Discussion – Competition Analysis Tools

Discussion – Competition Analysis Tools

I still believe the tools I selected are the best for analyzing the global environment. PESTEL analysis is one of the most reliable tools for conducting competition analysis for a business that intends to move operations into a global environment. PESTEL analysis offers a comprehensive understanding of the various factors that cause change in an industry. That way, a business can prepare adequately for rivals. Also, PESTEL analysis provides insights into the threats and opportunities the business may encounter as it moves operations into a new global environment. For instance, understanding the legal structure of the new host country is crucial. That is because some countries have laws that protect local businesses, which may hinder foreign companies from thriving. Therefore, PESTEL analysis provides prior knowledge about the business implications a business will encounter in the new legal environment. Another advantage of PESTEL analysis is that it informs the company of strategies to gain a competitive edge in the new market. The company will withstand competitive pressures once it applies the appropriate strategic moves.

In addition, SWOT analysis is the other tool that I found effective for conducting competitive analysis. SWOT analysis involves the evaluation of the business’s external environment (opportunities and threats). The information helps the business to identify its potential rivals. Besides, the business may leverage SWOT information to adapt to the changing business environment. SWOT analysis also focuses on key business areas that may affect its competitive position. The tool classifies factors affecting the business into external/internal and positive/negative elements. As a result, it offers crucial insights that guide the business’s strategy. Thirdly, SWOT analysis aids decision-making, a vital business aspect in the global environment. Aligning the company’s strengths with the opportunities it is likely to encounter through SWOT analysis facilitates decision-making.

Evidence to Show the Effectiveness of the Tools

According to Benzaghta et al. (2021), SWOT analysis applies in competitive analysis more frequently than any other tool. The tool helps managers formulate strategies in their new business environments. The global environment is characterized by uncertainty, implying that the most effective tool should offer a forecast of future expectations. To that end, the SWOT analysis offers a holistic glimpse of strengths, weaknesses, threats, and opportunities implicated in a specific project. The first SWOT analysis was conducted in 1982, using Volkswagen as the real-world company example. Since then, the tool has remained the most popular. For instance, 22% of all companies in Bahrain use SWOT analysis in competitive analysis (Benzaghta et al., 2021). Businesses prefer SWOT analysis over cognitive mapping, value chain analysis, Porter’s five force analysis, portfolio analysis, and Delphi. Benzaghta (2011) also affirms that this is the most popular competitive analysis tool in Egypt. SWOT analysis has remained popular because it offers businesses moving into the global environment a foresight of what they should expect in the new environment.

On the other hand, PESTEL analysis is used by businesses as a checklist of the conditions imposed on the business by political, environmental, social-cultural, technological, economic, and legal factors. By analyzing past events and experiences, managers put themselves in a better position to predict the future business environment and position themselves strategically (Berzengi & Linbom, 2008). One of the reasons I find PESTEL analysis to be an effective tool is because it delves into stakeholder analysis. The tool analyzes which people are important to the business and how they may influence the business in the future. The PESTEL tool is so powerful that sometimes, it is mandated by authorities to help companies establish sustainable businesses. For instance, in 2006, the European Commission mandated governments in member states to obligate large corporations to conduct a SWOT PESTEL analysis to identify environmentally unfriendly products (Berzengi & Linbom, 2008). After identifying these products, businesses should ensure environmental sustainability by adjusting their production processes or avoiding them altogether. The insistence on PESTEL analysis by the European Commission shows that the tool is suitable.

The Weaknesses of Other Competition Analysis Tools

One of the tools widely mentioned by others is Porter’s five forces. Although Porter’s five forces offer insights into the current situation of the industry, it fails to provide a comprehensive analysis of the industry’s future outlook. Porter’s five forces window of applicability is limited because the tool focuses on past events and experiences (Goyal, 2020). The outcome of the analysis applies in the short run, but it becomes ineffective in the long term due to the evolving nature of business environments. For instance, with globalization, the business environment keeps changing since new players keep entering the market; thus, relying on the past may not give a clear picture of what may happen in the future.

Another reason I refute the application of Porter’s five forces analysis tool is that most people apply it inappropriately. Porter’s five seeks to provide insights into industry factors that may influence a business (Goyal, 2020). In other words, the tool is meant for industry analysis but not company analysis. PESTEL analysis may inform strategic discussions at the company level but should not apply as a primary company analysis tool. SWOT analysis is beneficial to investors because it delivers company-specific insights.

Furniture Market SWOT Analysis

PESTEL Analysis of the Furniture Market

Political factors have a significant influence on the furniture industry. Tariffs and trade agreements are some of the elements in the political environment that affect the furniture market. Once trade tariffs go up, market prices are likely to increase. However, trade agreements may be signed to lower the impact of increased tariffs. Economic factors also affect the furniture industry. For instance, during economic downtimes, consumers are likely to delay furniture purchases, leading to decreased sales (Kalinina, 2013). When it comes to sociocultural factors, demographics matter as an older population is likely to demand more furniture to offer comfort. On the technological front, robotics and AI are likely to lower production costs once applied in furniture production. In addition, legal considerations that affect the global furniture industry include labor laws (Kalinina, 2013). For instance, underage children are barred from working in furniture factories as this contravenes local and international labor laws.

References

Benzaghta, M. A., Elwalda, A., Mousa, M. M., Erkan, I., & Rahman, M. (2021). SWOT analysis applications: An integrative literature review. Journal of Global Business Insights, 6(1), 55-73.

Berzengi, R., & Linbom, A. (2008). Competitive advantage of environmental sustainability. https://www.diva-portal.org/smash/get/diva2:238560/FULLTEXT01.pdf

Goyal, A. (2020). A critical analysis of Porter’s 5 forces model of competitive advantage. Goyal, A.(2021). A Critical Analysis of Porter’s, 5.

Kalinina, D. (2013). Saint Petersburg Furniture Market Analysis and Its Opportunities. Case:        Company X.

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Description
You enter your project team meeting with Mike and Tiffany to hear them discussing the tools that they found to conduct an analysis of the industry and competitors. “Mike, there are so many more tools than I even realized to give us some good data,” Tiffany states.

Discussion – Competition Analysis Tools

“I know,” Mike says. “That’s why I wanted to take some time to look at our options and figure out what information we really need to support the board’s decision.”

Mike and Tiffany both found some great tools from their research on the subject. Complete the following:

Based on your classmates’ discussion posts for Week 2, do you still believe the tools that you selected will work best for a global strategy? Why or why not?
What evidence do you have to support your decision?
How would you refute the people who chose an additional tool rather than one of the tools that you selected?
Based on the tools that you selected, provide a brief analysis of your market, using those tools.
Please submit your assignment.

For assistance with your assignment, please use your textbook, all course resources, and any external research and resources you have gathered.