Strategy Development Tools: PESTLE Analysis And Porter’s Generic Strategy

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.Please type in Times New Roman 12 point with 1.5 line spacing and page numbers.Ensure your Student Number and Name appears on the Cover Sheet.Your final submission is due Friday of week 5 at midnight.

Porter Generic Strategy

Strategy development tools are very important to understand organization environment so that management can develop various strategic plans for the business. Strategic planning is the process of developing the strategy or making of action plan to attain the business objectives of an organization (Jarratt and Stiles, 2010).

The main key element of strategic planning process is – Acknowledging of vision, mission and values and assessing key aspects of internal and external factors having significant impact over the business decision of an organization. To research more deeply, an Australian organization is selected in align with the two strategy development tools i.e. PESTLE analysis and Porter Generic Strategy.

2 Porter Generic Strategy

This strategy provides various ways to an organization in relation to competing. It helps in determining whether a business’s profitability is above or below the industry average. If it is above, then the firm is enjoying long run sustainable competitive advantage. This generic strategy is derived by Michael Porter, which includes major four elements – Cost leadership, Differentiation, Cost focus, and Differentiation focus (Lechner and Gudmundsson, 2014). In a rapidly changing market, flexibility with ability to quickly respond the market constitutes an important aspect in running a business successfully. Using this tool enable an organization to allocate resource effectively, set various priorities, and align employees with the business vision and mission. This reduces ambiguity and gives direction and clarity to the management. For practically understanding, an analysis is made on Telstra (telecommunication company of Australia) with all the above four aspects.

2.1 Cost Leadership Strategy

Telstra gains the generic strategy in an industry as their cost of operations is lower than the competitors i.e. Vodafone and Optus. In 2016, Telstra conical their strategy to make sure all new growth investment and streamline the business operations. They intend to monetise the assests valued $2 billion for the next two years and build up the balance sheet. They also target on the productivity programme to decrease underlying core fixed costs by $2.5 billion by FY22 (Bureau, 2018). As the operation, cost will be lower down, the company will able to earn higher profits and the number of sales will also be increased.

2.2 Differentiation Strategy

 Telstra executed this plan mainly in order to possess adequate skills and capabilities to generate distinctiveness in the product in comparison with its competitors (Optus and Vodafone) based on few attributes, which lets the customers to get the products distinct from the competitors. The company is engaging with this strategy by accessing advanced and modern technology (5G), high labour work force and establishing communication to the customers with help of social media campaign. This is helping the company to target broader range of customers and earn economy of scale.

2.3 Focus strategy 

A firm uses this approach to assist a specific division instead of catering to the complete marketplace. This targeted segment of the company includes special groups of customers or a specific geographic region. There is also an entry barrier to this segment as customers are more loyal towards the brand. For instance, Telstra is planning to provide high-speed service to the latest smartphone users and thus intend their strategy towards 5G technology (Reichert, 2018). With their narrowed focus, their new commercial unit will not contain the mobile network assests together with towers, spectrum and radio access equipment as it will remain combined with the core customer segment other than network differentiation. These plans will be significant in executing the 5G strategy.

Cost Leadership Strategy

The new infrastructure business unit will give more springiness and transparency to the organisation in relation to underlying infrastructure.

Exploiting all these strategies in the business help Telstra to achieve significant economies of scale, however, they do not rely on cost leadership to compete, this is a competitive environment and every organization is coming up with something new as innovation to gain a competitive edge in the market. These brand can pursue customers to become brand loyal and paying a premium for their products (Martenson, 2007).

3 Pestle Analysis

A PESTLE analysis is a strategy development tool used by the organization to assess the external macro environment factors affecting the internal decision and business plans. Using this tool can help the management to assess various factors prevailing in the business environment and thus provide various threats as well as opportunities to the management (Ho, 2014). Therefore, it is also called an analytical tool for strategic business planning.

