabkowski and Kaplan, 2015).

In this essay, four major strategic management tools including SWOT analysis, Ansoff matrix, Porter generic strategies and Porter five forces will be discussed. In addition, the major advantages of these tools will also be discussed in this essay. Practical examples will be discussed in order to have the clear understanding about the utility of these tools.

Swot analysis is one of the most commonly used and popular tools of strategic management. This tool consists of four elements namely, strengths, weaknesses, opportunities and threats. Determination of the strengths and opportunities helps in identifying the positive internal factors of the organization and determination of the weaknesses and threats helps in indentifying the negative internal factors (Bull et al. 2016). Strengths refer to the areas where the particular organization is ahead of their competitors and they having advantage over others. Weaknesses refer to the areas where the organization is behind that the competitors. Opportunities refer to the factors that might help the organization in increasing their business in future. Threats refer to the factor that might affect the business in future. In addition, the major advantage of this tool is that it is easy and simple to implement without having the much requirement of expertise. This tool also considers all the relevant factors and thus the output is not based on any assumption.

Qantas airways are one of the leading organizations from Australia. If swot is being done on their business then their strengths will include their brand value, identity, global reach and huge access to financial resources. Qantas is ahead than its competitors in these factors. Furthermore, their weaknesses will include not having presence in budget carrier market and lower profits. In these factors they are trailing in the industry (Scolozzi et al. 2014). Opportunities for them will include increase in air travelers and introduction of fuel efficient aircrafts. These factors can help Qantas in enhancing their revenue in future. Threats for them will include increase in fuel price and increase in competition. These factors can cause adverse impact on the business of Qantas.

Ansoff matrix

Ansoff matrix is another popular strategic management tool used in identifying the market enhancement strategies. According to this model, there are four ways by which business organizations can enhance their market reach and revenue. This model is based on two factors, market and product. The first factor is the market penetration. According to this approach, organizations can increase their market by introducing more variants of their existing products and further penetrate in the existing market. This will increase the sales volume by targeting larger customer segments (Hussain et al. 2013). The next approach is market development. It states that organization can also introduce completely new products in the existing market to cater to new customer segments. This will also increase the sales volume and revenue. The next approach is market development. In this case, business organizations can enter in new markets with their existing products that will further increase the market opportunity for their existing products. the last approach is the diversification. This refers to the strategy of offering completely new products in a new market (Yin 2016). Thus, these four approaches can help the business organizations to increase the market share and presence. The major advantages of this tool are easy to use and practical approaches.

Unilever is one of the leading brands in the consumer product category across the world. They are having huge product portfolio in different countries. According to the market penetration approaches, majority of their consumer products are available in different sizes and prices. This helps them to target customers across different income levels in a particular country and it also enables them to further penetrate in the market. According to the product development approach, they offer soaps, shampoos, detergents and deodorants in a particular market. This helps them to cater to different customer requirement at a time in single market. According to the market development approach, Unilever is having their same product available in different countries (Vignali 2014). This is helping them to create more market opportunity with single product type. According to the diversification approach, Unilever is having India specific products in India only and Australia specific products only in Australia. This is helping to meet the diverse requirements in different countries.

This model refers to major three factors that can help the business organizations in gaining competitive advantages. The first element is cost leadership that refers to strategy of offering products in lowest cost possible in the market to attract more customers (Tanwar 2013). The next element is product differentiation that states that offering distinctive products can also helps in attracting customers and gaining competitive advantages over the competitors. The last element is market focus that states that if the products can be designed considering a particular customer segments, then competitive advantage can be gained. The major advantages are having diverse approaches that can match different organizational situations (Teeratansirikool et al. 2013).

Porter generic strategies

Chinese mobile brands such as Huawei and Lenovo follows cost leadership strategy in offering products in lower cost and thus attracting more customers. On the other hand, Samsung is following differentiation strategy by offering distinctive products such as curved screen in mobiles (Salavou 2016). Apple however is following market focus strategy where they are only catering to the higher end target customers and offering products according to their requirements and expectations.

This tool refers to the five elements that determine the industry competitiveness of a business organization. The first element is bargaining power of the buyers. This denotes the extent to which the buyers are having the upper hand in barraging with the organization (E. Dobbs 2014). The next element is bargaining power of the suppliers that defines the degree to which suppliers can bargain with the organization and can influence in their business. The next element is threat of substitutes that defines the extent to which the organization is facing competition of substitute products in the market. The next one is threat of new entrants and it states the degree to which the organization is facing the challenge of new entrant in the industry and increasing the competition (Cetindamar and Kilitcioglu 2013). The last element is competitive rivalry that defines the extent to which rivalry is present among the companies and activities they are initiating to stay ahead in the competition. The major advantages are considerations of diverse factors that can influence industry competitiveness.

Coles is a leading retailer in Australia. According to five forces analysis, Coles is having higher force of bargaining power of buyers due to the presence of number of options for them, higher force of bargaining power of the suppliers because Coles retail branded products. Thus, pricing of the products will determine the selling price. They are having higher force of threat of substitute because large of retailers are doing same business as Coles (Rajasekar and Al Raee 2013). They also have lower force of threat of new entrants due to the fact that huge investment and economies of scale are the barriers for new entrants to enter. Coles is having higher force of competitive rivalry due to aggressive marketing campaigns of all the brands.

Conclusion

Thus it can be concluded that different strategic tools are having different utilities that helps the business organizations to determine diverse requirements. This essay also discussed the strategic tools with the help of practical examples and concluded that different business organizations are using strategic management tools in meet their diverse needs. These tools are helping the business organizations in designing their strategies more effectively.

References

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Dobbs, M., 2014. Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.

Hussain, S., Khattak, J., Rizwan, A. and Latif, M.A., 2013. ANSOFF matrix, environment, and growth-an interactive triangle. Management and Administrative Sciences Review, 2(2), pp.196-206.

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Rajasekar, J. and Al Raee, M., 2013. An analysis of the telecommunication industry in the Sultanate of Oman using Michael Porter’s competitive strategy model. Competitiveness Review: An International Business Journal, 23(3), pp.234-259.

Salavou, H.E., 2015. Competitive strategies and their shift to the future. European Business Review, 27(1), pp.80-99.

Scolozzi, R., Schirpke, U., Morri, E., D’Amato, D. and Santolini, R., 2014. Ecosystem services-based SWOT analysis of protected areas for conservation strategies. Journal of environmental management, 146, pp.543-551.

Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of business and management, 15(1), pp.11-17.

Teeratansirikool, L., Siengthai, S., Badir, Y. and Charoenngam, C., 2013. Competitive strategies and firm performance: the mediating role of performance measurement. International Journal of Productivity and Performance Management, 62(2), pp.168-184.

Vignali, G., 2014. The mix map modelling approach: research application–a thought for the service industry. International Journal of Business and Globalisation 10, 12(1), pp.75-81.

Yin, N., 2016. Application of AHP-Ansoff matrix analysis in business diversification: The case of Evergrande Group. In MATEC Web of Conferences (Vol. 44, p. 01006). EDP Sciences.