Porter’s Five Forces
Michael Porter developed this model which identifies key forces that influence a company’s operations and profitability while operating in an industry. It was developed in 1979, and it is used by corporations as a competitive position analysis which assists them in evaluating the competitive strengths of an enterprise (Rajasekar and Al Raee, 2013). The first force is referred as the bargaining power of customers which enable them to raise the prices of their supplies. The bargaining power of customers defines their ability to influence a company’s pricing strategy. The threat of substitutes is alternative products or services which can customers choose for fulfilling similar requirements. The threat of new entrants is difficulty face by enterprises while entering into an industry. The industry rivalry is the pressure of competitors in an industry. Before launching new products, diversifying or forming future strategies, this tool is used by executives to identify their competitive strengths (Dobbs, 2014).
Adidas is an international organisation which operates in the apparel and accessories industry. It offers products such as shoes, clothing, and accessories to its customers. The threat of substitute products is low because Adidas’s strengths are product innovation based on which it offers customers’ expectations. The threat of new entrants is low because corporations require huge resources to enter into new markets. Adidas already has a strong presence in the industry and customers are loyal towards the brand. The bargaining power of buyers is high because they have access to more information and many organisations offer competitive pricing (Mahdi et al., 2015). The bargaining power of suppliers is low because Adidas has multiple sources from which it gets its suppliers. Furthermore, suppliers are dependent on the company, and the company did not have to incur huge costs in changing its suppliers since it operates globally. The competitive rivalry in the industry is high due to recent acquisitions in the industry and established customers such as Nike, Reebok, Puma, and Fila.
SWOT is an acronym for strengths, weaknesses, opportunities, and threats. It is a strategy development tools which is substantially popular among organisations. This tool is used by executives to evaluate the internal strengths and weaknesses of the company and compare them with external opportunities and threats (Brooks, Heffner and Henderson, 2014). Both of these factors influence the way a corporation is operated along with its profitability. Strengths assist the company in identifying key factors which are effective and provide a competitive advantage to the firm. The company can develop business strategies by recognising its strengths and compare them with its opportunities to exploit them (Machmud and Sidharta, 2014). It enables the organisations to identify various weaknesses which adversely affect their business and reduce their profitability. The threats create challenges for the company which result in affecting the current and future operations of the business.
SWOT Analysis
Coca-Cola was incorporated in 1886, and it is carbonated soft drink manufacturer which offers its products at a global stage. The key strengths of the company are the strong brand reputation worldwide; it was ranked as the 3rd best global brand in 2016 (McWilliams, 2016). The company has already established effective manufacturing, distribution, and marketing strategy which provide it a competitive advantage in the industry. Its weaknesses include a weak portfolio which is mainly focused on beverages, whereas, its key competitive PepsiCo has diversified its products lives which other products such as snacks. Its opportunities include growth in the demand for lower calories drinks and diversification of its products into different segments including food items and others (Salmons, 2012). The threats faced by the company include growing awareness regarding the disadvantages of soft drinks and reduction in soda consumption of people. Furthermore, the lawsuit against Coca-Cola for alleged deceptive marketing might result in imposing fine on the company and negatively affects its market reputation.
Resource-based view or RBV is a tool which is used by executives to form long-term business strategies in the company by relying on the resources which provides them a competitive advantage. This model evaluates the key resources of an enterprise to identify the one which provides them a competitive advantage. In order to recognise the key resource, the executives can evaluate the elements of a company based on the VRIO model (Coleman, Cotei and Farhat, 2013). VRIO is an acronym for valuable, rare, inimitable and organised. Availability of these four factors results in making a resource highly reliable for the company based on which it can form future strategies to exploit opportunities related to such resources.
Amazon is a leading organisation in the e-commerce industry, and it offers its products across the globe. The tangible resource of the company which provides it a competitive advantage is its effective distribution infrastructure which assists it in differentiating a large number of products without wasting must time. This resource is highly reliable since other competitors did not have a system which enables them to identify different products without losing any time (Blunt, 2017). The company uses robots to find out different products which are stored in its large warehouses which assist it in offering various options to its customers such as same day or one-day delivery. This is an extremely rare resource because other e-commerce companies rely on their suppliers to deliver products to their customers. On the other hand, it is inimitable because other corporations have to invest heavily in order to establish a distribution facility which is big as Amazon’s infrastructure (Pooler, 2017). The corporation has effectively organised this resource and rely on it to deliver its products faster than its competitors based on which the company has generated a competitive advantage in the industry.
