Competitive Analysis Techniques for Environmental Factors

Question: Discuss about theCompetitive Analysis Techniques for Environmental Factors. Answer: Introduction An organization faces competition in an industry. To survive, it needs to come up with strategies that give it a competitive advantage. As a result, companies use analytical tools to know about their position, competitors' position, and industry. This essay explores the use of PESTLE, SWOT and Porter's Five. PESTLE PESTLE stands for political, economic, social, technological, legal and environmental factors. Evidently, it is mainly used to analyze the external factors that influence an organization. According to Sammut?Bonnici (2015), this tool is used in making strategic decisions and planning. For example, knowing about economic factors can assist in setting prices. Additionally, PESTLE is used with SWOT analysis to get a comprehensive understanding of the organizations position (Mullerbeck 2015). In analyzing the company, first, the SWOT analysis identifies the factors affecting it and the PESTLE analysis provides a detailed discussion of these factors. PESTLE analysis is advantageous due to the following. Firstly, it creates a deeper understanding of the organization (PESTLE analysis n.d.). The understanding is acquired from evaluating its external environment. Secondly, PESTLE allows the organization to take advantage of new opportunities identified (PESTLE analysis n.d.). For example, from the analysis, the organization gains knowledge of opportunities in the external environment that it can use to increase production. Thirdly, the tool is easy to use and provides a simple outline (PESTLE analysis n.d.). PESTLE is used to analyze the factors mentioned earlier, which provides a simple framework for analyzing an organization. PESTLE analysis also has the following limitations. The first one is that it is based on the study of the external environment (PESTLE analysis n.d.). Therefore, the tool does not provide a complete analysis of the organization, which may make it difficult to make decisions. The second limitation is that it can lead to accumulation of too much data. The article Advantages and disadvantages of PESTLE Analysis" (n.d.) states that the excess data may make it difficult to analyze the environment and draw conclusions. The last limitation is that the tool is simple and may not provide comprehensive results (PESTLE analysis n.d.). Therefore, the organization may require additional tools for analysis. SWOT SWOT is a tool used to analyze a firm's strengths, weaknesses, opportunities, and threats. According to Sammut?Bonnici and Galea (2015b), the use of SWOT analysis aids in identifying the competitive advantage of the firm. This objective is achieved through the analysis of internal factors because the firm identifies areas to improve to gain a competitive advantage. The tool also analyzes the external environment through opportunities and threats (Sammut?Bonnici Galea 2015b). The organization can use the information acquired to create a competitive advantage. Overall, the tool is used to analyze the internal and external environment to gain a competitive advantage. SWOT analysis has several advantages. The first benefit is the ability of the tool to be used on a specific objective of the company (SWOT analysis 2013). For example, a SWOT analysis of an existing products market can be conducted. For the second one, the SWOT analysis provides a guide that can be used by the organization (SWOT analysis 2013). SWOT analysis indicates areas of weakness, which a company can apply as a guide when improving performance. The last benefit is the use of SWOT to acquire a deeper understanding of the company (Harrison 2010). Evidently, SWOT is a tool that can be used to learn more about a company. SWOT analysis also has the following limitations. The first one is the difficulty in acquiring information about a companys internal environment (SWOT analysis 2013). The difficulty is witnessed as a result of the companys tendency to hide information especially if it reveals weaknesses. The second one is the subjective nature of the results, which may make them inaccurate (SWOT analysis 2013). The identification of strengths and weaknesses may be wrong if the researcher was biased. The last limitation involves the inability of the tool to provide a comprehensive analysis (Harrison 2010). The analysis may require other tools to explain the competitive advantage of a company wholly. 5F Porter's five forces technique entails the analysis of an industry. The use of this tool allows an organization to know the level of competition in its industry. First, the analysis of the competitive rivalry allows companies to know whether an industry is attractive (National Agency for Innovation, n.d.). Second, the threat of new entries enables businesses to know about barriers that limit competition by restricting entrance into the industry. Third, the threat of substitutes provides information about substitute products available in the market. Fourth, bargaining power of suppliers indicates the influence of suppliers (Mathooko, Ogutu 2015). Having many suppliers reduces their influence while fewer suppliers increase it. Fifth, bargaining power of customers reveals the impact of customers in the industry (Mathooko, Ogutu 2015). Having many consumers makes their bargaining power great meaning their influence is high while fewer consumers have low influence. Porters five has various advantages. The first one is that the company is provided with a way of knowing its position in the industry (Porter's five forces 2012). This knowledge assists in making decisions related to its competitive advantage. The second one is that the tool is simple and provides a comprehensive report (Porter's five forces 2012). It is not complicated to derive results from the framework provided. Porters five also has the following disadvantages. The first one is the availability of factors that change rapidly such as technology. The use of these factors makes the analysis to provide results that are short term because it cannot address the rapid changes (Beattie 2018). The second weakness is the use of this technique for the analysis of one organization. Beattie (2018), states that the tool was intended for the analysis of an industry thus misusing it may provide wrong results. Conclusion The analytical tools explored assist in making decisions concerning competition. Evidently, these tools are mainly used together to provide a comprehensive outlook because they are used for different types of environments. Overall, these techniques are vital to the survival of a business. 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