Sample assignment HI6006 Competitive Strategy
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report has discussed the 4 framework that can be used for the analysis of the
business and its macro environment. These frameworks are the backbone of our
understanding of the business. PESTEL and Five Forces analysis are used to
analyze the macro environment while generic strategy is used to understand
internal dynamics of business and SWOT is combination of all.
In this assignment we have discussed 4 competitive frameworks. These frameworks present a way to analyze a business. There are several frameworks that can be used for the same purpose. These frame works are SWOT, PESTEL, Five Forces, Resource-Based View, Generic Strategies, Ansoff and so on. Of all these frame works, there are 4 frameworks that are of utmost importance. These frameworks are SWOT, PESTEL, Five forces and Generic Strategies.
This is a strategy which has been used for the analysis of both internal competency of business as well as external environment in which it operates. This frame work is combination of all the frameworks. Here, we analyze the strengths and weaknesses of the business. These are internal to the company and then we analyze opportunities and threats. These are external to the business and business can use its internal strengths to exploit opportunities and can work on weaknesses to avoid threats (Porter 1980).
We are taking an example of Woolworth here and we are conducting SWOT analysis of the same.
- Market leader in retail business
- Known brand with fair diversification
- Great customer satisfaction
- Presence in highly competitive industry
- Weak profitability due to low value addition
- Increase in processing to allow higher value addition thus margin
- Online platforms that can increase the reach and cut the cost
- Entry of companies such as Amazon
Thus, from the above analysis we can see that Woolworth is a brand with market leader and it can use these strengths to exploit the opportunity in form of e-commerce which has become the trend. This will allow company to cut cost and become more profitable which is one of the weakness of the company. Thus, it can also mitigate the threat of Amazon.
The next framework that we are using here is PESTEL analysis. This framework is widely used when companies are looking for expansion. The reason for the same is that this framework allows company to have complete assessment of the country they are entering hence they can minimize the risk of uncertainty.
The example of the same can be seen by assuming that Woolworth wants to enter in India hence we will have to do PESTEL Analysis to see how India fares to see if it should enter there or not.
The PESTEL analysis focuses on following factors:
Thus, India will be assessed on these parameters to decide the investment worthiness.
Political: If Woolworths wants to enter in Indian market then it will comfortable as India is a democracy where there are equal opportunities for everyone. Hence, it will compete on a level playing field. There are less political turmoil hence the investment of the company will be safe (Alfred 2009).
Economic: India is one of the fastest growing economy. It has second biggest population and has big retail market. The market is still largely fragmented and has ample of scope for branded chains to come in and regulate the market. Indians have low per capita income hence are very price sensitive. Thus, Woolworth can adopt to discounted store model to increase in penetration.
Social: India is a democracy. It has respect for all religion and humans. Thus, Woolworth won’t be seen as outside to the country and people of India will be willing to buy its product.
Technological: India is of the biggest mobile market and the biggest data consumer. Hence, it provide ample of opportunity to run online store.
Legal: India is governed by rule of law and the law sees everyone equal. In case of dispute the law doesn’t discriminate.
Environmental: India is very eco-sensitive country thus Woolworth will have to focus on sustainability.
Thus, we can see that it is one of the best location for Woolworth to enter.
Porter’s five forces model is a tool for the purpose of analyzing the competition in a competitive business market. The source of this model is industrial organization economics through which it determines five different forces which actually impacts the intensity of competition for a particular entity in the market. This in turn gives an idea about the attractiveness or unattractiveness of an industry in the form of profitability and market share. For an unattractive industry, all the five together points out towards reduced profitability whereas in case of attractive industries, all the five forces give a positive result. These five forces are bargaining power of suppliers, threat of new entrants, threat of substitutes, bargaining power of buyers and lastly industrial rivalry. Let us take an example of Woolworths limited which is a retail giant based out of Australia. The threat of new entrants is quite higher in case of Woolworths as new competition brings innovation, new ways of performing some task and attract more customers with the help of low pricing strategy. They also go for low cost and higher value proposition for their customers. Secondly, suppliers hold a dominant position in the food retail industry. This reduces profit margins for Woolworths limited and therefore bargaining power of suppliers is high. Due to increased amount of competition and market players in the concerned industry, the bargaining power of buyers has increased which has put more pressure on Woolworths to come up with more discounts and offers. Threat of substitutes would also be higher for Woolworths in case if new products are coming with same or better value proposition as the one offered by them. Lastly, rivalry among competitors in food retail industry is intense and it have taken a toll on long-term profitability of the organization as a whole.
With the help of Porter’s generic strategies, one can define the way in which a company can pursue competitive advantage in the concerned industry. The strategies which can be used for this purpose are lower cost, product or service differentiation or focus. In case of lower cost, a company choose to lower the prices of its products or services as compared to its competition. Secondly, a company, in order to gain competitive advantage, can also go for product or service differentiation in which they have to come up with some feature or technology which will differentiate their product from their competitor’s products. In this way, customers will be bound to pay a higher price in order to own a different product or service. Another way to look at these strategies is through focus. A company can make their products for niche segment or can offer it to all the segments of the industry. The choice of competitive advantage and focus together forms a complete generic strategy for a market player. For example, Apple places their products at a premium price but offers a different user experience to their customers. So, they have adopted product differentiation strategy with their focus on all segments of the mobile industry.
At the end, we can conclude that SWOT, PEST , Five forces and generic strategies allow us to have clear picture of present and future of the business and if the business is run keeping these strategies in mind then it can help business to expand as well as sustain its operations.
Porter, M., 1980, Competitive Strategy: Techniques for Analyzing Industries and Competitors, New York: Free Press.
Alfred, J., 2009, Delivering Results: Managing What Matters, Springer Science & Business Media. p. 44. ISBN 978-1-4419-0621-2.
Collins, R., 2017, “Is there a better way to analyse the business environment?” Retrieved Aug 23, 2018.
Value Line, 2012, “Value Line – The Most Trusted Name in Investment Research”, www.valueline.com.