Pestle Analysis in Strategic Management
Write an essay of explaining what the main strategy development tools are and how they are used in business.
Pestle is one of the major tools in strategic management for the business organizations. This tool is being used by the business organizations in order to determine the external environment being faced by them in their operation. In addition, in the current business scenario, majority of the large business organizations are operating in global market. Thus, the external environment faced by them is more diverse in nature. This is due to the reasons that different countries are having different business scenario for the organizations. Another major merit of using pestle analysis is the ease of usage (Barney 2014). It is very easy to use in the strategic management along with covering different aspects of the external environment. This includes the political, economical, social, technological, legal and environmental factors.
Thus, effective usage and implementation of the pestle analysis will help the business organizations in determining the diverse external environment and implement the strategies accordingly. In order to analyze the effectiveness of the pestle analysis along with identifying the approach of implementing it in the business scenario, an industry will be selected for further analysis. Tourism sector is one of the most potential business sectors in Australia with the increase in traffic of tourists in different destinations in Australia. However, tourism industry is also having the importance of pestle analysis (Bettis et al. 2014). This is due to the reason that this industry also faces the issue of different external factors.
The first element of pestle analysis is political factors. Determination of this factor helps in understanding the change in the trend of the political scenario. In the case of the tourism industry, this is more important due to the reason that political scenario in Australia will determine the inflow of the tourists and the trend of investment in this sector. Effective determination of the political factors will help the entire tourist industry to indentify the political challenges to be faced. The next element is the economic factors that refer to the economic performance of the entire industry (Eden and Ackermann 2013). This is also important due to the reason that change in economic factors such as inflation will affect the tourism sector. The next element is the social factors. This determines the social and cultural trends, which can influence the tourism industry. Technological factor refers to advancements of the technology in the tourism industry. In the recent time, there are various technological advancements witnessed in the global market of tourism industry. Thus, determination of the technological factors will help in identifying the gaps and implement measures accordingly.
Industry Analysis - Tourism Sector in Australia
According to Ginter, Duncan and Swayne (2018), a business organization uses the given to components to carry out its business process. These are resources and services or products which in an indirect manner are derived from the resources. The resource based view states that the company`s resources are its determinants of the performance within the chosen industry and the competitive advantage within the given industry. Introduced by Birger Wernerfelt in 1984, the model aims to highlight the importance of the resources in a given firm and identifies how these resources need to be utilized in order to achieve competitive advantage. The model works on various assumptions. First of all, it assumes that the diverse nature of the company`s operation in the market is greatly dependent on the diversity of the resources they possess and the second assumption states that diversity in terms of the resources are present as strategic are not easily accessible throughout the firm (Gupta 2013). However, the researcher underlined the importance of the resource diversity in an organization.
According to Wheelen et al. (2017), an organization will only be able to perform well if it utilizes its resources well. The theory is important as it lays down the importance of adequate resources. The given model is used to analyze a company`s strategic position and strategy. The methods used by a firm to collect resources are analyzed,
Figure 1: The Resource Based Approach to Strategic Analysis
(Source: Hill, Jones and Schilling 2014).
A Resource-Based Approach to Strategy Analysis:
The theory identifies the internal performance of the business and reflects how the resources and the capabilities work simultaneously.
Resources: These refer to the resources which are necessary to carry out the major organizational functions (Koumparoulis 2013). The primary resources used by a firm are human resources, technology, loyalty of customers and financial aid. For the tourism sector, it becomes important for the key decision makers to identify the different resources required in order to make their business successful. This may be resources based in hotels and motels which may attract the various customers and act as a motivator (Slack 2015). These resources and customer service facilities help the various companies in the tourism industry to stand out. In Australia the tourism industry is very huge and the exceptional service offering is the reason for its advantage.
Capabilities: These are defined by the capacity of the resources which are available and refer to the tasks which are performed with these.
Resource-Based Approach to Strategy Analysis
These factors are essential for determination of the competitive advantage which is availed by the company in the market (Lasserre 2017). For instance, if the travel agencies are considered, their resources are the tickets and offers they provide the customers and their capability lies in the fact that they fulfill the desire of the customers. If the company is able to ace in these factors then it can become a leader in the market.
The importance of SWOT Analysis is determined by the individuals who conduct the analysis on behalf of the company. If the decision maker has the capability to utilize the information from the SWOT, then he will be able to derive results which are extremely beneficial for a business organization (Martinsuo 2013). SWOT can be said to be an acronym for the four given words: Strengths, Weaknesses, Opportunities and Threats. While the Strengths and Weaknesses are said to be related to the internal environment, the Opportunities and Threats are said to be subject to the external environment of the business enterprise (Morschett, Schramm-Klein and Zentes 2015). The value of SWOT helps the leaders in recognizing their limitations and highlights their strengths whereas the weak companies can recognize their advantages and limit their weaknesses.
SWOT Analysis is considered important as it highlights the health or the sickness of the business. It is also important because it helps in identification of the external and the internal factors of the business which may have an impact on it (Stead and Stead 2013). SWOT Analysis also goes a long way in helping an organization to form a strategy to gain sustainable advantage in the business organization.
For instance, in the Tourism industry it may be important for various hotels to identify their strengths and weaknesses and to understand what makes them better than its competitors. They will be able to recognize what their advantages are through their strengths which may be the infrastructure to the service provided (Rothaermel 2015). This may help the hotel to perform better. A threat for the hotel may be its external competitors which may form a barrier for the given hotel. An opportunity for the hotel can be an expansion of the given business in different areas or new geographical location which may bring more profit to the firm and develop the scope. A weakness for the hotel may be its inability to provide the service promised or high turnover.
SWOT maps out the key focus areas of the different business components and helps the company to figure out where its attention should be. The tourism Industry in Australia is prone to various SWOT factors and identification of them may help various businesses functioning under this industry
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