Research Paper on Strategic Models of a Business

Paper Type:  Research paper
Pages:  7
Wordcount:  1850 Words
Date:  2022-06-23

Introduction

In today's fast-changing world, many industries and businesses environment is increasingly characterized by high levels of uncertainty and rapid change. Companies are facing exciting and dynamic challenges in their working environment. Consequently, the business environment is becoming more competitive especially in terms of prices and services. To be able to solve this, companies are establishing good business strategic models that can become strategically competitive in the globalized business. Strategic models are theoretical systems of business environment within which the company operates to bring efficiency and effectiveness of the business (Grant, 2016). If a company fails to effectively adapt to its environment, it leads to a strategic problem. Therefore, it is through use of strategic models that a business is able to compete successfully. By use of company's examples, the paper aims to exemplify the use of strategic models and other analysis in creating a robust strategy for the business.

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SWOT Analysis

SWOT Analysis is one of the simple and widely used tools that enable a business to appreciate its 'strengths, weaknesses, opportunities, and threats involved in the business activity" (Rudnicki & Vagner, 2014). In the global marketplace, SWOT analysis helps in analyzing present and future competitive state of a business An example to be employed here is that of Air-Asia Airline Company which will help us to understand its market liberalization trend.

Strengths-this is where the business does best in its operations giving it an upper hand over its competitors. Strengths of a company enable them in allocating resources that may be potential in the growth of revenue and profitability. For instance, the low operational and maintenance cost of Air-Asia Airline Company has been steady and consistent thus enabling the company to satisfy its customers (O'Connell & Williams, 2015). Another way is through its cooperative and strong management team formed by different kinds of the executive management team and a connection from the government, thus helping them to effectively manage the Airline. Therefore, strengths of a company enable them to compete effectively thus allowing profit and revenue growth.

Weakness- these are areas where the business needs improvement. Air-Asia is finding it immensely challenging in keeping up with their costs as low as possible due to fuel costs fluctuations and increase in service costs. Looking at the weaknesses of the company, it is not meant to blame past shortfalls in performance. Rather, it is to highlight some of the vital areas that require to be improved for the business to compete efficiently (Valentin, 2011). It is hard for a company to identify its strengths without first highlighting their weakness and look forward to how they can improve so as to stay ahead of its competitors.

Opportunities- these are avenues in the environment surrounding the business which can be capitalized so as to increase its returns. For a business to grow, it requires one to identify "new opportunities including new potential customer groups and broader distribution of products" (Rudnicki & Vagner, 2014). For instance, Air-Asia can increase its returns in surging in overseas travel. In doing this, they need to consider destinations like Singapore, Malaysia, and Bangkok which are popular in tourists and seasonal vacation. Another way is through low-cost fare model which will attract customers all over the world and thus help them in increasing their profitability.

Threat- these are those factors that detriments the growth of a business. The occurrence of a threat or risk in a company has a negative impact on company's performance. The taste of a customer keeps on changing causing him/her cut back on purchasing the products and services. However, it can be controlled when the company decides to take a contingency plan and implement it before the threat becomes a great risk (Grant, 2016). Air-Asia Company has been facing threat through competition from bigger companies such as Air India, Virgin Airlines etc. Also, cost of management has been making it hard for the company to meet with high fuel cost. SWOT analysis, therefore, enables a company to be ready for what it may encounter from the external environment and see how they can deal with risks that have a negative effect on their performance.

PESTLE Model

Just like SWOT, PESTLE is an acronym for "political, economic, social-cultural, technological, environmental and legal." It looks at a business and determines what could affect the health of an organization (Valentin, 2011). PESTLE gives an understanding to decision-makers of changes that may be taking place within a given market. A business can make better decisions when they know ahead of time on changes they are likely to encounter. Irrespective of good or bad, any market has the potential and this model helps in weighing things in a very objective balance hence encouraging strategic planning. An example to consider is Google Company which is a famous search engine. The PESTLE analysis of Google will help in analyzing the kinds of pressures and opportunities that Google has been subjected to thus helping other upcoming businesses.

Political - there are various ways the government can intervene for the economy of the nation some including environmental law, trade restrictions, tax and government policy etc. Such political factors always have an impact on companies and how they carry out business. Although Google is mainly into internet based business; it is more immune to political forces. For instance, it faces a challenge with the justice department due to lots of inappropriate content on the internet and the classified document (Girard, 2015). Also, it faces a challenge with the government of Chinese due to searching results of censorship. Due to its collaboration with the government of U.S. and defense of personal privacy, Google tries not to have any problem with censorship world widely. It is important therefore for companies to respond to the current and anticipated future legislation and be able to adjust accordingly to their marketing policy.

