HI6006 Competitive strategy holmes college sample
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Table of Contents
1. Tools. 2
2. Executive summary. 2
3. Introduction. 3
4.1.1 PESTEL analysis. 3
4.1.2 Application. 3
4.1.3 Implications. 4
4.2.1 SWOT analysis. 5
4.2.2 Application. 5
4.2.3 Implications. 6
4.3.1 Porter’s Five Forces model 6
4.3.2 Application. 6
4.3.3 Implications. 7
4.4.1 Ansoff Matrix. 8
4.4.2 Application. 8
4.4.3 Implications. 8
4.5.1 Generic Strategies. 9
4.5.2 Application. 9
4.5.3 Implications. 9
5. Conclusion. 10
There are various tools that can be used for the purpose of developing strategy. For the purpose of this discussion five different tools have been explained in the following paragraphs.
PESTEL: PESTEL is a tool that can be used for the purpose of understanding the macro-environmental factors that can affect the operations of a business. PESTEL is an abbreviation of Political, Economic, Social, Technological, Environmental and Legal factors (David and David, 2016).
SWOT: it is considered as a tool that can be used for the purpose of analyzing the competitive position of an organisation through analysing its Strengths, Weaknesses, opportunities and Threats.
Porter’s Five Forces model: This model is used for the purpose of understanding the competitive environment of a business, with the help of five different forces, which are Bargaining power of the buyer, bargaining power of the suppliers, threat of new entrants, threat of substitutes and industry rivalry.
Ansoff Matrix: This tool provides four different types of growth strategies that can be availed by an organisation as per its requirement. The four different growth alternatives are, Market Penetration, Market Development, Product development and Diversification (David and David, 2016).
Porter’s generic strategies: These are a set of strategies that can help an organisation to acquire competitive advantage in its selected market segment. There are four different strategies, Cost leadership, Cost focus, differentiation and differentiation focus.
The report has been developed to project five different tools for developing strategy, which are PETEL, SWOT, Five Forces Model, Generic Strategies and Ansoff’s Matrix. The application of the tools has been made in five different organizations based in five different nations. The implications of the tolls have also been discussed.
The paper intends to through light upon different tools for forming strategies. The paper also intends to apply those strategies to different organizations and understand their implications.
PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal factors. It is considered a tool that helps an organisation to understand the macro-environmental factors that can affect the operations of the business. On the basis of this analysis effective strategies can be formed.
The application of PESTEL model has been made in the case of Tesco Plc, which is the UK supermarket giant.
Tesco runs its business in 12 different nations. Hence, the company is required to deal with the taxation policies, instability in political environment, level of unemployment and economic health of the country. For instance, tesco imports certain materials from China and hence the import duties can affect the operations of the company (METZGER, 2014).
It has been found that there has been a rise in labour cost in UK, the minimum wage rate in UK has enhanced by 4.45 within the previous 25 years. There are other factors such as, change in exchange rates, enhancement of cost of materials and others that can affect the operations of Tesco.
The taste and preferences of the customers have changed over time, at presnt customers with tight schedule looks for getting all the products under same roof and they also seek for a flexible return policy. Moreover, customers have become health conscious and they focus upon getting organic food. Tesco is required to focus upon these changes (METZGER, 2014).
The development in the field of IT and mobile technology has benefit Tesco to a greater extent. The presence of internet and social media has helped Tesco in providing goods online and using social networking sites such as Facebook and YouTube to promote its brand to the masses.
The customers as well as the government have become highly conscious regarding environmental protection. Tesco has encouraged its customers to do online shopping to reduce carbon foot print; moreover, the drivers are trained to take the most fuel efficient routes to reduce emissions. The organsiation has planned to reduce carbon foot print by 50% till 2020 (METZGER, 2014).
There are various regulatory norms that tesco must comply to conduct its business without any difficulties. Tesco faced legal action due to discrimination of employees on the grounds of age and gender in 2016. Tesco strictly adheres to the code of practices as implemented by food Retailing Commission.
