HI6006– Competitive Strategy | Trimester 1, 2019

Key Strategy Development Tools

Unit Lecturer:
Dr. Nhai Mai

Hsu Mon Zeyar NPB3020

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1. Executive Summary

The purpose of this paper is to explain about the four strategy development tools and how
they are applied to business in the different industries. In this paper, PESTEL, The Five
Forces Model, SWOT and Two Generic Strategies have been explained with industry
examples. Changes in those factors can have a direct impact on not only individual’s firm but
also on other players within the industry. Those external factors have the power to impact the
progress of businesses and entire industries.

Those strategic tools are critical to analyse the macro environment organisation before
starting a new business or entering a new market in foreign countries which will make
business analysts to estimate the business whether it would be a profitable business or not.

By applying PESTLE on Facebook Inc., it can be understood the challenges of the firm that
have been faced in certain countries which can have the impact on their revenue and
reputation despite the fact that it has other strong opportunities. The Uber Market in
Myanmar is unattractive with the analysis of The Five Forces Model. Uber should have
strongly analysed those five forces before entering into Myanmar Market. Uber is a dominant
force in the ride-sharing industry of worldwide however; it should have considered the five
forces in Myanmar Market which is different from others because of their new infrastructure
and new government affairs. With SWOT analysis on Airbnb, this business model explains
about both external and internal factors, the company has opportunities to expand their
business into more markets and enhance more models than its core model. Porter’s two
generic strategies are vital to take the organisation’s competencies and strengths into
account. It has been understood that different targeted customers, business analysts are
able to make a firm decision to work on by researching on Southwest Airline and Apple.

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2. Introduction

The four strategic tools PESTEL, The Five Forces Model, SWOT and Two Generic
Strategies are researched with practical examples from industry. Using those different
strategic tools, some factors can be considered to make a profitable business before
entering a new market or starting a new business. PESTEL can make business analysts
understand the factors which can either be opportunities or threat in certain market. The Five
Forces Model can turn into an attractive market by understanding its forces. For example,
business analyst can avoid the mistake of making a supplier as a monopoly by
understanding the Five Forces Model. SWOT analysis can differentiate external factors and
internal factors of a business. Using this as an advantage, a unique business model can be
implemented to stand out within competitors or expand more models. Two Generic
Strategies are critical when making a decision to make a profitable business targeting to
different group of customers.

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3.1 PESTLE
3.1.1 Function

A PESTEL analysis is a tool to analyse the macro environment of the organisation before
starting a new business or entering a foreign market. PESTLE is an acronym that stands
for Political, Economic, Social, Technological, Environmental and Legal factors(Yüksel
2019).

3.1.2 Analysis of Facebook Inc.

In terms of political factor, millions of people use this a platform to voice the
disagreement with government politics. In developed countries, government support the
firm for globalisation. Facebook Inc. has been creating more job opportunities worldwide
(Facebook 2018). It has been centred on continuous innovation existing products and
services which are designed to place users and their social interactions. With the trend of
increasing E-commerce service, the company also offers better marketplaces to satisfy
the expectations of users through its websites and mobile applications. Facebook Inc.
addresses the complexity of waste disposal management, threats of climate change and
attitude toward ecological products (Panmore Institute 2019). It has innovated and
introduced new products with the legal protection and proper disclosure of data based on
patent laws. The firm increases the user experience by having coverage of free Wi-Fi
(Facebook 2018).

3.1.3 Opinion

Government authorities in countries such as China restrict public to access Facebook

which can affect Facebook’s long-term revenues while the political stable countries can
be opportunities. In terms of economy and social factor, the firm has major opportunities
to develop its multinational operations. User experience can be improved as the mobile
usage is increasing, however; there are some threats within social media companies.
The firm has implemented its sustainability of social media business to satisfy concerns
regarding the natural environment. Enhancing patent laws and free Wi-Fi are
opportunities for the company.

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3.2 The Five Forces Model

3.2.1 Function

Porter’s five forces are bargaining power of buyers, bargaining power of suppliers, threat
of new entrants, threat of substitutes and rivalry among existing customers(Tony G 2016).