In respect to Telstra, the analysis will be like –

3.1 Political Factors

The political factors of Telstra includes pushing of regulatory reforms by the government of Australia. For example, Telstra is enjoying the in past few years, there is a reform in the Universal Services Obligation favouring government backed National Broadband Network. This reform will enable Telstra to progressively sell its HFC and copper networks to NBN and so this will cause further entry barrier to telecom industry in Australia (Coyne, 2014). In addition, Telstra also enjoys cordial global diplomatic relations with most of the countries globally and this provides various business opportunities for the company.

3.2 Economic Factors

Subdued GDP due to falling commodity prices can have a significant impact on telecommunication growth. Moreover, as per the 2017 forecast, demand made by Chinese for key Australian products exports, Iron Ore and Coal is expected to decline and will lot of excess supply, the prices may go further down (Chia, 2018). Therefore, this does not seem good for the Australian economy and telecom sector.

3.3 Social Factors

The social factors are the direct reflection of the society in which the company operates. It is comprised of various aspects such as culture, belief, attitude and values. Telstra needs to understand the customers’ life-style thoroughly in order to make their venture successful. Moreover, Telstra needs to give class distribution due importance. For instance, they would not able to give the premium product to the general public if the majority of the population was of a lower class and so they need to adopt niche-marketing strategy.

3.4 Technological Factors

In this competitive landscape, technology structure is changing at a fast pace. This provides the company an opportunity to deliver innovative products to the society. Telstra can invest in digitization to improve service offerings and customer experience. Moreover, they can also save huge amount of cost when they are starting service in a new segment or country with help of leasing telecom infrastructure and network.

3.5 Legal Factors

In every country, there are several government institutions and regulatory framework having a significant impact on the business polices and plans. In Australia or any other country where Telstra wants to incorporate their network, the management needs to consider several countries or state laws such as intellectual property law, health and safety law, discriminations laws, to keep company, employees and customers in a safe position. For example, In April 2018, the Federal Court ordered to pay $10 million penalties for the misleading representation to customers in respect with “Premium Direct Billing” (Spencer, 2018).

3.6 Environment factors

Different industries or countries hold different standards of environment protection in their norms. Telecommunication industry also comprises of some important laws in relation to sustainable environment and Telstra needs to follow them in an effective way. For instance, they need to Foray into environment friendly battery store segment. Moreover, the company also need to switch to renewable sources of energy in their offices as it will give them a strong brand identity in the industry and company may also get support from the government in the form of subsidy.

Conclusion

In conclusion, it can be said that these strategy development tools play a significant role in achieving organization goals and strategic objectives. These provide a blueprint of various threats and opportunities pertaining to the business environment of an organization. However, Telstra business environment is quite good but the company need to start its venture outside the home country and mainly in Asia countries so as to achieve a competitive edge in the telecommunication industry.

References

Bureau, D. (2018) Telstra announces Telstra2022 to improve customer experience 

Chia, K. (2018) Top Iron Ore Shipper Warns China Is at ‘Peak Steel’ 

Coyne, A. (2014) Telstra hands over copper, HFC in new $11bn NBN deal

Ho, J.K.K. (2014) Formulation of a systemic PEST analysis for strategic analysis. European academic research, 2(5), pp.6478-6492.

Jarratt, D. and Stiles, D. (2010) How are methodologies and tools framing managers' strategizing practice in competitive strategy development?. British Journal of Management, 21(1), pp.28-43.

Lechner, C. and Gudmundsson, S.V. (2014) Entrepreneurial orientation, firm strategy and small firm performance. International Small Business Journal, 32(1), pp.36-60.

Martenson, R. (2007) Corporate brand image, satisfaction and store loyalty: A study of the store as a brand, store brands and manufacturer brands. International Journal of Retail & Distribution Management, 35(7), pp.544-555.

Reichert, C. (2018) Telstra2022: Key takeaways from Telstra's new strategy 

Spencer, L. (2018) Telstra ordered to pay $10M over third-party billing service 

Stonehouse, G. and Snowdon, B. (2007) Competitive advantage revisited: Michael Porter on strategy and competitiveness. Journal of Management Inquiry, 16(3), pp.256-273.