The implications of PESTEL analysis as a strategic tool can be understood through the analysis of the opportunities and threats that are associated with this tool. The same has been explained in the following sections:
PESTEL can be considered as a simple framework, which can be used at ease. The findings gathered through the usage of this tool will help an organisation to avoid potential threats. The application of this tool helps in developing effective strategies. This tool can clearly project the implications of entering into a new market (Hussey, 2012).
There is a chance of making the mistake of oversimplifying the information gathered for the purpose of decision making. It will be necessary to conduct the process on a continuous basis. The application of this tool can restrict the access of the users to quality external information (Hussey, 2012).
This is a tool for developing strategy, which helps a business in understanding its strength, weaknesses, opportunities and threats. This tool can potentially support a business in realizing its competitive position. In this way SWOT analysis helps an organisation in developing effective business strategy.
The Application of SWOT model has been made in case of Countdown Supermarket, which is based in New Zealand.
Strengths: the strength of the organsiation can be considered as its strong supply chain, low prices offered to the customers, increased number of loyal customers and a strong brand name.
Weaknesses: the weaknesses of the company can be considered as less efficient workforce, and poor customer services (Sarsby, 2016).
Opportunities: Countdown can grab the opportunity of expanding in online market, the brand can enter into emerging markets, the organsiation can extend its product base and it can pout more focus towards innovation.
Threats: The threats can be considered as the market has turned matured, higher level of competition and the taste and preferences of the customers are continuously changing (Sarsby, 2016).
The implications of SWOT analysis is presented below:
It can be considered that an organsiation can use SWOT model to develop business strategies at a low cost. It is very easy to use SWOT analysis, basic understanding regarding the business will be enough for applying SWOT model. It takes lesser time to apply SWOT model in case of complex problems. The model specifically emphasizes upon the strengths, weaknesses, opportunities and threats of a business.
The application of SWOT analysis is regarded as a single stage in the process of business planning process; hence, it is not the ultimate stage. It will not be considered as effective to understand complex issues. It will be difficult to analyses uncertain problems (Sarsby, 2016).
This model is used for the purpose of understanding the competitive environment of a business, with the help of five different forces, which are Bargaining power of the buyer, bargaining power of the suppliers, threat of new entrants, threat of substitutes and industry rivalry.
Application of Five Forces Model to KFC, which is a fast food company, based in Kentucky, USA:
Bargaining power of the buyers (high):
The bargaining power of customers of KFC is considerably high as they have a wide range of brands to choose such as, McDonald’s, Subway, Domino’s, RFC etc. Therefore, it can be said that the awitching cost of the customers is low (DEY, 2016).
Bargaining power of suppliers (Low):
The main ingredients that KFC requires are chicken, potatoes and soft drinks. It can be said that there are numerous suppliers available in the market, who are ready to enter into contracts with KFC to supply these items. Hence, the bargaining power of the suppliers is low (DEY, 2016).
Threat of new entrants (medium):
Considering the threat of new entrants, it can be said that it is difficult for a new organsiation take up a huge investment, develop superb marketing strategy and product development strategies to reach at the level of big brands like KFC. Moreover, KFC has developed a huge base of loyal customers. However, Radix Fried Chicken, started its business in 2008 and it has been able to gain a considerable market share (DEY, 2016).
Threat of substitutes (high):
The threat of substitutes is considerably high as there are numerous fast food brands such as McDonald’s, Subway, Domino’s and many more, who offer similar products to the customers.
Competitive rivalry (high):
There are numerous big brands operating in the fast food market segment such as, McDonald’s, Subway, Domino’s and many more, which has turned the level of rivalry higher.
It is a simple model and easy to understand. This model is capable of providing ways of analysisng the market forces in an understandable way. It can be considered as renowned model used for the purpose of developing competitive strategies. This model is considered as perfect tool to gather information regarding the feasibility of entering or exiting an industry.
This model is capable of providing only a snapshot of the market. The model is not effective in defining the entire industry and it fails to take into consideration the non-market forces. This model can be applied in case of simple market structures only; the model entirely focuses upon the idea regarding competition (DEY, 2016).
