Strategy Development Tools Used in Business

PESTEL Analysis PESTEL Analysis is an analytical tool which is used to measure various factors affecting the business externally. It is an acronym which stands for factors affecting the company such as political, economic, social, technological, environmental and legal factors. It evolved from PEST analysis after globalization and other factors made it of great importance to investigate the impact that legal and environmental factors may have on a company. It is mostly used as a concept in marketing principles utilized by businesses to track their environment of operation or are about to launch a new service or project. PESTEL focuses on identifying trends and is, therefore, useful for thinking proactively and to be able to anticipate any change rather than being caught off guard and being overtaken changes (Saari et al, 2016, p.

SWOT Analysis SWOT Analysis is used extensively by companies to assess various projects, initiatives or products. Albert Humphrey came up with the idea in the 1960s and was developed with the aim of business assessment on the basis of data that had been collected from the Fortune 500 companies. The main objective of a SWOT analysis is to assist in decision-making since opportunities can be uncovered and threats discovered before they become a burden to the company (Yavus & Bacan, 2013, p. For instance, this analysis can enable a company to point out their market niche where they have a competitive advantage hence assisting them to maximize their strong points while avoiding the threats that would hinder success. The elements of a SWOT Analysis are strengths, weaknesses, opportunities, and threats.

Therefore, if a resource has VRIN attributes, then the resource gives the company an upper hand in the market (Lin & Wu, 2014, p. This was an approach developed by Wernerfelt in the 1980s and many scholars support his work by arguing that businesses should take a closer look inside the business so as to find what makes it competitively advantageous rather than looking for a competitive surrounding for the business. Exploiting opportunities using resources that are in existence and are externally available is more viable than trying to get new skills with every new opportunity which avails itself. The two resources which aid in assisting companies to achieve high performance are tangible and intangible assets. Tangible assets include physical things like buildings and equipment while intangible assets involve things which cannot be seen or felt such as reputation and trademarks.

Resources are not advantageous to a company if it is not organized enough to get the value from them. RBV framework is advantageous in that it aids in the identification of features that can create a competitive advantage for the company like value and rareness. Various critics argue that the framework has weaknesses such as lacking managerial implications which means that it explains that the management needs to have resources which meet the VRIN criteria, however, it does not explain how managers can actually accomplish this. Moreover, gaining a competitive advantage which is sustainable is difficult to achieve because of the dynamic environment the company carries out its activities in. Therefore, the competitive advantage realized will not be long-term. Hair Jr, J.