Write an essay of explaining the main strategy development tools and how they are used.
The main purpose of this essay would be to understand the use of the competitive strategy development tools that are used by the organizations so that it can help them in understanding the internal and the external environment in a better manner. The external environment of the organization can be understood by developing the PESTLE analysis and the Five Forces analysis that will allow the company in gaining knowledge regarding the competitors that are present in the area. The internal analysis can be done with the help of SWOT that results in finding out the strengths and the weaknesses of the company so that it can be turned in to opportunities. These analysis tools need to be used in a proper manner so that it can be used to identify the core competency of the organization.
The use of this strategic tool helps the company in understanding their external environment in a better manner so that they can have clear idea regarding the market where they are carrying out its operations. It is an abbreviation for Political, Economic, Social, Technological, Legal and Environmental. The political scenario needs to be understood so that it can help the organization in understanding the policies of the country in a better manner (Newton, 2014). The economic perspective of the place also needs to be understood by the company so that it can help them in getting an idea of the inflation rate and the exchange rates that are prevailing in the region. This will help in influencing the performance of the company in a positive manner (Tanaka, 2014).
The societal factors also need to be considered by the organization so that they can be able to identify the size of the population along with the demographic features that are present within the area. This will allow the organization in developing the products in a manner that would help in meeting the needs and preferences of the local people. The technological factors allow the companies in developing ideas regarding the latest technologies that needs to be taken up so that it can help in increasing the level of production and the efficiency among the employees (Hussain, 2013). This will allow the company in gaining a competitive advantage in the market over the rivals so that they can increase their potential in the market. The legal factors have to be understood by the company so that it does not lead them to any issues in setting up the business with respect to safety laws and other polices present in the country. It is important for the organization to understand the surrounding environment so that the level of pollution can be under control, which will result in increasing their responsibility towards the society (Zalengera et al., 2014).
A company like Aldi who is present in Australia has been using this strategy for a long period, which has helped them in identifying the competitors that are present in the market. The successful analysis of the external environment with the help of this tool has resulted in increasing their attractiveness in the market while launching a new product or service.
The use of this tool will help the company in understanding the competitive strength so that their position can be determined within the similar industry. It will help the organization in understanding its strengths so that the position of the company can be evaluated in the market and within the industry so that it can figure out the profitable ventures by launching a new product in the market. The power of the supplier will result in evaluating the impact that they create in the market with respect to supplying the raw materials (Dobbs, 2014). It will help the companies in understanding the control of the suppliers in the market. It will also allow the companies in understanding the cost of switching from one supplier to another, which will affect their level of operations as well. The power of the buyers will help the organizations in understanding the impact that is created by the buyers regarding the products that are being offered to them in the market. The potential buyers need to be identified by the company so that it can assess the cost of switching by the buyers to a different product that is available in the market (Yunna & Yisheng, 2014).
The rivalry among the competitors will also allow the companies in understanding the abilities of the competitors that are present in the market, which offers similar products as well. The evaluation of the competitiveness that is present in the market will result in development of the products in a better manner so that it can increase the attractiveness of the company in the market (Mathooko & Ogutu, 2015). The substitution threat needs to be assessed by the company as well so that the companies have a better knowledge of the customers and their likeliness in changing towards alternative products if price of the products are increased. The threats from new companies that may enter the industry also has to be evaluated so that it can help in increasing the profit levels of the company so that the profitability does not get hampered for the company (Ortega, Jalon & Menendez, 2014).
Aldi uses the Five Forces analysis in an effective manner, as it allows them to understand the competition that they get from companies like Woolworths and Wesfarmers. It has helped the company in understanding the needs and preferences of the customers in the market so that the products can be developed in a better manner.
This strategic tool allows the companies in assessing their strengths and weaknesses so that it can be turned in to opportunities along with the threats that they face in the industry. It helps the company in analysing their internal environment, which needs to be understood so that the efficiency level of the employees can be increased. The strengths should be analysed by the companies in a proper manner so that it can help in identifying the core competencies. The weaknesses of the company needs to be analysed so that it can identify the liabilities and work towards it so that it can be minimized. This will help in increasing the efficiency of the company as well (Suh, 2014).
The opportunities need to be analysed so that it can help the company in gaining a competitive advantage in the market. It will also help the company in understanding the ways through which more number of customers can be attracted towards the company. This will allow the company in increasing its rate of profitability based ion the opportunities that has been identified. The threats of the company also needs to be analysed so that it will help in overcoming the factors that may reduce the profitability of the company (Yuan, 2013).
Conclusion and recommendation
It can be recommended that the use of these strategic tools will allow the Aldi is understanding the market in a better manner. These tools allow the company in identifying its strengths and weakness along with the nature of competition that is present in the market. It will help the company in increasing its competitiveness in the market, which will attract more number of customers towards the company.
Reference List
Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45.
Hussain, F. (2013). Impact of PESTLE factors on power generation projects of Bangladesh (Doctoral dissertation, BRAC University).
Mathooko, F.M. & Ogutu, M., (2015). Porter’s five competitive forces framework and other factors that influence the choice of response strategies adopted by public universities in Kenya. International Journal of Educational Management, 29(3), pp.334-354.
Newton, P. (2014). What is the PESTLE Analysis?.
Ortega, A. G., Jalón, M. L. D., & Menéndez, J. Á. R. (2014). A strategic analysis of collective urban transport in Spain using the Five Forces Model. Investigaciones Europeas de Dirección y Economía de la Empresa, 20(1), 5-15.
Suh, J. (2014). Theory and reality of integrated rice–duck farming in Asian developing countries: A systematic review and SWOT analysis. Agricultural Systems, 125, 74-81.
Tanaka, H. (2014). Toward project and program management paradigm in the space of complexity: a case study of mega and complex oil and gas development and infrastructure projects. Procedia-Social and Behavioral Sciences, 119, 65-74.
Yuan, H. (2013). A SWOT analysis of successful construction waste management. Journal of Cleaner Production, 39, 1-8.
Yunna, W., & Yisheng, Y. (2014). The competition situation analysis of shale gas industry in China: Applying Porter’s five forces and scenario model. Renewable and Sustainable Energy Reviews, 40, 798-805.
Zalengera, C., Blanchard, R. E., Eames, P. C., Juma, A. M., Chitawo, M. L., & Gondwe, K. T. (2014). Overview of the Malawi energy situation and A PESTLE analysis for sustainable development of renewable energy. Renewable and Sustainable Energy Reviews, 38, 335-347.
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