3.2.2 Analysis of Uber in Myanmar Market

Uber’s clients are sensitive to price variations due to the existence of alternatives and
rivals. Customers can freely choose between local taxi services, with very low switching
cost(consult-myanmar 2019). Uber’s business model is highly dependent on drivers
owning cars and the firm does not own vehicle among its fleets. As Uber is a technology-
based company, its policy is to offer their software to clients for free, these services can
easily be swapped at zero cost(Armin 2019). In the transportation industry, there are
numerous organisations that can provide a replacement for Uber services. To survive in
Myanmar market, it is vital for Uber to avoid raising customers charges (The Myanmar
Times 2019).

3.2.3 Opinion

Uber’s clients in Myanmar have a high bargaining power as they have other options and
also the drivers as suppliers have the freedom to switch with other rivals. Myanmar
government developing more infrastructures in public transport such as buses and trains
which can be a big threat of substitutions for Uber’s operations in Myanmar. Grab whose
business model is as same as Uber gives a tough competition to Uber in terms of
offering free mobile tablets to drivers and premium promotions to loyal customers.
Therefore, Uber’s operation in Myanmar is unattractive.

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3.3 SWOT

3.3.1 Function

Albert Humphrey evaluated the theory to understand the Strengths, Weaknesses,

Opportunities and Threats of a business organisation.

3.3.2 Analysis of Airbnb

Airbnb’s business model enables the firm to compete with affordable prices as compare with
hotels and other accommodations (Dean 2019). Both hosts and travellers focus on rating
and review system, which offer the safety and security to the Airbnb users (Dean 2019).
However, Airbnb is paying the price to hosts who are violating the Housing Laws and
Regulations (Dean 2019). Airbnb offers a mobile friendly user experience which facilitates
both hosts and guests to provide a better communication. Hotels offer high prices especially
holidays seasons whereas Airbnb still provides with lower prices than hotels. Airbnb
services are operating in more than 192 countries (Dean 2019). Every country has its own
law and regulations to comply with. The company has relied on guests and hosts to meet
the local laws. The company has already faced lawsuits and fines. For example, Barcelona
authorities fined Airbnb 30,000 euros fore breaching tourism laws (The Guardian 2014).

3.3.3 Opinion

With high valuation and brand reputation, investors are available worldwide. As it has a
potential growth globally, the company can expand easily. The image and reputation of the
company is strongly dependent on quality provided by the hosts. Airbnb has very high
opportunities to exploits those markets where hotels ratio is very low. Airbnb has other
options to implement more business models other than their core business such as travel
guides and car rentals. As the business model can be copied easily, there are many
competitors entering the market (Pamela Chan 2018).

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3.4 Two Generic Strategies

3.4.1 Function

Porter’s generic strategies are Cost Leadership Strategy and Differentiation Strategy. Cost
leadership strategy is either increasing profits by reducing costs or market share by charging
lower prices. Differentiation Strategy is to be different from or more attractive than
competitors by offering outstanding special features or services.

3.4.2 Analysis of Two Generic Strategies

Southwest Airline is being successful of the largest low-cost domestic airline.

By using a point-to-point model, the company is able to gain more shorter routes and traffic
which can lower average flight time. Other strategies to do cost-cutting that the firm use is
modernising its fleet and using more fuel-efficient fleet of aircrafts which helps to reduce
maintenance costs. Those can help the company to offer the lower fares to customers which
becomes higher demand for its tickets and thus saving marketing expenses( Market Realist
2019).

Apple focuses on its innovative key features and products that differentiate it from
competitors. Through its research and development processes, Apple has been
continuously innovating its products and features. It has been launching new products for
the mobile market. Apple uses minimum advertised price strategy and by selling more
products to its current customers that reach customers in all market segments. By providing
premium customer service and technical support, customers are willing to pay for premium
price (Panamore Institute 2019).

3.4.3 Opinion

Southwest Airline’s 42-year record of low debt ratio with high profit operations is proving the
success of Southwest Airline’s business model. The only risk to concern is to have the
unique sources of cost reduction otherwise the business model can be copied by other
competitors.

Apple is strong in its product development. Innovation is the heart of Apple’s business.
However, the firm should emphasise more on market penetration and development which
can be against aggressive competitor like Samsung.

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4. Conclusion

Four strategic tools explain about factors to be considered before entering a new business
or market. By understanding the factors which opportunities or threats or strengths or
weaknesses to a business, a strong business model can be implemented by innovation
premium products or offering excellent services. Some risks can be taken into account and
are able to avoid the possible losses that a firm can encounter.

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