This tool provides four different types of growth strategies that can be availed by an organisation as per its requirement. The four different growth alternatives are, Market Penetration, Market Development, Product development and Diversification.
Applying the Ansoff’s matrix in case of Nestle, which is a renowned food and drink company based in Switzerland, it has been found that:
Market penetration: As per this strategy an organisation penetrates into a market through offering lower prices. It has been found that while entering into the Pakistani market, Nestle reduced the size of its renowned product Milo and reduced its price in order to make it acceptable to the market.
Market development: it is a strategy, where an organisation enhances the demand for an existing product in a new market. It has been found that Nestle applied this strategy by introducing Nescafe coffee in the Chinese market (CHERRY, 2014).
Product development: it is considered as the policy of introducing new products in an existing market. While operating the European market, Nestle enhanced its product base by the introduction of health and nutritional products.
Diversification: it is a strategy of developing different products as compared to present product line. Nestle diversified its products base by making investment in renowned cosmetics company, L’Oreal and also in entering pharmaceutical segment (CHERRY, 2014).
This tool helps in identifying the risks for moving towards a particular direction. The tool is highly effective to provide was of growth. The tool can be easily presented to the stakeholders. It helps in developing a culture of risk awareness (Ansoff, 2014).
It can be considered as a theoretical model. The model fails to consider the operations of external competitors. This model fails to project the fact that market development and diversification strategies calls for a change in the day to day running of a business (Ansoff, 2014).
These are a set of strategies that can help an organisation to acquire competitive advantage in its selected market segment. There are four different strategies, Cost leadership, Cost focus, differentiation and differentiation focus.
Singapore Airlines is one of the renowned Airlines company based in Singapore has successfully applied the generic strategies to attain business growth. The company has applied differentiation as well as cost leadership strategy for attaining massive growth.
The company has applied the diversification strategy by forming 36 direct subsidiaries and related organizations such as, Singapore Airlines Cargo, Singapore Airline terminal and Singapore Engineering Company. The subsidiaries are, Silk air, Tiger Airways, Virgin Atlantic and many more. The elements of diversification for the organisation can be regarded as developing the ‘Singapore Girl’, providing memorable in-flight experience, development of the renowned Changi Airport, continuous innovation of services, fixing premium rates for business class (Pangankar, 2011).
The elements of cost leadership can be considered as maintenance of a young fleet with fuel efficient aircrafts that require low maintenance cost, developing cost reduction programs to reduce the labour cost as compared to rivals, moe focus on reduction of wastage, innovations made to enhance efficiency (Pangankar, 2011).
These strategies can potentially support a business in enhancing competitive strength over its rivals. These strategies help an organisation to find out the best way to encourage growth of the business.
It is possible for a business to employ hybrid strategies. It is considered that cost leadership does not help in selling products automatically. The enhancement in sales volume can be made through differentiation rather than imposing higher prices. The capacity of competence based strategy is higher as compared to generic strategies.
conclude, it must be said that the tools used for developing strategy are very
much essential for organizations to adopt, as formation of strategies is
necessary for maintaining the sustainability of a business. Five different
tools have been described in a proper way and their application and
implications has also been discussed.
Ansoff, H. (2014). Strategic management. [Place of publication not identified]: Palgrave Macmillan.
CHERRY, K. (2014). NESCAFE. A MARKETING ANALYSIS. [S.l.]: GRIN PUBLISHING.
David, F. and David, F. (2016). Strategic Management. Pearson Education UK.
DEY, K. (2016). FAST FOOD INDUSTRY IN THE UK. ANALYSIS OF MCDONALDS WITH PESTEL, VRIN AND PORTER’S FIVE… FORCES. [S.l.]: GRIN PUBLISHING.
Hussey, D. (2012). Strategic Management. Hoboken: Taylor & Francis.
METZGER, K. (2014). BUSINESS ANALYSIS OF UK SUPERMARKET INDUSTRY. [S.l.]: GRIN PUBLISHING.
Pangankar, N. (2011). High Performance Companies. Wiley.
Sarsby, A. (2016). SWOT analysis. London: Spectaries.
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