PESTLE analysis as a strategy developmental tool is considered as an important tool in the business field as it is a framework which helps in describing the macro-environmental factors. With the help of this tool, any organization can evaluate the external environment and identify the root cause of business inefficiency. This strategy is basically taken into consideration by the managers or the top officials to take necessary steps and route the business process for being efficient.
This analysis basically consists of 6 governing factors which are political, economic, social, technological, legal and environmental factor. By analyzing all these factors, we can find a concrete and profound factor which is hampering the business process. In order to be in a business for a long run, all the major industries use this framework as a tool to increase the efficiency of a business process (Gupta, 2013).
In this essay, the discussion will be focused on two companies from two different industries which are Sanofi, a Pharmaceutical company, and Hitachi which is a Heavy Machinery company and how PESTLE analysis and diversification as a strategy tool helps in gaining a competitive advantage over the other industry leaders.
Sanofi is a multinational pharmaceutical company based out in France. It basically operates in the field of pharmaceutical drugs R&D, production, and marketing (Sanofi, 2018). PESTLE analysis of Sanofi will help in getting the detailed analysis of the company’s challenges in operation and the major areas on which the focus should be given to maintain brand structure.
(Source: Business to You, 2016).
Being exposed to the drug market, Sanofi as an organization faces challenges in tackling several political risks. The risk associated with military invasion, standard safety regulations, bureaucratic intervention are some of the associated risks on which focus should be given.
There are several macro and microenvironmental factors that impact the business process of any organization. By considering the economic factors like the rate of growth of a country’s economy, inflation, unemployment rates, financial market’s efficiency it can be easy to evaluate the growth trajectory. These factors can also be considered as a major player in increasing an organizations efficiency and process (Johnson, 2016).
The living standard of the people is diversified across all the borders. This diversification and the way people perform activities impact the organization’s culture. This is the key to how one can predict the social environment or the customers of a particular market. Several social factors should be considered such as literacy ratio, the standard of education, society’s class and power structure which are the key factors of analysis.
The automation of the process has been a major stakeholder when it comes to being an efficient business. The ramifications of the technology have given a boost to all the organization to get an upper hand in this competitive environment. There are several factors that should be taken into consideration like the recent technology which is a boom nowadays and the technological developments which are being adopted by your competitors to gain a competitive advantage in the market (Jarzabkowski and Kaplan, 2015).
Like the way a living pattern varies across the globe, similarly, there are diversified environmental factors which vary across borders. Environmental laws, weather, regulation related to pollution etc. are some of the governing factors.
The legal decisions lay down by the authority of a particular region or country should be respected and should be taken into consideration while entering such market where factors like copyrights, IPR, law related to health and safety, patent law, protection of data are notable factors. It can help to gain profits (Yüksel, 2012).
Hitachi is a multinational conglomerate company based out in Tokyo, Japan. It has diversified itself into a total of 11 business industries running across the globe which also includes the heavy machinery division (Hitachi, 2018).
Diversification as a strategy tool helps a company to be more flexible and can be used to extend the line of products of a company. It provides the competitive advantage of operating in various diversified markets. This strategy includes three diversification factors which are horizontal, concentric and conglomerate diversification (Tan and Sousa, 2015).
In concentric diversification strategy, a business which has already established itself in the market and is known for a particular product tries to add a similar kind of product. This helps in acquiring a broader area and a fair share of the market. In horizontal diversification, a company explores itself in other fields of products other than the one it is already established and famous for. This strategy sometimes declines due to the fact that the new product might not gain the same advantage as the other product. Using conglomerate diversification, companies enter into a market zone which is previously unexplored. Companies form merger and acquisitions with other companies as moving into an unexplored market is highly vulnerable for a business. This strategy results in increasing the base of the customers (Madsen and Walker, 2015).
Hitachi as a company has also diversified itself into several different units and has been implementing several strategic tools to gain a competitive advantage. The company has integrated its process with advanced technological tools and State of the art AI technology. An example is the use of Internet of Things (IoT), which has helped the company to optimize its process by integrating the manufacturing unit with its IT industries.
The company also focuses on the distribution strategy in the market. It uses a mix of the various channel of distribution like resellers, having an in-house team of sales and several other intermediaries. By implementing such diversified chain of operations, Hitachi has been able to build a protective environment to operate its sub-units with the utmost efficiency and effectiveness. Due to its experience in operating such a large scale of diversified business, it has been able to give a cut-throat competition to its rivals like General Electric, Samsung, Honeywell, and has maintained its position in the market as a global leader. Such diversification at this large scale has made it easier for Hitachi to gain competitive advantage and become bigger in the market share (Moutinho and Phillips, 2018).
Conclusion:
By proper analysis of the paper, it can be concluded that the strategic tools are helpful in getting an understanding of any organizational environment and devise a strategy to grow your business more and more. Once an organization is able to capitalize and utilize the tool, it can make the most out of any business.
On one hand, PESTLE analysis as a tool gives an insight of the six different external factors that the marketers should consider while analyzing macro-environmental factors that may affect the business process. On the other hand, diversification as a tool can be used to implement a strategy to diversify a business process and enter into a new market wherein the company doesn’t operate presently.
In the present scenario, where every company is entering into the market with its chain of products, it is important that this checkpoints or tools should be considered by Sanofi and Hitachi. This will not only help them in gaining a competitive advantage but also help them in acquiring a larger portion of worldwide market share.
References:
Business To You., 2016. Scanning the environment pestle analysis. [Online]. Available at: https://www.business-to-you.com/scanning-the-environment-pestel-analysis/ [Accessed on13 Aug, 2018].
Gupta, A., 2013. Environmental and pest analysis: An approach to external business environment. Merit Research Journal of Art, Social Science and Humanities, 1(2), pp.13-17.
Hitachi., 2018.Hitachi Inspire the Next. [Online]. Available at: https://www.hitachi.co.in/ [Accessed on 13 Aug, 2018].
Jarzabkowski, P. and Kaplan, S., 2015. Strategy tools?in?use: A framework for understanding “technologies of rationality” in practice. Strategic Management Journal, 36(4), pp.537-558
Johnson, G., 2016. Exploring strategy: text and cases. Pearson Education.
Madsen, T.L. and Walker, G., 2015. Modern competitive strategy. McGraw Hill.
Moutinho, L. and Phillips, P., 2018. Strategic analysis. In Contemporary Issues in Strategic Management (pp. 46-79). Routledge.
Sanofi., 2018.Sanofi. [Online]. Available at: https://www.sanofi.com/en/about-us/ [Accessed on 13 Aug, 2018].
Tan, Q. and Sousa, C.M., 2015. Leveraging marketing capabilities into competitive advantage and export performance. International Marketing Review, 32(1), pp.78-102.
Yüksel, ?., 2012. Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), p.52.
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