A strategy is not the outcome of one great idea but, helps produce information which plays an important role in making a decision to develop a strategy. Hence ideas have to be thoughtfully analyzed to form an effective strategy. Tools for the development of strategies for success and profit can be broadly classified into five categories. It is necessary to understand the effectiveness of a business process when putting to use its resources. This can be done by analyzing the external environment through a PESTLE analysis, assessing the capability within the organization to respond to change, assisting in defining a strategy and finally helping in implementing the strategy.
Tools of strategy can be best explained as below:
Soar refers to strengths, opportunities, aspirations, and results and this tool for strategic planning on the organization’s existing strengths and its vision for achieving its strategic goals. The focus here is on what is being done in a good way presently with no focus on perceived threats or weaknesses of the organization. Every level of the organization is represented which leads to healthy participation by all employees to work at achieving the goals they helped set. This tool helps in making changes in the planning and decision-making to meet the organization’s requirements.
This is a strategic tool which helps an organization identify its strengths, weaknesses, opportunities and threats. Here, strengths and weaknesses are considered to be internal, while threats and opportunities are considered to be external. This tool is used to evaluate and study the company’s position and preparedness in facing competition which will help prepare it in a better manner to sustain itself in the market. With the help of this tool, the company strengthens its full potential by reducing the impact of its weaknesses and by working towards achieving the opportunities and withstanding the threats that it might face in the future. With the help of this tool, the company can either strengthen any particular part or it can use it to achieve the goal of the company as a whole. Nestle Australia used the SWOT strategy tool to help position itself in the ready-to-eat food industry. This strategy tool is a flexible macro view tool used by companies to help decide on future courses of action.
This is a variant of the SWOT analysis which works at developing strategies from external-internal analysis of great help in marketing. This tool first checks the opportunities available to the company and then works towards perceiving threats to achieve its goals. It allows the company to make suitable strategies based on external factors that will help it to enhance its market positioning while also taking its strength into consideration.
This tool is used by organizations to analyze and understand the competition in the market. Michael Porter refers to the forces as microenvironment which affects the capability of an organization to satisfy its customers while making a profit for itself. Whenever a change occurs in these forces singly or jointly, then the organization will have to make a fresh assessment of the market. These five forces can be broadly classified as vertical and horizontal. The horizontal forces include threats of substitute products or services, threats from existing competitors and threats from new companies entering the market. Vertical forces refer to the bargaining power of the suppliers and the bargaining power of the customers. This tool works on the paradigm, of structure-conduct-performance and is used to tackle a wide range of problems which hinder their profit making. This tool is useful to make a qualitative evaluation of its strategic position as a general framework to identify where power lies in a business situation
This strategic tool refers to the macro-environmental factors affecting the organization namely political, economic, social and technological. This external strategic analysis helps an organization for undertaking market research to study market growth. The position of the business and its future potential can also be understood using this tool. Political factors include government policies on taxes, labour laws, environment, tariffs etc as also the climate of political stability. Economic factors comprise interest rates, exchange rates, inflation etc which impact business operations and decisions. Social factors refer to culture, demography etc based on which the organization plans strategies for growth and profits. Research and Development, automation, technological innovation etc are all part of the technological factors which is considered when using PEST analysis as a tool. These factors play a role in deciding the quality, and cost of products or services and also reveal the problems to enter new markets. These factors taken into consideration with the external factors can help understand the opportunities that will present themselves. The PESTLE tool is a more rational and logical tool as compared to the traditional PEST analysis. PEST helps assess the market at a given point in time or within a set time frame. This tool helps an organization improve efficiency and make better decisions which will benefit it in its operational activities.
Being a tool used to identify the external forces which are affecting an organization. The factors referred to here are political, economic, social, technological, environmental and legal which play a role when conducting an analysis of the situation. This tool helps an organization monitor and respond to changes so as to prepare itself to face competition and take advantage of the opportunities that present themselves. This tool is a strategic framework for the company so it can understand the external factors that influence the company’s market value and is also not in direct reach. This tool helps to identify those factors which will impact the organization in a long term and therefore needs to be analyzed carefully. Decisions on market planning, changes in the organizational framework, product development etc are all to be made after considering the external factors and PESTLE is a useful tool. This tool helps in maximizing the opportunities and minimizing the threats an organization can face which is beyond its control.
Every organization be it small medium or big can benefit from the strategy analysis tools mentioned above to be able to grow, face competition and achieve its goals. These tools are handy when they need to assess the market, study their future prospects, analyze the growth potential or plan to tackle anticipated or perceived threats. Taking full advantage of an opportunity when it presents itself is crucial for an organization to grow and these strategic tools help them in foreseeing such opportunities and plan accordingly.
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