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HI6006 : Competitive Strategy

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HI6006 : Competitive Strategy

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HI6006 : Competitive Strategy

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Course Code: HI6006
University: Holmes Institute

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Country: Australia

Question:
Write an essay explaining what the main strategy development tools are and how they are used in business.
 
Your essay must contain a comprehensive discussion of 4 of the following: PESTEL, Five Forces, Resource-Based View, PROFIT, Input/Output, SWOT Analysis (you may include Cross Impact Analysis), Generic Strategies, Ansoff, Ghemawat, with reference to academic journals and practical examples from industry.
 
Be sure to use paragraphing. In this essay, sub-headings are permitted.
 
Be sure to reference your sources in-text and provide a list of references at the end in Harvard style.
Answer:
Introduction:

Strategic development tools provide organisations with benefits through which effective planning and execution of decisions are made in critical manner. For strategic development tools, organisations collect desired information and relevant data that are processed according to the management tools to achieve strategic goals and objectives ( Qehaja , et al., 2017). There are many developments tools that are used by businesses, but among all PESTLE, SWOT, Ansoff and Five Force analysis are the four tools that are immensely used by contemporary organisations (Groenendijk, 2003). Therefore, this essay will analyse these four management tools while applying them in real business environment.
PESTLE or PEST analysis tool is used by managements to identify and evaluate external or macro factors facing the firm. This tool is mostly used at the time when companies plan to enter new market because it helps organisations get a knowledge required for formulating plans and for conducting situational analysis. PESTLE analysis comprises of factors that are related to Political, Economic, Social, Technological, Legal and Environment. To stay ahead of the game, organisations make macro or external analysis of their firms at regular intervals as it helps them to identify significant changes in business environment that needs alteration for effective business operations (Gupta, 2013).
Making PESTLE analysis of McDonalds will help in evaluating external factors that presents threats and opportunities to the company while operating in macro environment. Politically, McDonald has expansion opportunities due to its exclusive international trade and global supply chain system. The company makes continuous reforms in its strategic and practices to lesson taxes without violating country’s law (McDonald’s, 2018).  However, nutritional values have affected the sales of company’s product many times. Economic conditions have always been favourable for the company as McDonalds new market entry strategy always targets developed and developing countries where economies of scale can allow sales for the company products. Social factors have remained challenging for the company due to change in lifestyle trend, as more people are switching from fast food to healthier and fresh food. Technologically, McDonald has a strong base, however, its diversification strategy shows more scope for improvement in it. Legal constraints in diversified countries McDonalds operates in also affects company’s sales and cost factors. Environmental factors affect McDonalds since most of its business is outsourced to franchise owners and any change in operating country’s climate can distress overall supply chain system (Vrontis, 2008).
SWOT analysis is most frequently used development tool which provide aid to the management in the process of decision making. This tool is considered as the most effective tools and very useful for the success of business since it prepares organisations for future threats and opportunities. By identifying firm’s strengths and weaknesses, SWOT analysis helps organisations discover new trends and threats that can be rectified before it turns out to be distressing. It can also be said that SWOT analysis is a visual representation of internal factors that are related to business environments that includes firm’s Strengths, Weakness, Opportunities and Threats (Ritson, 2011). This development tools not only maximises business strengths, but also alerts companies regarding obstructions that comes in growth path while formulating strategic formulas to gain competitive advantage (Helms & Nixon, 2010).
Samsung is one of the leading brands dealing in electronic products and mobile phones and making SWOT analysis of the company will help in evaluating firms’ internal factors. Samsung biggest strength lies in its strong portfolio for which it has become one of the known brands worldwide. Innovation and investment made in R&D products have added to its strength. Company also follows diversification strategy by introducing wider range of products in many countries.  However, there are few weaknesses also like the company never introduces new products on its own and always wait for its competitors to make the first attempt. Dependency on foreign country production and outsourcing manufacturing for cost curtail adds further to its weakness. Opportunity can be seen in Samsung company as there is wide scope for opening more retail store that can attract customers in rural areas. By providing customers with additional service, Samsung can maintain enhanced relationships with its customers along with gaining loyalty. Nevertheless, continuous reformation in technology and innovation affects strategies of Samsung. Threats from its competitors also impacts product sales especially in Chinese market (Rasheed, et al., 2015).
Five Force Analysis
