Porter Five Force Models: Evaluating External Environment
Discuss about the Evaluate Activities Of Development Tools.
Development tools are the considered as an important aspect of the business as it can be seen that it helps to evaluate the internal and external environment in a proper manner. In this paper, the discussion will be made on the development tools like Porter Five force models, Resource-based view and Pestle analysis which help to evaluate the activities conducted on a routine basis.
This is one of the essential management tools which are taken into consideration by the company so that activities can be conducted by analyzing the external environment. It is seen that this framework is taken into consideration by the top management so that growth and success can be achieved in the market. In this factor, there are five factors on which focus is given by the company like a threat of entrants, a power of suppliers, a power of buyers, and rivalry against the competitors and threat of substitute (E. Dobbs, 2014).
The first factor is related to the threat of entrants in which proper analysis is made of the new entry made by the business. In this overall cost is taken into consideration of the company at the time of establishing the business. Next factor is related to a power of supplier in which it states that how much suppliers are there in the market. It is seen that if there are fewer suppliers then demand enhances and if there are more suppliers then demand decreases (Fitzpatrick, Nguyen and Cayan, 2015).
Next factor is related to a power of buyers in which proper analysis is done of the buyers who are regularly purchasing the product of the company. Next is rivalry against the competitors in which analysis is done of the competitors who are conducting same activities in the competitive environment. Last is related to the threat of substitute and in this substitute product available in the market are analyzed and according to that, the strategies are made so that goals and objectives can be accomplished effectively.
So, this framework helps the company to consider the effective strategies so that the activities can be completed in a proper way. Also, this tool is helpful at the time of evaluating the overall performance of employees who are conducting routine activities of the organization.
In this practical example on which focus can be given is Tesco. In this, these factors will be analyzed like
Threat of entrants
It is seen that it is high as there are small businesses that are entering the market and offering same products. So these products are made available by the small business also.
Power of suppliers
It is seen that if the focus is given on power of suppliers then it is seen that it is low as there are many small stores who offer the same kind of the products to the customers and they can easily purchase from the store also (Haleem and Jehangir, 2017).
Tesco Example: Analyzing Threat of Entrants, Power of Suppliers, Power of Buyers, and Threat of Substitute
Power of Buyers
It is seen that power of buyer is high in this section as their buyer can purchase same product from any other store easily.
Threat of substitute
It can be analyzed that substitution rate is high as there are many stores that offer same products and customers also have varied choices to purchase the products (Mathews, 2016).
One of the major development tools that help the company to conduct proper analysis in a proper way is pestle analysis. This helps the marketers to evaluate the macro environment and by this only the activities are conducted. This framework is considered by the manager or the top management and according to that only directions are given to the employees to conduct the activities. It consists of the six factors which are political, economic, social, technological, legal and environmental analysis (Grünig and Kühn, 2015).
In this, the political factor is linked with the overall rules and regulations imposed by the government in the country. It is analyzed that it gives direct impact on the policies and procedures that are imposed by the government. At the time of conducting the activities, it is considered so that in proper manner activities can be completed (Grundy, 2017).
Next is an economic factor which is related to inflation and deflation and also it gives impact on the prices level. Purchasing decisions are considered by focusing on this factor. Next is a technological factor which is related to the adoption of latest technologies so that innovation in the products can be done properly. Next factor is a legal factor in which the focus is given on the laws related to importing and exporting of the products. The last factor is related to an environmental factor which is linked with the surroundings and also the impact is analyzed on the routine activities of the company.
Example of Samsung
Samsung considers all the legal rules and regulations at the time of entering the market. Also, the cost is affected by it if the emphasis is given on labor and manufacturing cost. In the economic factor, the company focuses on the overall cost of the economy. Next is a technological factor in which company focuses on innovating new products and offers various models so that success can be achieved in the market.
Also, at the time of importing and exporting the products the company emphasizes the rules and policies so that hindrance can be minimized. Last is environmental issues in which the company focus on using those products which can be easily degradable in the environment.
This is one of the effective development tools that help to attain competitive advantage of the organization. It is a tool which is considered by the managers so that proper utilization of the resources can take place. This tool gives emphasis on the internal resources of the company and also it considers the assets, capabilities, and potential that should be considered by the company to grow in the market (Alvarez and Barney, 2017).
It also helps to enhance the overall performance of the organization. If the company focuses on this model then it can be easy to generate the competitive advantage. In this, there are tangible and also intangible resources which are considered so that overall targets can be attained (Davis, 2017). This also helps to generate the value of the customers and also it has a connection with the proper maintenance of the strategic resources so that success can be achieved in the market by attaining competitive advantage (Kozlenkova, Samaha and Palmatier, 2014).
Example of ford
It is seen that to achieve success in the market the company tries to maintain a competitive advantage in a proper manner. It is seen proper differentiation is made by the companies and also offers good quality so that demand can be enhanced by the products offered to the customers. Also, the organization has enhanced the satisfaction level of the customers in the context of the products given.
By this concept, the company tries to maintain the prices so that demand for the products can be enhanced. The company focuses on considering the latest technologies so that customers can get attracted towards the products offered to the customers. The emphasis is also given to maintain the services so that customers can avail the services in a right manner. It is seen to maintain competition level the company focuses on quality and compete with the luxury brands of the car like BMW and Mercedes so that growth and profits can be achieved (Nason and Wiklund, 2018).
So, it is analyzed that development tools helps to achieve competitive advantage and can grab large market share.
Alvarez, S.A. and Barney, J.B., 2017. Resource?based theory and the entrepreneurial firm. Strategic entrepreneurship: Creating a new mindset, pp.87-105.
Davis, P.J., 2017. How HR can create competitive advantage for the firm: Applying the principles of resource-based theory. Human Resource Management International Digest, 25(2), pp.4-6.
Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.
Fitzpatrick, B.D., Nguyen, Q.Q.A. and Cayan, Z., 2015. An Upgrade To Competitive Corporate Analysis: Creation Of A" Personal Finance Platform" To Strengthen Porter's Five Competitive Forces Model In Utilizing. Journal of Business & Economics Research (Online), 13(1), p.54.
Grundy, T.D., 2017. Dynamic Competitive Strategy: Turning Strategy Upside Down. Routledge.
Grünig, R. and Kühn, R., 2015. Global Environmental Analysis. In The Strategy Planning Process (pp. 89-96). Springer, Berlin, Heidelberg.
Haleem, F. and Jehangir, M., 2017. Strategic Management Practices by Morrison PLC, UK. Analysis, Lessons and Implications. Middle East Journal of Business, 12(3).
Kozlenkova, I.V., Samaha, S.A. and Palmatier, R.W., 2014. Resource-based theory in marketing. Journal of the Academy of Marketing Science, 42(1), pp.1-21.
Mathews, J., 2016. An Information Processing View of Competition Analysis. IUP Journal of Business Strategy, 13(1), p.7.
Nason, R.S. and Wiklund, J., 2018. An assessment of resource-based theorizing on firm growth and suggestions for the future. Journal of Management, 44(1), pp.32-60.
Porter five force analysis., 2018. edrawsoft. [Online]. Available at: https://www.edrawsoft.com/five-forces-chart.php.[Accessed on 19 April, 2018].
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