Discuss about the Competitive Strategies for Political and Political Factors.
Owing to the boon and bane of globalization, profits and competition in market and business structure has seen immense change in the last decade. Companies and business organizations in order to stay competitive in the market makes the use of different kind of analytical tool and strategies to chalk out business plans, decide investments and analyze expected profits. The analytical tools that the paper would focus upon are Pestle, Swot and Porter’s Five Forces. These tools are used by almost all the small and large-scale business organizations in order to evaluate the impact of the macro and microenvironment on the organizational structure of the company. The essay would be segmented into three parts discussing SWOT, Pestle and Porter’s Five Forces respectively.
Pestle is the extended form of PEST. PEST howsoever refers to the political, economic, social and the legal factors that affect an organization or a business. PEST was later extended with the legal and the environmental factors that too, seemed to make a significant impact on an organizational structure (Zalengera et al., 2014). PESTLE is essentially a tool that analyses the external impacts on an organization. Pestle is used and operated by the strategic managers and planners of the company. Political factors adhere to the political changes that may influence a company. For instance the change in government bring new trade policies and revision of price of products, which marks the profit of the company. Economic factors like strong unemployment rates in a particular area affect a business. Social factors are the ever-changing trend that initiates the demand of certain services. For example, work pressure encouraged the spa industry to flourish (Lichten et al., 2015). Technological aspects refers to the fact that how advent of modern technology has made an impact on any organization like the increased production, hassle free promotion etc. Environmental factors decide the positioning of the company, that is, for example, a business related to information technology would not base its branch in remote or hilly areas. Apart from that, all organizations owe some responsibility towards the environment like the use of green technology, treating waste before dumping etc. Legal factors are related to the laws that business organizations should adhere to like the laws related to employee protection acts, sewage treatment, health and safety acts, acts related to tax payment issues etc (Aithal 2016). To understand in details when and where PESTLE is used by any company, an example can be taken. PepsiCo used PESTLE to figure out the macro environmental factors before launching its products into unknown markets. For example, PepsiCo would use PESTLE to evaluate if the economic structure of a place would make the business profitable or the legal factors adhere to the company policies.
SWOT, once more is an analytical tool that is used by business heads of companies to determine the internal factors of a company that may affect the production, sales and profit count as a whole (Bohari, Hin and Fuad 2017). SWOT is the acronym for Strength, weakness, Opportunities and threat of a particular business. Assessing the strength, weakness, opportunities and threats of a company, a business can plan its objectives in favorable manner. In this context, it must be noted that whole strength and weakness are the internal factors that matter to the company, opportunities and threats are the external factors. An example can be cited to delve into further details about the same (Wu, Song and Kang 2016). For example, the strength of Wal-Mart lies in its huge customer base and in its market share. At the same time, the weakness of the company lies in the fact that Walmart products cannot be sold any longer in America. Walmart can capitalize the opportunities to increase the growth of the company. It can expand the company in other countries to maximize the profit. The pressure of other retail sellers like Sainsbury’s and TESCO are the major threats to Walmart since all the retail stores deals with similar kind of product. Hence, before launching its products in an unknown market a SWOT analysis would provide Walmart with a complete idea about the internal and the external factors of the market.
‘Porter’s Five Forces’ as the term suggests are five powers that essentially evaluates a company’s strength and its course of action regarding goods and products. The five powers that is incorporated with Porter’s Five Forces are buyer power, supplier power, threat of substitutes, threat of new entry and competitive rivalry (Rothaermel 2015). Buyer power refers to customers, the power of the customers to buy or discard the products and services of a particular company. Supplier power can be explained as the bargaining power of the suppliers of raw materials towards a company. If the number of suppliers are less, the bargaining power of the supplier would be more and vice versa. Competitive rivalry points to the similar brands existing in the market that produces similar kind of products. Competition is generally high if the number of competitors in the market is more, or the market is saturated (Mathooko and Ogutu 2015). Threat of substitution points to the similar kind of products available in the market, which may be opted by the customers discarding the products of any particular company. Customers may discard a product for another for various reasons like its availability, prices, and the way the product appeals the customers and its promotional strategy. To overcome the threat of substitution, companies makes the use of attractive pricing strategies and gives offers and discounts to bring products and services to limelight. Threat of new entrant is about the establishment of a new company in the already existing market. A new company when launches in the existing market with similar goods and services, it creates a threat for the existing companies in the market (Brooks, Heffner and Henderson 2014). The customers are further divided and threat may include the shift of customers from the existing company to the new entrants. For example, JW Marriot would use Porters Five Forces model to assess its positioning in the market before entering into an existing market. For Marriot, the bargaining power of the suppliers would be low, as there are a number of suppliers and Marriot is a gigantic organization (Porter and Heppelmann 2014). As such, suppliers would never fall short. The bargaining power of customers on the other hand would be high as in the recent past, with the considerable growth of global economy, customers are shifting to elite class hotels and there are a number of competitors for Marriot. The menace of substitutes is again high as third grade hotels claim to be ‘international’ by duping, however, the difference remains n the quality of the services that are provided. The dupe and the low price, which at the same time seems to offer the same privileges like Marriot, attract customers. Competitive Rivalry is again high. Marriot faces two strata of competition both from the similar hotels like Hilton resorts and cheap dupes of international hotels.
In the concluding part, it can thus be said that PESTLE, SWOT and Porter’s Five Forces are extremely important and indispensible criteria of strategic planning made by small or large-scale companies. These are the analytical tools that help a company’s growth, decide its investment plans, focus upon its expansion and analyses the expected profit returns.
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