Management Tools SWOT and PEST - Essay Example

Management SWOT Using SWOT provides organisations with a way for Amazon to raise and discuss non-conformist issues. In addition, SWOT plays a huge role in the creation of strategic objectives when it is applied as part of the overall strategic process rather than as a silver bullet on its own. For a company like amazon that deals with clients from all over the world, this advantage is especially useful. For example, using SWOT, it is possible for the company to perform an internal and external analysis that provides a futuristic way of developing strategy. SWOT is extremely useful for all types of strategic planning (Ahmad, 2013:34). Amazon’s executives and managers can use it to develop ways to approach its suppliers, clients, competitors and employees in a critical and strategic manner. For example, SWOT can allow amazon to focus on developing internal and external mechanisms that give it a competitive advantage over its rivals (Boone, 2012:21). In large corporations such as amazon, the diversity in employee and customer bases provides an immense challenge that most companies often fail to overcome. Managing a highly diverse customer and employee pool requires an excellent understanding of those employees and clients. SWOT provides a means of going deep within an organisation’s internal dynamics and allowing the company to balance its objectives so that they are streamlined with employees (Cardenas, 2014:31). Through its external support system, SWOT allows companies such as amazon to create systems and structures that enhance their understanding of what the “outside” world demands. Suppliers, rivals, customers and the government are all analysed using SWOT’s external mechanisms to create a perfect comprehension of what the external environment requires of it (U.S. Dept. of Agriculture, Risk Management Agency, 2012:21). Most importantly, SWOT offers Amazon an opportunity to balance its internal and external objectives and avoid getting overambitious. More often than not, companies put either of these concepts ahead of one another knowingly or unknowingly. For example, amazon may want to integrate its new employees from India into its culture and organisational behaviour. However, it also wants to use its employees to project its objectives globally. Balancing these ambitions is a huge challenge for most corporations, but SWOT provides the perfect tool to achieve optimal equilibrium (Huber, 2014:42). SWOT can also be used a tool for brainstorming instrument to help Amazon focus its efforts on its core strengths and weaknesses. In addition, amazon can use SWOT analysis as a tool for collecting information from a wide variety of angles or it may be able to exploit its results to competitive advantage by either aligning its strengths with its opportunities or transforming threats or weaknesses into opportunities or strengths (Wetherly, 2011:47). The most obvious limitations of SWOT are, firstly, vulnerability to oversimplification. Although it can combine a large number of situational aspects to create a manageable quantity, SWOT promotes oversimplification of situations. In addition, it is very easy to influence this technique through vested interests at Amazon (Cadle and Eva, 2014:65). This will be especially obvious in case amazon needs to use SWOT at the highest level of the organisation. The people at Amazon who develop strategy must be aware of the issues involved in oversimplification and self-interests and take them into account at any cost. Another limitation of SWOT that may concern Amazon executives is that there is no clear scope regarding what is and is not appropriate (Fine, 2010:23). While using SWOT, Amazon must be mindful its ease of use and its ability to simplify analyses does not offer a method for solving disputes that result from discussions. PESTLE The biggest application provided by PESTLE is that it provides a straightforward and easy-to use model for business analysis (Woodburn and Wilson, 2014:27). For example, Amazon would have an easy time working with PESTLE so that its executives can exploit its potential to the maximum. Amazon, with the volatile environment it is involved in, would benefit immensely from this tool because its employees, even the new recruits, would have an easy time using it. In addition, PESTLE offers cross-functional expertise and skills that would be priceless to a firm such as Amazon. For example, Amazon has a lot of departments and business units that need to be managed effectively so that the whole organisation functions as planned (Taylor and Francis, 2012:32). Cross-functional skills would be important in allowing Amazon to streamline its departments and business units to compliment organisational objectives. By providing Amazon with the opportunity to analyse its external environment, the company can avoid getting caught up in the complications emanating from a lack of understanding of the external environment (Pullan, 2013:24). For instance, Amazon would be better of using PESTLE if it wants to comprehend and adapt to political, economic, social, technological, legal and environmental factors that affect its ability to operate (Papajorgji, 2013:32). Like SWOT, PESTLE encourages and promotes the development of strategic approaches in organisations. Strategic thinking is the backbone of 21st century companies such as Amazon that need to flourish – not survive in an increasingly competitive business environment. Strategic thinking is also a source of competitive advantage. Amazon executives should be ready to exploit the mechanisms offered by PESTLE that facilitate the identification and exploitation of opportunities. Over the years, Amazon has mastered the use of PESTLE in identifying opportunities in new markets, hence elbowing out major rivals like eBay and Alibaba (Mana, 2012:39). For example, PESTLE can act as a tool for Amazon to analyse the implications of venturing into the lucrative Chinese market and, if results allow it, proceed with such plans. It will be able to rival Alibaba, which dominates that market. The usefulness of PESTLE is therefore invaluable to Amazon (Narayanasamy, 2009:35). Just like SWOT, one of the main limitations of PESTLE is that it (mis)leads users to oversimplify information that is crucial in strategic decision-making (Duhaime and Stimpert, 2011:54. In addition, a company such as Amazon would have to conduct PESTLE analysis regularly before it can exploit its true potential. This requires significant financial and human resource investment, although a large corporation such as Amazon is capable of financing such repeat analyses (Dalton and Best, 2009). However, the budgets would be better allocated to more important aspects. Amazon must not fall prey to the “paralysis by analysis” syndrome in which firms collect excess information and then forget that the aim of PESTLE is the determination of issues so that remedies can be developed (Palepu and Healy, 2013:56). In addition, companies often limit who participates in PESTLE analysis because of cost and time factors. This inhibits its effectiveness (Brijs, 2012:29). However, Amazon should not have this problem, although the resources and time would be better spent elsewhere. PESTLE also comes with the limitation that users cannot access quality information fully due the cost and time required to collate it, and Amazon would be caught in this web if it does not proceed with caution and good planning. Finally, assumptions often form the foundation of most of the data used (Media, 2010:28). This makes any decisions made using that data subjective rather than objective. Solutions In both SWOT and PESTLE, Amazon should carry out good planning and brilliant execution. Good planning is the key to correct application of any business analysis tool. Once planning is complete, execution determines the eventual success of the application (Blais, 2012:45). Finally, Amazon executives should develop good monitoring and evaluation tools that “report” on progress made. If it can implement these two recommendations it will have made huge steps forward in understanding its needs and exploiting PESTLE and SWOT to satisfy them. References Ahmad, M. (2013) Marketing case studies and SWOT analysis: SWOT analysis applied to marketing case studies, Saarbrücken, LAP LAMBERT Academic Publishing. Blais, S. (2012) Business analysis best practices for success, Hoboken, N.J., Wiley. Boone, L. (2012) Contemporary marketing, 2013 update, S.l., Cengage Learning. Brijs, B. (2012) Business analysis for business intelligence, Boca Raton, FL, CRC Press. Cadle, J. & Eva, M. (2014) Business analysis (3rd ed.), Swindon, BCS Learning & Development Limited. Cardenas, E. (2014) Business analysis 52 success secrets - 52 most asked questions on business analysis - what you need to know, New York, Emereo Publishing. Dalton, C. & Best, N. (2009) Enterprise management 2010 edition, Burlington, Elsevier. Duhaime, I. & Stimpert, J. 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