Resource-based View (RBV)
PESTLE is an acronym for political, economic, social, technological, legal and environment. It is a strategic development tool which is used by corporations to evaluate various external factors which result in affecting the operations and profitability of the business. These factors affect a company in both positive and negative manner due to which evaluation of these factors is important (Kolios and Read, 2013). Executives can form the future business strategies and policies by evaluating these external factors since they create both opportunities and threats for the enterprise.
IKEA is an international organisation which operates in the retail industry, and it offers ready-to-assemble and designs furniture, kitchen appliances and others for its customers.
The company operates in 41 countries, and political pressure and changes from these countries affect its operations, for example, the ban on free trade by Trump administration (The Local, 2017).
Economic forces which influence the business of IKEA include changes in currency rates while operating business overseas.
Customers’ preference in international market changes based on which IKEA changes its business policies as well. The company’s social image as affected negatively due to removing the lesbian couple from the magazine in Russia and photo-shopping women from the catalogue in Saudi Arabia (Sherwin, 2013).
The corporation uses technology to improve its customer experience and provide them better services, for example, using augmented reality for improving customer service experience.
The company has to comply with local labour laws along with compliance with increasing operational costs. Compliance is regulations relating to the safety of customers by maintaining product quality are relevant for the company as well.
IKEA is taking serious steps towards sustainability of the environment by planning to invest $1 billion in renewable energy sources. Furthermore, it has plagued to use 100 percent renewable energy sources by 2020 (Edie, 2018).
References
Blunt, K. (2017) Amazon robots disrupting distribution networks. [Online] Available at: https://www.houstonchronicle.com/business/retail/article/Amazon-robots-disrupt-distribution-networks-12259413.php [Accessed 23rd August 2018].
Brooks, G., Heffner, A. and Henderson, D. (2014) A SWOT analysis of competitive knowledge from social media for a small start-up business. The Review of Business Information Systems (Online), 18(1), p.23.
Coleman, S., Cotei, C. and Farhat, J. (2013) A resource-based view of new firm survival: new perspectives on the role of industry and exit route. Journal of Developmental Entrepreneurship, 18(01), p.135.
Dobbs, M. (2014) Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.
Edie. (2018) Ikea boosts sustainable products and renewable energy sourcing. [Online] Available at: https://www.edie.net/news/7/Ikea-boosts-sustainable-products-and-renewable-energy-sourcing/ [Accessed 23rd August 2018].
Kolios, A. and Read, G. (2013) A political, economic, social, technology, legal and environmental (PESTLE) approach for risk identification of the tidal industry in the United Kingdom. Energies, 6(10), pp.5023-5045.
Machmud, S. and Sidharta, I. (2014) Business models for SMEs in Bandung: Swot analysis. Jurnal Ekonomi, Bisnis & Entrepreneurship, 8(1), pp.51-61.
Mahdi, H.A.A., Abbas, M., Mazar, T.I. and George, S. (2015) A Comparative Analysis of Strategies and Business Models of Nike, Inc. and Adidas Group with special reference to Competitive Advantage in the context of a Dynamic and Competitive Environment. International Journal of Business Management and Economic Research, 6(3), pp.167-177.
McWilliams, J.D. (2016) Coca-Cola No. 3 on Most Valuable Brand Ranking. [Online] Available at: https://www.coca-colacompany.com/stories/coca-cola-no-3-on-most-valuable-brands-ranking [Accessed 23rd August 2018].
Pooler, M. (2017) Amazon robots bring a brave new world to the warehouse. [Online] Available at: https://www.ft.com/content/916b93fc-8716-11e7-8bb1-5ba57d47eff7 [Accessed 23rd August 2018].
Rajasekar, J. and Al Raee, M. (2013) An analysis of the telecommunication industry in the Sultanate of Oman using Michael Porter’s competitive strategy model. Competitiveness Review: An International Business Journal, 23(3), pp.234-259.
Salmons, A. (2012) The Role of Marketing Auditing and Planning for Coca-Cola Corporation. Carpe Diem, The Australian Journal of Business & Informatics, 5(1).
Sherwin, A. (2013) Ikea faces boycott after it removes lesbian couple from Russian magazine to comply with Putin laws. [Online] Available at: https://www.independent.co.uk/news/world/europe/ikea-faces-boycott-after-it-removes-lesbian-couple-from-russian-magazine-to-comply-with-putin-laws-8955178.html [Accessed 23rd August 2018].
The Local. (2017) Ikea US boss calls Trump travel ban ‘troubling’. [Online] Available at: https://www.thelocal.se/20170201/ikea-us-boss-calls-trump-travel-ban-troubling [Accessed 23rd August 2018].
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