Discuss about the Competitive Strategy for Five Force Analysis Framework.
There are many tools that can be considered by the company but in this paper, the discussion will be made on the three tools. The three tools that will be discussed in the paper are SWOT analysis; pestle analysis and porter five forces. These tools help to find out the exact position of the company in the market.
This tool helps to evaluate the environment which is external. In this framework, the emphasis is given on the five factors which are a threat of entrants, a power of suppliers, a power of buyers, and rivalry against the competitors and threat of substitute. It can be analyzed that this tool is considered by the managers or the directors of the company so that they can give instructions accordingly (Austin, Bentkover, and Chait, 2016).
In this framework, the first aspect is associated to the power of buyers in which the evaluation is made that how many buyers are purchasing the products of the company. It is also seen that it has a connection with the demand of the products. The next aspect is rivalry against the competitors in which the analysis is made of the competitors who are in the market. Power of the supplier is also one of the factors in which the connection is with the suppliers who offer products to the customers (Salavou, 2015).
In Threat of entrants, it is seen that it is related to the companies who are entering the market. It mainly affects the overall productivity and profits of the company. It is seen that the last factor is related to the threat of substitute. In this factor, the products which are similar and satisfy the needs of the customers are considered. It can be seen that if the company focuses on this tool then they can get the benefit to accomplish overall goals and objectives.
This concept not only helps to make proper strategies but also helps to achieve growth in the market. The performance of the employees can also be analyzed if the focus is given to this tool by top management (Wheelen et al., 2017).
Example of Aldi
The threat of new entrants
It can be evaluated that the threat of entrants for Aldi is high as there are many companies who are entering the market to earn profits.
Power of Buyers
Power of buyer is low as the competitors sell same products at the low cost also.
Power of suppliers
Also, the power of the supplier is high as there are many choices available for the customer to satisfy the needs and wants and there are many competitors who are selling the same kind of the products in the market.
Threat of substitute
Substitution rate is high as the company offers those products that are available on the retail outlet. The customers can purchase the products easily from anywhere.
This is also one of the effective development tools that help the company to analyze the overall strength, weakness, Threats, and opportunities in the company. It is related to the internal analysis of the company. This tool has many sections like strength, weakness, opportunities, and threats (Bull et al., 2016).
The managers of the company focus on this concept so that strategies can be made accordingly to conduct the activities of the organization. Strength has a link with the marketing mix and if the company has a large market share then it is considered a strength for the company. Weakness is related to the resources which are not sufficient in the company. If the company has a weak distribution channel then it comes under weakness (Brooks, Heffner and Henderson, 2014).
The threat of the company is related to the availability of the competitors in the market. Opportunities are linked to the chances which the company gets to expand the activities or the market share (Gupta and Mishra, 2016).
It can be evaluated that strength possessed by the company is related to the good image in the market. Also, the share market is high so it can be easy to earn profits in an effective manner. It is analyzed that weakness is that the company is dependent on innovation and also lack of economies of scale. The threat is related to the laws that prevent sales and also the loss of subsidiaries. It is seen that there are many opportunities that can be grabbed by the company like international market growth and also to analyze the terms of competitors (Shin and Dess, 2017).
To conduct a proper analysis inefficient way, companies use Pestle analysis which is one of the important development tools. The activities in a company are conducted using this framework, which also helps in evaluating the macro environment. Usually, the managers or the top officials consider this and the employees of the organization are addressed to conduct their activities using this framework. PESTLE analysis is basically gauged using the following factors which are political, economic, social, technological, legal and environmental. All these factors, if combined, define the PESTLE analysis of a particular organization.
In pestle analysis, political factors consider the governmental regulations and the rules that have been laid by the officials in the country. The governmental policies and regulations have a direct impact on this. During activity conduction, this factor is taken into consideration so that the activities can be conducted in an efficient way (Shabanova et al., 2015).
Talking about economic factor, it is related to inflation and deflation of an economy of a country which has its impact on the price level. Using this factor the purchasing power is taken into consideration. Technological factors talk about the adoption of latest and advanced technology by which an innovative and efficient way can be implemented in the product manufacturing (Jarzabkowski and Kaplan, 2015).
The legal factors are those which basically deal with the legal environment that has a direct effect on the business environment of a company like labor laws and consumer laws. The last factor is the environmental factor which includes the effect of the surrounding environment on the activities of a company (Camisón and Villar-López, 2014).
At the time of entering the market, Samsung ensures that it abides by all the rules and regulation laid down by the governmental officials. From an economic point of view, the labor, production and manufacturing cost is given a strict provision so that the cost is kept to a minimum. From the viewpoint of the economic factor, the economy of a country is considered so that favorable decision can be taken.
If the technological factors are taken into consideration, Samsung ensures that innovation should be there in each and every product launched which becomes the favorite and most demanding product in the market. The company sticks to the proper norms and regulations so that there is no disturbance in the legal aspect and no laws are violated. Lastly, the company focuses on the environmental aspect, by which it ensures that the product manufacturer doesn’t have any direct or indirect impact on the environment.
Conclusion
Hence, it can be said that to evaluate the external and internal factors, these strategic analysis tools are important elements for a business formulation process which helps in determining the competitive analysis and current position in a market
References
Austin, J., Bentkover, J. and Chait, L., 2016. Tools for Transformational Strategic Planning. In Leading Strategic Change in an Era of Healthcare Transformation (pp. 47-70). Springer, Cham.
Brooks, G., Heffner, A. and Henderson, D., 2014. A SWOT analysis of competitive knowledge from social media for a small start-up business. The Review of Business Information Systems (Online), 18(1), p.23.
Bull, J.W., Jobstvogt, N., Böhnke-Henrichs, A., Mascarenhas, A., Sitas, N., Baulcomb, C., Lambini, C.K., Rawlins, M., Baral, H., Zähringer, J. and Carter-Silk, E., 2016. Strengths, Weaknesses, Opportunities and Threats: A SWOT analysis of the ecosystem services framework. Ecosystem services, 17, pp.99-111.
Camisón, C. and Villar-López, A., 2014. Organizational innovation as an enabler of technological innovation capabilities and firm performance. Journal of business research, 67(1), pp.2891-2902.
Gupta, G. and Mishra, R.P., 2016. A SWOT analysis of reliability centered maintenance framework. Journal of Quality in Maintenance Engineering, 22(2), pp.130-145.
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.
Salavou, H.E., 2015. Competitive strategies and their shift to the future. European Business Review, 27(1), pp.80-99.
Shabanova, L.B., Ismagilova, G.N., Salimov, L.N. and Akhmadeev, M.G., 2015. PEST-Analysis and SWOT-Analysis as the most important tools to strengthen the competitive advantages of commercial enterprises. Mediterranean Journal of Social Sciences, 6(3), p.705.
Shin, H. and Dess, G.G., 2017. From Swot to Value Appropriation: Career Implications. Academy of Strategic Management Journal, 16(1), pp.165A-168A.
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic management and business policy. pearson.
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