Discuss about the Strategy Development Tools.
The importance of strategy development tools has increased between enterprise, and the senior-level executives use these tools to analyse the market trends and factors that affect business to create effective strategies. This essay will discuss three tools which are used by corporations to develop strategies for their business. The first tools are SWOT analysis which was first introduced in the 1960s, and it assists management in developing strategies based on internal and external factors. The second tool is five forces model which is used by an enterprise for determining attractiveness or unattractiveness of an industry. Finally, this essay will evaluate Resource-based view which is an effective tool for analysing internal strengths to generate a competitive advantage in the industry. Examples of different corporations will be discussed to understand each model.
The SWOT analysis is a strategic development tool which assists enterprises in identifying their internet weaknesses and strengths and external threats and opportunities. The model was developed in the 1960s for creating business strategies, and it has remained unchanged through time (Bull et al., 2016). The model is based on both internet and external factors that affect a company’s operations. The internal factors create both strengths and weaknesses of a corporation which include business strategies, the effectiveness of leadership, positive working culture, talented employees, and others. On the other hand, external factors create opportunities or threats for a corporation which assist them in expanding their business. External opportunities include lower tax rates, interest rates, flexible government regulations, and others. External threats include high competition, changing customer demands, change in technologies, and others. This tool is used by senior and middle-level management in an organisation while developing business strategies. Managers can assess internet strengths and weaknesses and align them with external opportunities and threats to develop highly effective business strategies.
Example: McDonald’s uses SWOT analysis while developing future business strategies. McDonald’s is a fast food restaurant, and its strengths include positive brand reputation across the globe and operations situated in more than 36,000 locations (Rosenberg, 2018). The company has a strong product offering, and it changes its menu to suit the demand of its customers. The corporation has established an efficient production chain which reduces the time taken between booking and delivery of the order. The major weaknesses of the company include difficulty in finding prime location in major cities, weak product development, slowed revenue and declining market share. The opportunities for McDonald’s include expansion in emerging markets, growing dining out market, joint venture with small retailers, diversification of product offering and increased focus on corporate social responsibility. The threats faced by McDonald’s include high competition from old and new fast food restaurants, changing demographics due to increasing awareness regarding healthy food, economic recession, fluctuation in foreign exchange rates and downturn of the economy (Gerhardt, Hazen and Lewis, 2014). Based on these factors, the company uses its strengths while developing business strategies to gain a competitive advantage over others.
The five force framework is given by Michael Porter, and it is a strategy development tool that is used by enterprises to assess the attractiveness or unattractiveness of an industry. The tool is used by senior executives or managers of a corporation to create effective business policies while launching new products or services in the market or diversifying their products into new sectors (Latham, 2013). The tool determines the attractiveness of an industry by analysing five key forces which affect its operations. The five forces that affect the attractiveness or unattractiveness of a sector include the rivalry among the competitors, the threat of substitute products, the threat of new entrants, the bargaining power of suppliers and the bargaining power of buyers. These factors affect the business of an enterprise while operating in an industry and they affect the decisions taken by the top level management.
Example: Qantas Airways is an Australian Airline company which was founded in 1921. The company operates in the aerospace industry, and it offers its services across the globe. The competitive rivalry in the industry is high because a large number of domestic and international airlines operate in the industry. Large international airlines such as Delta, United and Emirates have increased competition for local Australian airlines. The bargaining power of suppliers is high in the industry because Boeing and Airbus are two main aircraft suppliers and they can hike up the prices of aircraft because they supply to airlines across the globe (Forsyth and Stewart, 2012). The bargaining power of buyers is high because a large number airline operates in the industry and with the increase in low-cost airlines the competition between airline operators has increased. Furthermore, the popularity of third-party online ticket booking services has increased the bargaining power of buyers because they can easily compare between airline prices. The threat of new entrants is low because of strict government conditions and requirement of high initial investment (Homsombat, Lei and Fu, 2014). The threat of substitute is low because air travel is the faster way of travelling in local and international markets. Alternative options include train, bus, ship or cars which are slow and relatively uncomfortable options.
