Competitive Strategy Assignment: Implementation Of Strategy Development Tools 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

Discussion on Key Strategy Development Tools in the competitive strategy assignment
Businesses of all types have to deal with the competition in the respective industry in which they operate. The success of the business lies in remaining thoroughly competitive in the market and to remain competitive businesses must know their current status in terms of their strengths, weaknesses, industry performance, customers and their demands, threats and opportunities in their market etc. Such information facilities the firms to formulate the necessary strategies and policies to achieve their core goals and objectives. To gather the required information an organization can, make use of various tools of strategic management such as Porter five forces model, SWOT analysis, PESTLE analysis, Ghemawat framework, Ansoff matrix Porter’s generic strategies, input output framework and various other tools. In this essay few of the above mentioned tools will be discussed.

Porter Five Forces Model with Woolworth’s example
Porter five forces model is a framework that helps in identification of such forces which enhances the competitiveness of an industry. Business organizations use this tool to know the level of competition in the business environment in which there are operating. It is macro analytics tool used in the business management which looks at the economy of the industry as a whole (Anastasiu, Gavri? & Maier, 2020). Hence, it focuses on five major forces that could lead to competition in an industry. These forces are: Buyer’s Power. Supplier’s Power, Rivalry’s Threat, Threat of Substitutes and the Barriers to new entries.

The buyer’s power in an industry decides as to how easy is for them to drive down the prices of the products dealt in such industry. Supplier’s power is supplier’s ability to drive up the product prices. Threat of substitutes is the risk for the suppliers wherein its customers can move from one product to another which has the similar quality and use but comes at lower price than the former one. When the demand for substitutes increases the original product’s demand automatically starts falling (Anastasiu, Gavri? & Maier, 2020). As buyers are generally price savvy they always look for the products with maximum satisfaction at the lowest price. The barriers to entry decide as to how easy is it for the new businesses to enter into the industry. If an industry required lower capital investment to start a business or there are lesser regulations in such industry or the loyalty of customers in such industry is not strong enough then such force could affect the business of existing firms. Lastly, the competitiveness of the industry is decided on the basis of rivalry firms exiting it. The more the firms are there the more is the competition and vice versa (Khurram, Hassan & Khurram, 2020).

Taking the example of Woolworths to apply Porter’s Five Forces Model wherein the company operates in the retail industry of Australian economy, it could be said there is the force of rivalries is quite high in the industry as there are various other strong players like ALDI, Coles Group, Tesco, Wesfarmers etc. Woolworths enjoyed 34% (14 ppts up from 2017) in the total market share in 2018 (Roy Morgan, 2019). However, it is still required to focus on its pricing policies as the rivalry firms have also increased their market shares and will make further efforts to increase their shares in subsequent periods. The grocery supermarkets in Australia required huge capital investments to start their businesses also it is really not easy to achieve the economies of scales for the start ups. Hence, the risk of entry of new firms in the market is lower for Woolworths as since its presence from long years it has been able to successfully achieve the economies of scale. The company is facing tough competition from its rivalries i.e. Coles and ALDI in terms of its product prices and this has given strong bargaining power to its customers as the products in this industry are of the nature that there substitutes are easily available in the market. Therefore, the risk of strong bargaining power of buyers and availability of substitutes is higher for Woolworths. However, the bargaining power of suppliers is quite low in the retail industry of Australia as the firms that operating in this industry are giant enough and there are multiple numbers of such firms operating in it. Hence, it makes difficult for the suppliers to drive up their prices. Rather, they have to adjust their prices in accordance with the other suppliers so as to not lose their giant customers such as Woolworths, Coles, Wesfamers etc.

Ghemawat’s AAA Global Strategy Framework and its application
Ghemawat’s Framework is also known as AAA framework which defines three key strategies to create value in the global world. These strategies are: Adaption, Aggregation and Arbitrage (Roy & Srivastava, 2017). Adaption strategy aims at increasing company’s revenue and market share by way of tailoring either one or more of the key components of its business model to match with the requirements or preferences of its local customers. Aggregation strategies aim at achieving the economies of scale or widening the scope by way of leveraging its existing products or expertise in the new regional or global market through advertising. Arbitrage is the strategy that focuses on exploitation of economic and other differences among different national markets or regions generally by locating different parts of supply chain in different markets (Ghemawat, 2018).

Toyota has used the aggregation strategy in its business. The production of automotive products by Toyota is mainly concentrated to Japan. In the year 2015, its total production was reported as 8.9 million units and out of it approximately 4.1 million of units were manufactured in Japan itself. The significantly larger scale of production enables the company to take the benefits of higher efficiency, lower costs of production and the quality control. Also, the concentration of its facilities also makes it quite smooth for Toyota to introduce multiple cost saving schemes (Gloria, 2016). The classic example of implementation of arbitrage strategy could be seen in Apple’s case where it has outsourced its maximum production and assembly work to China due to lower labor cost in the country. As per the reports by Forbes, if Apple brings back its production to US it would amount it incurrence of $4.2 million as an extra cost (Forbes, 2013).

