Introduction
The organization’s strategic plans must consider the business related issues that affect the external as well as internal environments in order to create an effective strategy that will help the company survive in future.
The strengths, weaknesses as well as threats should be considered together with the available opportunities. PEST, PESTLE, SWOT and group mapping are some of the strategic management tools that assist in assessments plans.
The PESTLE, SWOT Tools
In strategic management, these two tools are important due to their ability to create a product that has responsibility and capability to deal with the resources and sources of capital. The PESTLE as a fundamental tool of strategic management plays a major role in analysing the external environment of the organisation.
It first looks into the political factors that refer to the political environment existing in a given country (Arnold 2005). The political factor of this tool analyses the country political history whether it is conducive for future investments or not.
The second aspect is that of the economic environment in which the organisation is located. It considers the buying power of consumers, levels of employment income levels as well as the capability of the organisation.
The other tool is the social cultural environment, which refers to the culture, the way of life, the beliefs and values of people around the organisation. This factor is of importance because it determines how the organisation codes its messages, which are designed to influence the consumer behaviour.
The other factor of importance is the organisation technology and innovations and their implication on the future of the company.
It considers the competitors use of technology as well as how the organisation can use technology to deal with business issues such as efficiency of operations.
Other than technology, the other factor is ecological environment. The company must assess the effect of its operations on the environment, as well as predict the climatic trends and their effect on the operations (Drucker 1980).
Example
The organization that will serve as an example of this PESTLE analysis is the JC Penny stores in the United States of America. The political environment of the country is conducive to the retail stores as there are few restrictions on the entry into retail store businesses.
The political environment favours this company especially in the attempt to nationalise, move, and establish branches in other states provided they have the capital. On the economic aspect, the American economy has been facing economic recession that has made the company reduce its prices thereby affecting the profit margin.
This shows that the economic environment is influential in the business performance as it affects prices and increases competition as the business has to find new ways of attracting and retaining customers.
On the social cultural factors, the retail stores serve as major social activity whereby families come together for shopping. The media played major role in popularising this phenomenon as part of family social activity.
This is an added advantage to the retail stores as it creates constant flow of customers who prefer to shop in the retail stores. On the technology side, innovations such as computerised retail inventory systems of management have given this company advantage in inventory management processes.
Incorporation of the technologies will make the company more efficient, as it increase profitability. The other factor of interest is the ecology, which includes the physical environment that influences the performance of the organisation.
This influences people perception about the company whether it is environmental conscious or not. JC Penny stores buy carbon credits as a way of compensating the use of non-renewable energy
The strategic groups mapping
The strategic groups mapping is a strategy that deals with the business strategies that identify the consumer patterns and buying behaviours. It is analysing the consumers in order to establish their behaviours so that the company can sell its products successfully (Porter 2000).
Consumers have different buying preferences where the brand association of the product motivates them by the price, quality as well as brand identity.
To use this tool, the company has engaged in a number of activities to gather information from the market in order to establish the best strategy to know the consumer behaviours and patterns (Donald 2000).
The information intelligence entails having data on consumers as well as conducting surveys on consumer preferences. It also involves use of other market intelligence tools to study the market forces using the porter’s five-market forces.
These forces identify the strength of the buyer power, such as whether the buyer has power to negotiate or not. In addition, the other major factor to be considered is the supplier power.
When the supplier is monopolistic, he or she has a lot of influence on the organisation. Likewise, when there is high concentration of suppliers, the supplier power diminishes. Rivalry in the industry from the competitors is another important component of the Porter’s five market forces that influence the market.
The forces include factors such as the price wars, differentiation of products and huge advertising budgets. The new entrants in the market also influence the organisation strategic plans. In the case of retail stores, most of the new entrants are global retailers such as Tesco.
Though the regulations are not strict, it is capital intensive, which reduces the number of new entrants. Finally, the other factor of the Porter’s five market forces is that of substitutes.
Retail store substitutes are usually mini shops or retail outlets of a particular product, where the consumers can choose to buy directly from the manufacturer’s distribution points rather than retail store.
However, the retail stores have advantage over this method because they are one stop shop. This is a way of ensuring that there is time to assist and develop the company in order to acquire more resources (Donald 2000).
Example
The group mapping and application to the market forces will look into the market forces and the influence on strategic plans of the company. The JC penny stores buyers have power as they can move from one retail store to another like in the US where there are more than three hundred retail stores.
Therefore, the ability of the buyer to get new suppliers in the market is high. Rivalry is also high due to the concentration of retail stores in the country (Porter 2000).
Conclusion
A good analysis of the industry both internally and externally is critical in the development of a good strategic plan. The strategic plan can only be effective when it is based on information.
The effect is real when it has considered the external and internal environments of the company so that the plan can put in place mechanisms of dealing with those factors.
References
Arnold, D. 2005, Strategic planning an organisation, Oxford University Press, London.
Donald, C. 2000, Porters’ five market forces of the market, Sage Publications, Cincinnati.
Drucker, P. 1980, Strategic planning and organisational successful, Pearson Education, New York.
Porter, M. 2000, PESTLE analysis for organisations, Harvard University Press, Massachusetts.