Competitive Strategy Assignment: How Strategy Development Tools Are Used In Business?

Question

Task:

Purpose:
This competitive strategy assignment aims at ensuring that students have familiarized themselves with the foundational strategy development models and are able to relate them to current practical business examples.

Details
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 3 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.

In this essay, sub-headings are permitted.

Be sure to use paragraphing.

Be sure to reference your sources in-text and provide a list of references at the end, all in Harvard style

Answer

Essay-Key strategy development tools and their use in business
Business strategies have gained enough importance in today’s time when there is intense competition in the business environment. It is quite indispensible for business organization to plan and strategize their actions in order to survive and grow in the market in which they are operating their business. The present competitive strategy assignment discusses the use of various strategic development tools in the business and their practical implementation in the real-world business organizations. Strategic development tools help the businesses in examining their micro-economic and macro-economic conditions and on the basis of such conditions designing specific policies and strategies so as to achieve the overall business objective. As a part of discussion, 3 key tools have been identified to put the light on so as to emphasize on the relevance of strategic development tools for the businesses. These tools are Porter’s Five Forces Model, Ansoff Matrix and SWOT Analysis.

Porter’s Five Forces Model
Porter’s Five Forces Model is the strategic business tool which focuses on five of the major forces of an industry to determine as to how intense is the competition is there in that particular industry and the level of profitability it carries (Jurevilicius, 2013). The five forces are used in Porter’s Model are: Threat of new entrants, Bargaining power of customers, Bargaining Power of Suppliers, Threat of Rival Firms and Threat of Substitutes. The higher the intensity of the said forces in an industry the lesser is the profitability level of such industry (Dälken, 2014). An attractive industry has features like high barriers for the new entries, weaker supplier and buyers bargaining powers, fewer substitute availability of key products or services of the industry and lower competition among the industry peers. However an industry is called as unattractive when it has lower barriers for the new entrants, stronger buyers and suppliers bargaining forces, availability of multiple substitutes for the products and services and high competition among rivalry firms (Dyson, Bryant, Morecroft & O’Brien, 2007). Porter’s five forces model is applied on KFC to analyze the level of competition and profitability in its industry. KFC operates in fast food industry wherein it has various competitors to combat in order to maintain its market position. Its competitors are McDonald’s, Pizza Hut, Burger King and so on. All its competitors have their own brand values in the market. Therefore, the competition in such industry is quite intense. As there are various competitors who are dealing in similar sort of food items, the threat of substitute is high in this industry since people have multiple options in fast food. Also, due to heavy competition in the market, the buyer’s bargaining power is also quite high in this industry as they have multiple options to get their fast food from different food chains like McD or Burger King (Cook, R.L., 2011). However, the suppliers in this industry have moderate bargaining power as they intend to remain associated with large sized food chains like KFC. The intensity of competition and requirement of huge initial investment the fast food industry in which KFC is operating has lower risk of new entrants.

Ansoff Matrix
Ansoff matrix is the key strategic tool that helps the firm to determine its market growth and product growth strategies. The said model deals with the external market scenario and the product portfolio of a firm. It helps the companies to analyze the risk of growing and expanding their business. This models works primarily on 4 strategies which are: Market Penetration, Product Development, Market Development and the diversification (Corporate Finance Institute, 2020). Market Penetration is related to enhancing sales of the existing products in the existing market. Product development is related to introduction of a new product in the existing market. Market development focuses on taking the existing product to the new market. Lastly, Diversification focuses on entering into a new market with a new product. The companies therefore create a matrix with 2 quadrants, one for the product and another one for the market. Companies focus on strategizing on its existing products, new products, existing markets and the new markets while with the use of Ansoff Matrix as the strategic development tool (Tsatsoula, 2018). In the present essay, case of analysis will be used to examine the practical implementation of said matrix to a real world organization. As a market penetration strategy Coca Cola can think of widening its customer base through the use of various marketing mix tools. Further, as a product development strategy Coca Cola can propose introduction of new products in its existing market as it has created a sustainable brand image in the market over the long period of time and hence it is easy to come up with additional products under the same brand name. As a market development approach, Coca Cola can focus on new segment of its customers in its present market as similarly as it had done in 2005 when it introduced diet coke in the name of Coca Cola Zero (Vrontis & Sharp, 2003). Lastly, as a part of diversification, Coca Cola could propose to bring up some of the new products under its brand name and target a new market for such products.

