Strategic Management Essay: PESTEL And Five Force Model.

Write a report on strategic management tools.

Every company in this business world has to develop some planning in order to sustain in this dynamic business environment. During the development phase of planning or strategy, it has to face a large list of choices and considerations (Diamond, Koernig and Iqbal, 2008). In this case, it has to utilize its available resources and capability in an efficient way and this optimistic process is being provided by these strategic tools. Strategic tools play a very important role in the development of any organization by making them aware about the present situation of the environment, possible threats and risks associated with the business plan so that organization will be able to utilize their plan in both effective and efficient way (Wright, Paroutis and Blettner, 2013).

It basically helps the organization to monitor the environment around them and prepare them according to this macro-environment.

This factor actually determines the range up to which the government and their policies can impact on a particular industry or organization. It mostly compromises of political stability of the government, policies related to the government which includes trade policy, fiscal and all the related tax policies (Song, Sun and Jin, 2017). One of the examples is if the government has banned liquor in a particular state, then it will impact the business of Liquor manufacturing company and if in favor then the company will flourish its market.

This factory actually influences the monetary economy and related performance of the country business environment and as a result of this it is will have a direct impact on the growth of the organization or industry. It also includes rates related to interests, cost of raw material, the rate of foreign exchange and thing related to employment as well as unemployment (Shilei and Yong, 2009). One of the examples is if the economy condition of a particular country is not good, then the organization which is operating in this company are always on risk.

These factors mainly concentrate on the emerging trend in the particular country in which organization wants to do business in the form of social environment. It helps the organization to understand the needs of the customer along with their moral values related to the society (Paul, 2009).  It comprises of all the important aspects like demographic changes in families, level of educations, cultural trends, change within the attitude and lifestyles of the potential customers.

This factor is actually related to the amount of innovation within the technology and the possible growth that will affect the particular marketplace or industry.  Innovation can be of any form within research and development, mobile technology, automation of processor digital transactions. There is frequently a propensity to concentrate on expansions only in digital equipment, but deliberation necessity also is assumed to new approaches of delivery, logistics, and manufacturing.

Increase in the significance of CSR (Corporate Sustainability Responsibility) has increased the importance of environmental factors. This factor is related to the influence of the neighboring environment and the impression of ecological features (Lienemann, Plötz and Pestel, 2008). It involves climate, reprocessing processes, carbon emission, waste discarding, and sustainability

Political

For any organization who wants to establish their business in a particular country must understand the legal laws associated within the boundary of that particular company. It becomes very important for the organization that must collect the present alteration within the legislation which can impact their business both positively and negatively (Andrei and Prisecaru, 2014).  It involves factors like service legislation, customer law, wellbeing, and safety, worldwide as well as occupation regulation and limitations.

The significance of this force is the number of rivals and their capability to bully the corporation. The greater the number of players, besides with the number of corresponding merchandises and services they provide, the smaller the influence of the corporation. Dealers and consumers emerge out as a company's rival if they are powerless to obtain an appropriate deal (Yunna and Yisheng, 2014). When numbers of competitive competitors are not in large size then there are more chances for the company to increase their power to greater extending in order to achieve increased sales and revenues.

The company's supremacy is also impacted by the force of fresh entrants within the market of this company. If the fresh company will be able to attain the necessary competency of the market in which present company is operating within less cost and time, then it will definitely weaken the present position of the existing company. The company must have some kind of competency which cannot be copied and will act as a barrier for the new entries. One of the best examples is the strategy of dell to offer their products directly to the customers and avoid the middleman.

This force states how simply dealers can rise up the cost of merchandises and services. It is influenced by the number of suppliers of key features of merchandise or service, how exclusive these features are, and how ample it may cost the company to change from one dealer to another (Han, Porterfield and Li, 2012). Less the amount of dealers and the more will be the company dependent on a dealer, the more influence a dealer holds.

This precisely deals with the capacity of the customers to lower down the price of the product. It is influenced by how various purchasers or clients the company has, how important every customer is, and how abundant it may cost a purchaser to change from one enterprise to another enterprise. Smaller the base of the customer shows the greater power of manipulation of price. One of the best examples is the Nokia Company, at present time it does not hold strong customer base and so it has to adjust the price of their product accordingly.

Rival alternatives that can be utilized in place of the enterprise's merchandises or services stance a warning. Here the power of the company is totally based on the availability of alternatives for the company product in the market (Fregly et. al., 2014). If it is available then it will weaken the power of the company and if it is not available then it will increase the power of the company. One of the best examples is coffee and tea, if the coffee company increases its price then there is enough possibility that customers may switch to tea if it is available in the less price as compared to the present coffee price.

This five force model actually guides the company who wants to enter into a particular field about the forces which will try to restrict the growth of the particular company or it may restrict it from being entering into the market.

Conclusion

The current market of the business is in dynamic mode and it is not easy for any organization to remain stable. Hence, strategic tool plays one of the most important parts for the growth of any organization by offering them the necessary information about the possible risks and threats associated with the business process. It also helps the company in understanding the force which will impact the company while entering into the business.

References

Andrei, V. and Prisecaru, I. (2014) The Use of Pestel Analysis in Development of the Romanian Geological Repository. Scientific Bulletin of University Politehnica of Bucharest, Series C, 76, pp.247-254.

Diamond, N., Koernig, S.K. and Iqbal, Z. (2008) Uniting active and deep learning to teach problem-solving skills: Strategic tools and the learning spiral. Journal of Marketing Education, 30(2), pp.116-129.

Fregly, B.J., Besier, T.F., Lloyd, D.G., Delp, S.L., Banks, S.A., Pandy, M.G. and D'lima, D.D. (2012) Grand challenge competition to predict in vivo knee loads. Journal of Orthopaedic Research, 30(4), pp.503-513.

Han, C., Porterfield, T. and Li, X. (2012) Impact of industry competition on contract manufacturing: An empirical study of US manufacturers. International Journal of Production Economics, 138(1), pp.159-169.

Lienemann, K., Plötz, T. and Pestel, S. (2008) NMR-based urine analysis in rats: Prediction of proximal tubule kidney toxicity and phospholipidosis. Journal of pharmacological and toxicological methods, 58(1), pp.41-49.

Paul, O.A. (2009) Analysis of the Romanian biofuels industry under the current economic conditions using PESTEL. Economia. Seria Management, 12(1), pp.159-167.

Shilei, L. and Yong, W. (2009) Target-oriented obstacle analysis by PESTEL modeling of energy efficiency retrofit for existing residential buildings in China's northern heating region. Energy Policy, 37(6), pp.2098-2101.

Song, J., Sun, Y. and Jin, L. (2017) PESTEL analysis of the development of the waste-to-energy incineration industry in China. Renewable and Sustainable Energy Reviews, 80, pp.276-289.

Wright, R.P., Paroutis, S.E. and Blettner, D.P. (2013) How useful are the strategic tools we teach in business schools?. Journal of Management Studies, 50(1), pp.92-125.

Yunna, W. and Yisheng, Y. (2014) The competition situation analysis of shale gas industry in China: Applying Porter’s five forces and scenario model. Renewable and Sustainable Energy Reviews, 40, pp.798-805.