The above discussion on strategic management tools could be concluded with the fact the use of these tools could bring multiple benefits to an organization from achieving its objectives and targets effectively to achieving competitive edge over the other firms in the same industry. These tools could actually bring in operational excellence to the firms if they are proactively applied and used effectively throughout their implementation process. To survive in the highly competitive environment the firms must realize their current status and based on the same they must undertake strategic decision making in the businesses. It is not necessary that firm has to apply all the strategic development tools in its business model rather it must understand the relevance of each tool and select such tools that are most suited to its needs to achieve its appropriate benefits. As seen above in the essay, porter 5 forces could help the firm in identifying

SWOT analysis with Wesfarmer’s example
SWOT Analysis is the framework that compiles the firm’s strengths, weaknesses, opportunities and the threats (Sarsby, 2016). The main objective of this framework is to enable the organization to be aware of their positive and negative sides of the business so that the positive sides such as opportunities and strengths could be enhanced further to achieve better business performance and the negative sides i.e. the threats and weaknesses could be turned into its positives or be eliminated or reduced to the extent possible (Bull, et. Al., 2016). The use of SWOT analysis will offer the inputs that could be used to strategize the action plans in the right direction.

The application of SWOT analysis on the business model of Wesfarmers will be made in this section. The company has various strengths being a key player of Australian Retail Industry. It has been established since long years and so far it has achieved a sustainable brand name for its business (Forbes, 2011). The strong brand name is now coupled with strong customer loyalty as Wesfarmers has gained the confidence of large number of customers in the Australian market. Also, it has superior approach to allocate its capital and this has provided long terms returns to its investors. However, Wesfarmers has substantial presence in the domestic markets and not in the international markets which creates a negative side on its business. Also, the office works at Wesfarmers is facing variable trading conditions (Rickard, 2020). The company being a part of one of the major segments of Australia has multiple opportunities to grab in. It has the potential to grow through multi-option strategies wherein it can expand its business portfolio to earn good market share due to the nature of business. One major risk that Woolworths is facing is the threat from its competitors which are outperforming the company in various aspects since last few years.

References
Anastasiu, L., Gavri?, O. and Maier, D., 2020. Is Human Capital Ready for Change? A Strategic Approach Adapting Porter’s Five Forces to Human Resources. Sustainability, 12(6), p.2300.

Bull, J.W., Jobstvogt, N., Böhnke-Henrichs, A., Mascarenhas, A., Sitas, N., Baulcomb, C., Lambini, C.K., Rawlins, M., Baral, H., Zähringer, J. and Carter-Silk, E., 2016. Strengths, Weaknesses, Opportunities and Threats: A SWOT analysis of the ecosystem services framework. Competitive strategy assignment Ecosystem services, 17, pp.99-111.

Forbes (2013).If Apple Brought iPhone Manufacturing To The US It Would Cost Them $4.2 billion. Available at: https://www.forbes.com/sites/timworstall/2013/09/25/if-apple-brought-iphone-manufacturing-to-the-us-it-would-cost-them-4-2-billion/#4689b2f4115f Accessed at: 29th April 2020

Forbes. (2011). A Product of Evolution. Available at: https://www.forbes.com/global/2011/0926/fab-50-11-product-evolution-wesfarmers-australian-conglomerate-treagold.html#591a57187cf0 Accessed at: 29th April, 2020

Ghemawat, P., 2018. The new global road map: Enduring strategies for turbulent times. Harvard Business Press.

Gloria, L. (2016) Expanding Your Company Globally? Here Are 3 Strategies You Should Consider. Available at: https://blog.btrax.com/what-should-your-companys-international-expansion-strategy-be/ Accessed at: 29th April 2020

Khurram, A., Hassan, S. and Khurram, S., 2020. Revisiting Porter Five Forces Model: Influence of Non-Governmental Organizations on Competitive Rivalry in Various Economic Sectors.

Rickard, P. (2020). Wesfarmers under pressure. Available at: https://switzer.com.au/the-experts/paul-rickard/wesfarmers-under-pressure/ Accessed at: 29th April, 2020

Roy Morgan. (2019). Woolworths and Aldi grow grocery market share in 2018. Available at: http://www.roymorgan.com/findings/7936-australian-grocery-market-december-2018-201904050426 Accessed at: 29th April 2020

Roy, S.N. and Srivastava, S.K., 2017. Global business strategy: Multinational corporations venturing into emerging markets. Vikalpa, 42(2), pp.125-127.

Sarsby, A., 2016. SWOT analysis. Lulu. com.