SWOT Analysis
SWOT Analysis is yet another strategic business tool that helps a firm to know what it is doing rightly in its business and what needs to be improved. The said tool facilitates strategic business planning to achieve business goals and objectives and to improve the internal operations of the business. Alike Ansoff Matrix, SWOT Analysis also works on 2 by 2 Matrix wherein 4 key aspects are analyzed. These aspects are: Strength, Weaknesses, Opportunity and the Threats (White, 2018). The final output of the SWOT Analysis helps the in determining its objectives, goals, products, services or project are aligned with its strategies or not. The said analysis also helps the business in dealing with its weaknesses and the potential threats in the proactive ways by making use of its inner strengths and the external opportunities that are available to it in the market. Threats and opportunities represent the external business environment whereas its weaknesses and strengths denote its internal environment. A business case of McDonald’s is taken here in the present essay to demonstrate the application of the said tool in the real world business scenario. McDonald’s has strong brand image in the domestic as well as overseas market out of its taste and quality of food and also it has wide product portfolio for its customers.

These facts provide it strength to sustain in the long run even in the competitive business market. However, the slow product development and reduced market share makes it to the weakness of the company to survive in the market. As an opportunity, McDonald’s has value meals, innovative products such as Mix by Sprite Tropic Berry which was launched by it in 2018. Another key opportunity available with McDonalds is global market expansion due to its renowned brand image. Further, the company has an opportunity to take its business on the full-fledged online platform where the process like ordering food till payment everything could be done online (QSR Web, 2019). Though, technological advancements across the globe has offered multiple business opportunities to McDonald’s but at the same time the investments in such technologies such as Blockchain involves high investments with an uncertainty of proving successful in the long run (Forbes, 2017). Such risks create the threat for McDonald’s. Further the competition in the fast food industry in quite fierce which create another form of threat for the company. Moreover, the introduction of new range of fast food items on account of innovation from different rivalry firms could create substantial threat to the company. Also, the environmental concerns that are constantly coming up are imposing high threats to the smooth operation of McDonalds. In 2018, the environmental regulators have directed the company to ban its usage of plastic straws in around 37000 outlets worldwide due to excessive plastic pollution (Business Strategy Hub, 2019). While the strengths and opportunities provide the support to the business, weakness and threats create problems for the business.

In the limelight of discussions made in the current assessment it can be concluded that the formulation of adequate business strategies helps it not only in meeting its set objectives and goals but also to prepare itself for all the uncertainties and risks that are currently prevailing as threats to the business existence. The formulation of such business strategies calls for the use of key strategic tools. The appropriate use of such tools certainly has the ability to provide competitive advantage to the business organization in long run over its rivalry firms. Hence, the businesses must firstly identify which strategic business tool does it require on the basis of its current situation and objectives and once such the required tools are identified then such tools shall be implemented appropriately to the real business case so as to obtain the desired outcomes.

References:
Business Strategy Hub. (2019). [Online]. McDonald’s SWOT Analysis (2019). Available at: https://bstrategyhub.com/mcdonalds-swot-analysis/ Accessed on: 24.04.2020.

Cook, R.L., 2011. Fundamental forces affecting US fresh produce growers and marketers. Choices, 26(316-2016-6944).

Corporate Finance Institute. (2020).[Online]. What is the Ansoff Matrix? Available at: https://corporatefinanceinstitute.com/resources/knowledge/strategy/ansoff-matrix/ Accessed on: 24.04.2020.

Dälken, F., 2014. Are Porter’s five competitive forces still applicable? A critical examination concerning the relevance for today’s business (Bachelor's thesis, University of Twente).

Dyson, R.G., Bryant, J., Morecroft, J. and O’Brien, F., 2007. The strategic development process. competitive strategy assignment Supporting strategy: Frameworks, methods and models, pp.3-24.

Forbes (2017). [Online]. How Focus On Technology Can Drive Sales For McDonald's. Available at: https://www.forbes.com/sites/greatspeculations/2017/06/27/how-focus-on-technology-can-drive-sales-for-mcdonalds/#1cd4a79a434b Accessed on: 24.04.2020.

Jurevilicius, O. (2013). [Online]. Porter's Five Forces. Available at: https://strategicmanagementinsight.com/tools/porters-five-forces.html Accessed on: 24.04.2020.

QSR Web. (2019). [Online]. McDonald's joins blockchain pilot to improve ad spend efficiency, supply chain transparency. Available at: https://www.qsrweb.com/news/mcdonalds-joins-blockchain-pilot-on-ad-spend-efficiency-supply-chain-transparency/

Tsatsoula, E., 2018. Application of Ansoff's Matrix-Methodology: Marketing Growth Strategies For Products.

Vrontis, D. and Sharp, I., 2003. The strategic positioning of Coca-Cola in their global marketing operation. The Marketing Review, 3(3), pp.289-309.

White, S.K. (2018). [Online]. What is SWOT analysis? A strategic tool for achieving objectives. Available at: https://www.cio.com/article/3328853/swot-analysis-defined.htmlAccessed on: 24.04.2020.