STRATEGIC ANALYSIS

Comparison and Contrast of Porter's Five Forces Strategic Tool and PESTLE Analysis

Comparison and Contrast of Porter's Five Forces Strategic Tool and PESTLE Analysis

Introduction

Strategic management in an organization involves the tasks of monitoring and evaluation of external threats and opportunities in context to the organization's strengths and weaknesses. Strategic management is crucial to a company's performance, profitability and survival in the short term as well as the long term. It involves the analysis of external and internal strategy formulation, implementation, evaluation and control (Srinivasan, 2006 p.7). Porter's five forces and the PESTLE model are invaluable tools that provide a detailed analysis of important forces in an organization's external environment.

Discussion

Reason for choosing PESTLE model and Porter's five forces model

The reason for choosing PESTLE model and Porter's five forces model for comparison is the fact that both frameworks are used by an organization for strategic planning and management. Whereas Porter's five forces examine the competitiveness in the industry; PESTLE model scans the macro-environmental factors; however, both models help an organization in being more aware of the external factors that may influence its operations and productivity (Bowhill 2009, p.332).

PESTLE Model

PESTLE analysis is an increasingly important tool to take into consideration the pre-existing environmental factors in an organization before starting the marketing process. The process of analyzing the environment and using this information in all the planning phases should be ongoing. Environmental factors for organizations may differ from country to country, however, in some cases similarities are present between countries in terms of their strategic environmental factors (Analoui and Karami, 2003 p. 74).

On the scale of importance, the factors of PESTLE model will vary from organization to the organization and industry to industry. A global defense contractor's PESTLE model and factors in terms of importance will extensively differ from that of a B2B company. Where social factors may affect a garment producing concern, political factors may be more highly rated in terms of importance for a private military company. Therefore, the application and usage of the model varies with industries and organizations.

Advantages of PESTLE Model PESTLE tool has helped firms understand the environment in which they are operating from various angles including business position, market growth or decline, direction and potential for operations etc. Positive alignment of activities of a firm with significant environmental forces is ensured by the effective use of this tool. It helps organizations clarify strategic threats and opportunities that the company might face and forecast for both short term and long term.

Usage of PESTLE model

PESTLE analysis is commonly used for research reports, business and strategic planning, organization change and marketing planning. It can also be used for analyzing the effects of the environment on competitors. This would help the company predict future moves and reactions of the competitors in response to changes in their environment.

In business and marketing planning

In order to make a business or marketing plan, setting new targets for growth, product development and brand positioning is much easier if the management has a PESTLE ...