Economical - today, global sales are significantly being affected due to economic crisis taking place all over the world. Economic factors have a huge impact on how companies carry out their business and how profitable they are. For instance, United States is one of the countries that have been hit most since that's where Google is located. Since Google sells services that are funded by adverts and not products, the crisis have not affected it (Girard, 2015). Additionally, its free provision makes the company gain popularity with advertising companies thus enabling them to respond to all kinds of crisis.

Social - the changing demographic patterns of social-cultural factors can be constructive or unconstructive to any business. This area involves the shared belief and attitudes of the population including those that concern the growth of the population, health consciousness etc. Recently, use of social media has increased significantly which is an advantage to Facebook who is Google competitors. Although Facebook has brought new opportunities for Google, it has influenced its market due to competition between each other. Using localized marketing techniques, Google markets its brand in various cultures hence creating a better brand image and perception that all increase its revenue. Therefore, understanding social-cultural factors are of great interest as it has a direct influence on how business marketers understand their customers and even what drives them.

Technological - technology keeps on changing and it significantly impacts the way a business markets its products. For instance, Google is expanding rapidly due to advanced technology taking place daily. For it to follow its revolution, it has to be constantly updated which will help it work faster and better. Its whole business is based on technological innovation by investing a lot in research and development. As a result, it enables it to keep ahead of its competitors including Microsoft and Amazon (Girard, 2015). Of paramount, businesses must understand and take chance in developing technology to enable them to stand beyond their competitors.

Environmental - just like other big business, sustainability is vital for any company. Investing in sustainability not only improves brand recognition and image but also minimizes operational costs (Rudnicki & Vagner, 2014). For instance, Google is more focused on building products and services that assist others to carry out their business sustainably. Also, it is investing in projects of renewable energy which help in protecting the environment. Consumers want to source their products from not only an ethical environment but also from a sustainable source.

Legal - in any business, compliance is significant and requires careful attention. In a legal environment, copyright is a major challenge facing Google since third parties are likely to steal information from certain owners. To avoid these, Google has created a page concerning copyright information for people to view what is legal and what is not legal. It is now apparent that organizations need to know what is and what is not legal so as to successfully carry out their business.

Comparative Industry Structure Analysis

This is also known as Porter's Five Forces Analysis which is a significant tool for businesses. Purposely, the model determines the attractiveness of an industry and creates a starting point for formulating a strategy that understands the competition in which the business operates (Teece, 2010). It locates the power of a business hence helps in understanding the strength of an organization and its competitive position. To create a robust strategy, companies must use this Porter's five forces in helping them know if their new products are potentially profitable. It will enable them to know where the power lies, enable them to locate their strengths and improve their weakness so as to avoid future mistakes.

Bargaining power of customers - due to a large number of competitors in the market, bargaining power of customers is higher. For example in Air-Asia Airline, customers have a high bargaining power since they can choose from a variety of airlines that offer low-cost services (O'Connell & Williams, 2015). All business must understand that powerful buyers are those that have an influence on the prices.

Bargaining power of supplies - this is pressure exerted by suppliers towards prices, quality and products availability. Powerful suppliers are able to demand premium prices and limit your profit by reducing the quality of the product and availability of the product. As a result, bargaining power of a supplier helps in shaping the competitive structure of the industry. In a case of Air-Asia Airline which has large numbers of suppliers, its supplier power is moderate and limited thus no major impact on the company.

The threat of new entry - profitable markets attracts new entrants which erodes profit of the business. The profitability of a business can decline to a competitive rate if incumbents have no strong and durable barriers to entry. In Air-Asia Company, there is a high threat of new entrant as market liberalization has created opportunities for many foreign airlines to enter into the regions of Asia Pacific. Barriers to entry act as a deterrent against new competitors.

The threat of Substitute - in a market where there are substitute products, the likelihood of customers to switch to alternatives in response to prices increases. As a result, suppliers' power reduces and even market attractiveness. This is in the case of regions of Asia-Pacific where consumers are preferring...

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Research Paper on Strategic Models of a Business. (2022, Jun 23). Retrieved from https://proessays.net/essays/research-paper-on-strategic-models-of-a-business

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