Michael Porter’s Five Force analysis is another strong development tool used by businesses to analyse competitive position of the company in market or industry it operates in. In fact, this tool determines the market competition in related industry and intensity in which competitors are behaving while competing with each other. This strategic tool helps in formulating marketing mix for the company after identifying five factors: bargaining power of suppliers, bargaining power of customers, threat of new entrants, threat from substitutes and rivalry among present market players. This 5F model not only helps in formulating appropriate marketing plans but also helps in determining market position of the organisation while analysing weakness and strength in its position in regards to the above mentioned five factors ( Njambi, et al., 2016).
PepsiCo is a strong brand in food and beverage industry where rivalry among competitors is seen in aggressive manner. Fights between PepsiCo and Coca Cola has been witnessed by everyone that gives biggest example which shows the level of competition between rival companies and strong force which PepsiCo has to face while operating in marketplace. Buying behaviour of customers have also been strong force for the PepsiCo products as they tend to switch to other company products easily. Also, there are many substitute products available in the market from which customers can choose according to their preference and availability. Suppliers bargaining power is comparatively weak in PepsiCo’s case due to high availability of alternatives (PepsiCo, 2018). Due to vast expansion of business, PepsiCo offers regular purchase from its suppliers and in return, suppliers try to remain attached with the company for which they offer raw materials in best prices. New entry firms can also affect PepsiCo’s sale as customers may switch to new products. However, the loyalty PepsiCo has gained from its customers makes difficult for new entrants for entering in the market (Smithson, 2017).
Ansoff matrix
Ansoff matrix is one of those development tools that are used by organisations to determine various risk related factors in business operations. Proper understanding of this development tool can help organisations while formulating business growth strategies.  Ansoff matrix provide firms with scope of diversification by developing business policies through identification of strategic options and combining it with matrix to evaluate different risk levels in business. Developed by Igor Ansoff, this tool is massively used in contemporary organisations due to easiness and unpretentious in use. Four categories that are included in Ansoff matrix are Product development, Market development, Market penetration and Diversification strategy (Gianos, 2013).
Application of Ansoff matrix in Apple Inc. can help in understanding this development tool in precise way. Market penetration means selling more products to the existing clienteles that can be done through heavy promotion and cost reduction strategies. Apple Inc. can release updated products at regular intervals that can keep customers engaged with it products. This technique is generally used by large firms where they beat competitors by releasing innovative and developed products periodically (Anon., 2017). Product development is also required by Apple as the company uses its own operating system which many times prove non-user friendly to its customers. Moreover, reshuffling of existing products by making them more user friendly, Apple can gain customers loyalty. Market development means to introduce existing products in new market for expansion and market development. Since Apple is a known brand, its international strategies will not require much efforts (Jeon, 2017). However, targeting new customer segment may require launch of new products depending on the culture and preference of targeted market. Diversification is dissimilar to market penetration as this requires launching entirely new range of products in fresh market. Apple played risk fully here by introducing iTunes products in fresh market even being in computer and mobile phone field (Dudovskiy, 2018). 
References
Anon., 2017. Apple Inc. Annual Report, Washington D.C.: s.n.
Dudovskiy, J., 2018. Apple Ansoff Matrix. [Online] Available at: https://research-methodology.net/apple-ansoff-matrix-2/[Accessed 21 08 2018].
Gianos, J. F., 2013. A Brief Introduction to Ansoffian Theory and the Optimal Strategic Performance-positioning Matrix on Small Business (OSPP). Journal of Management Research , 05(02), pp. 107-118.
Groenendijk, L., 2003. Planning and Management tools. Netherlands: ITC.
Gupta, A., 2013. Environment & PEST Analysis: An Approach to External Business Environment. International Journal of Modern Social Sciences, 02(01), pp. 34-43.
Helms, M. M. & Nixon, J., 2010. Exploring SWOT analysis – where are we now? : A review of academic research from the last decade. Journal of Strategy and Management, 03(01), pp. 215-251.
Jeon, J.-E., 2017. The impact of brand concept on brand equity. Asia Pacific Journal of Innovation and Entrepreneurship, 11(02), pp. 233-245.
McDonald’s, 2018. McDona’ls annual Reports. [Online] Available at: https://corporate.mcdonalds.com/content/corpmcd/investors-relations/financial-information/annual-reports.html [Accessed 21 08 2018].
Njambi, E., Lewa , P. & Katuse, P., 2016. Relationship between Threat of Substitutes and Competitive Advantage of Large Multinationals in Kenyan Beverage Industry. The International Journal of Business and Management, 04(07), pp. 412-423.
PepsiCo, 2018. PepsiCo’s Performance with Purpose Goals: People. [Online] Available at: https://www.pepsico.com/[Accessed 21 08 2018].
Qehaja , A. . B., Kutllovci , E. & Pula , J. . S., 2017. Strategic Management Tools and Techniques: A Comparative Analysis of Empirical Studies. Croatian Economic Survey, 19(01), pp. 67-99.
Rasheed, R., Nawaz, . R. & Abbas, Y., 2015. Samsung Electronics and Apple Inc.: A Case Study in Contrast In Competetive Analysis in 21st Century. International Journal of Engineering and Advance Technology Studies, 03(01), pp. 16-26.
Ritson, N., 2011. Strategic Management. s.l.:Ventus Publishing.
Smithson, N., 2017. PepsiCo Five Forces Analysis (Porter’s Model). [Online] Available at: https://panmore.com/pepsico-five-forces-analysis-porters-model[Accessed 21 08 2018].
Vrontis, D., 2008. The external environment and its effect on strategic marketing planning: a case study for McDonald’s. J. International Business and Entrepreneurship Development, 03(3/4), pp. 290-307.

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