The paper "Strategic Analysis Tools" is a great example of business coursework. The strategic analysis can be defined as the method and procedure of conducting intensive research on a given business environment of an organisation for the purpose of formulating strategy (Cadle, Paul and Turner, 2010). Strategic analysis of any business involves the understanding of the environment of an organisation in order to enhance efficiency and effectiveness through the improvement of the organisation’ s capacity to deploy its resources. When operating a business, it is imperative to make business success through a number of objectives (Jenskin, 2015).
There are many methods which assist in analysing an organisation’ s current state before any decision is made. Some strategic analysis tools include SWOT Analysis, PEST Analysis, Porter’ s five competitive forces etc. PEST and Porter’ s Five Forces Analysis are two fundamental concepts for organisational leaders and B2B sales professionals (Kotler et al. , 2009). This can be witnessed by their ability to reveal vital information regarding the external factors that affect a business, which can be utilized by business leaders in decision making. For business leaders, PEST and Porter’ s Five Forces Analysis concepts are important in strategic planning used to gain information about a business (Cadle, Paul and Turner, 2010).
For B2B sales professionals, these concepts are critical for preparing for meetings since they can be utilized to gain an understanding of the external trends that affect prospects’ buying decisions (Henry, 2011). In this essay, I will argue that PEST Analysis is essential in developing strategy as a precursor to using Porter’ s Five Forces Analysis. The paper will offer the merits of PEST analysis over Porter’ s Five Forces Analysis and will highlight the reasons why Porter’ s Five Forces Analysis is insufficient in strategic development.
It will also offer a case study that will illustrate the effectiveness of PEST analysis and will then critically analyse the preposition of using PEST Analysis as a precursor to Porter’ s Five Forces Analysis. Today, business organisations are operating and conducting their businesses in an environment that is ever-changing that ever before (Marcovici, 2014). Managers and business leaders are expected to contribute their expertise where strategic concerns are discussed. Whether it is a large multinational corporation or just a small company, an understanding of effective business analysis techniques and tools will assist in contributing to effective strategic decision-making processes (Kaplan and Norton, 2011).
All organisations are expected to identify external factors that could influence their operations (McDonald and Wilson, 2012). Many of these factors will be factors that a company has no control over. Popular tools for identifying and analysing these factors are PEST Analysis and Porter’ s Five Forces Analysis. PEST Analysis is a useful strategic tool that is used to identify the external factors that affect an organisation (Cadle, Paul and Turner, 2010).
On the other hand, Porter’ s Five Forces Analysis entails external factors that affect the nature of competition between firms and the internal factors that influence methods in which organisations compete. PEST Analysis identifies Political, Economic, Social, and Technological factors (Cadle, Paul and Turner, 2010). PEST analysis divides the external environment into four segments which represent the most important issues that affect an organisation. This is why it is considered a fundamental tool for strategic development. PEST Analysis can work alone in strategic analysis or can be used together with other strategic analysis tools such as Porter’ s Five Forces Analysis and SWOT Analysis (Cadle, Paul and Turner, 2010).
PEST Analysis can also be used in combination with Porter’ s Five Forces since it is like transposing the PEST Analysis ideas onto Porter’ s Five Forces. PEST Analysis helps organisations improve on decision making (Zanoni, 2012). The best results are possible when an organisation makes the right decision by analysing different factors. It also assists in predicting the future by taking into consideration the present performance (McDonald and Wilson, 2012).
In addition, it also assists in detailing out the opportunities that an organisation can cash in on together with the threats that could damage the business.
Boundless 2015, “Limitations of the Five-Forces View,” Boundless Management. Boundless, Retrieved 21st Feb. 2016 from https://www.boundless.com/management/textbooks/boundless-management-textbook/strategic-management-12/external-inputs-to-strategy-87/limitations-of-the-five-forces-view-421-881/
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