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P.E.S.T. is a mnemonic name that stands for Political, Economic, Socio-cultural and Technological factors in the external micro-environment of business. It is a famous analytical tool used by business leaders to build and strengthen their vision for the future through proper understanding of external environment. It also assists the business to align its plans and actions with the forces of change taking place every day, as well as avoiding taking actions that can lead to ultimate failure of the business (Anonymous). On the other hand, Porters 5 Forces refer to a framework, which presupposes that the industry is affected by five forces. It asserts that a corporate strategy should counter the threats and opportunities in the firms external environment. Managers use this model to understand the context, in which the firm operates.
Harley Davidson, Inc. is the largest manufacturer of heavyweight motorcycles in the world. Its headquarters is located in Milwaukee, Wisconsin. It employs 9,000 people worldwide. It also produces boots, bags, leather jackets, t-shirts among other accompaniments. However, Harley Davidson faces competition from Victory and Indian motorcycles as well as foreign competition (McBee, 2011).
It is evident that the major threats to the company are external to its micro-environment. They usually present themselves as threats to the business and are, therefore, beyond the firms control. This situation has made the company adopt certain strategies that would enable it acquire a competitive advantage over its rivals. It also indicates that the companys strategic managers can adopt the use of Porters 5 Forces and P.E.S.T. analysis (McBee, 2011).
Porter identified five forces that determine the power of competition. Consequently, they help in determination of attractiveness and profitability of the industry. The strategic manager can efficiently analyze the strength and weaknesses of substitute products using this design. It can also help the company identify the brand loyalty, switching costs, current trends, and close customer relationships. It can also help in determining the competition rivalry of the existing players. As a result, the company may help to ascertain the level of differentiation between the players and their products, as well as strategies for growth (Themanager.org). These analyses would help the company to implement the generic strategies so as to create the competitive advantage.
Heavyweight motorcycles produced by HD are luxurious. It implies that the company competes primarily on the quality and design, rather than price. The most probable action, therefore, would be a focus on the differentiation strategy as advocated by Porter. The strategy involves the development of products that offer unique qualities favorable to the customers. The product should also be different or better from those of competitors. The approach can be facilitated by access to a recent scientific research, highly creative development team, and strong sales team. However, the company can decide to reduce the price if it cannot keep up with the quality of its rivals. The firm can also adopt the cost leadership and focus strategy depending on the magnitude of competition (Themanager.org).
On the other hand, P.E.S.T. analysis would greatly assist in assessing the external forces in details. The company can identify the strengths in economic, competitive, political, and socio-cultural environments. The economic strength of the company is that it has the hugest market share in the U. S. by enjoying half of the U.S. market share and a third of the global market. It has also registered increase in revenue over the past few years. The technological evaluation might have played a role in influencing the company to invest in technological advancement featuring logistics and production management efforts. For example, the company has adopted computer-based inventory controls to enhance inventory control (Anonymous).
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Design has also significantly improved through this investment. Socio-cultural forces are also crucial in identification of the potential market. Harley Davidson has focused on the aging population and changes in lifestyle of the majority of the youth. It also tries to evaluate the income inequalities, which might affect the market share, as well as the seasons. It might have informed the company in its plan on socially based mystique involving its product line (Anonymous).
Political, environmental and legal forces can also be exemplified using P.E.S.T. analysis. The evaluation involves deep evaluation of environmental protection laws, human resources legislation, and internationalization of the business. These forces have a huge impact on the cost of production, and hence, profitability. Proper evaluation of the forces helps the company to take precautionary measures in advance. It can, therefore, serve as guidelines to the manager on solving the problem of high-price tags and economy (McBee, 2011).
P.E.S.T. analysis is also the best analytical tool in assessing the competitive forces. This study aims at evaluating the main competitors and devising mechanisms on solving the crisis. The company sells its products at higher prices than the rest of competitors. It focuses on increasing the quality and design so as to please as many customers as possible. Its motorcycles are luxurious and, therefore, do not need to focus on price reduction. Additionally, the company has gone to the extent of enhancing potential substitutes so as to diversify its products (McBee, 2011).
In brief conclusion, the Porters 5 Forces and P.E.S.T. analysis serve as the best analytical tools in Harley Davidson. It is because most of the challenges it faces are external to the business micro-environment. The strategic managers can, therefore, propel the business to the greater prosperity as it is being witnessed in its strategies.