Resource-based view model is used by enterprises to identify their resources which can provide them a competitive advantage over their competitors. This model is used by senior level management while creating future business policies for maintaining or sustaining their competitive advantage (Hunt and Davis, 2012). Resources which show the characteristics of VRIO model are used by the enterprises for generating a competitive advantage. VRIO is an acronym for value, rarity, imitability and organisation. This model analyses whether a resource is valuable, rare, inimitable and organised by the company which assist in generating a competitive advantage for the enterprise.
Example: Zara is a global clothing retailing brand which is a subsidiary of Inditex. The company has generated a competitive advantage due to its responsive supply chain operations. The corporation has established both in-house and outsourced manufacturing facilities. Although in-house manufacturing increase costs of the firm but it assists them in delivering the latest trends clothes in just 4-5 weeks whereas other competitors such as GAP and H&M launch new products in 6 months (Crofton and Dopico, 2012). The company uses in-house manufacturing for products which have uncertain demand whereas for production of usual, certain demand products the corporation uses its outsourcing facilities. The supply chain of Zara is valuable and rare, and it is difficult for competitors to imitate it. The corporation has effectively organised it supply chain which provides it a competitive advantage. Therefore, based on RBV model, the corporation has generated a competitive advantage in the fast fashion industry.
It can be concluded from the above observations that these tools are crucial for the success of an enterprise since they provide significant information to organisations which assist them in developing effective business strategies for generating a competitive advantage. In the fast pace and continuously changing business world, these strategy development tools enable corporations to evaluate different internal and external factors that affect their business and developing effective business strategy. Example of different companies is discussed in the essay which effectively uses these tools to develop business strategies and improve their operations. These tools are crucial to the success of a company, and it enables it to develop strategies to sustain their future growth and profitability.
References
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.
Business To You. (2016) VRIO: From Firm Resources to Competitive Advantage. [Online] Business To You. Available at: https://www.business-to-you.com/vrio-from-firm-resources-to-competitive-advantage/ [Accessed 28 April 2018].
Business To You. (2017) SWOT Analysis: Bringing Internal and External Factors Together. [Online] Business To You. Available at: https://www.business-to-you.com/swot-analysis/ [Accessed 28 April 2018].
Crofton, S.O. and Dopico, L.G. (2012) Zara-Inditex and the growth of fast fashion. Essays in Economic & Business History, 25.
Forsyth, A. and Stewart, A. (2012) Of Kamikazes and Mad Men: The Fallout from the Qantas Industrial Dispute. Melb. UL Rev., 36, p.785.
Gerhardt, S., Hazen, S. and Lewis, S. (2014) Small Business Marketing Strategy Based on McDonald’s. ASBBS Proceedings, 21(1), p.271.
Homsombat, W., Lei, Z. and Fu, X. (2014) Competitive effects of the airlines-within-airlines strategy–Pricing and route entry patterns. Transportation Research Part E: Logistics and Transportation Review, 63, pp.1-16.
Hunt, S.D. and Davis, D.F. (2012) Grounding supply chain management in resource?advantage theory: in defense of a resource?based view of the firm. Journal of Supply Chain Management, 48(2), pp.14-20.
Latham, J.R. (2013) A framework for leading the transformation to performance excellence part I: CEO perspectives on forces, facilitators, and strategic leadership systems. Quality Management Journal, 20(2), pp.12-33.
Rosenberg, M. (2018) Number of McDonald’s Restaurants Worldwide. [Online] Thought Co. Available at: https://www.thoughtco.com/number-of-mcdonalds-restaurants-worldwide-1435174 [Accessed 28 April 2018].
Visual Paradigm. (2018) What is Five Forces Analysis?. [Online]Visual Paradigm. Available at: https://www.visual-paradigm.com/guide/strategic-analysis/what-is-five-forces-analysis/ [Accessed 28 April 2018].
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download