How to Use Company Assessment Tools

Introduction

The evaluation of the performance of a company is an important step to be taken by managers and leaders. Business experts are involved in this type of activity to recognize the strengths and shortages of their work and define new perspectives. As soon as a company assessment is performed, it is possible to consider effective strategies to achieve success and progress in the future. In the modern world of business, companies have access to a variety of assessment tools with the help of which the level of performance is identified. They include SWOT, MOST, PESTLE, CATWOE, the McKinsey 7-S framework, or Porter’s Five. As a rule, these titles identify what kind of analysis is required and what metrics are evaluated. Hewitt (2019) recommends combining methods in a logical architecture to narrow the influence and relevance of activities. In this paper, four methods, namely SWOT, PESTLE, the McKinsey 7-S framework, and Porter’s Five, will be researched in terms of their usage, benefits, and shortages to clarify what combination is the best for the development of the airline business.

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McKinsey 7-S Framework

Depending on their experience and the level of knowledge, managers use different assessment tools. McKinsey model is one of the options according to which a company is developed within the frames of seven organizational factors, including strategy, structure, style, systems, shared values, staff, and skills (Gökdeniz, Kartal & Kömürcü 2017). Any company has a definite number of specific goals and various methods to achieve them. Not to be lost among the existing alternatives, the authors of the McKinsey framework focus on internal factors to promote strategic assessment and establish alignment of different systems.

This tool is used to identify a strategy and its appropriateness to the already developed environment. Then, a structural standpoint has to be recognized along with systems’ execution. The identification of shared values and style helps to understand if the needs and demands of the team meet the expectations of the community. Finally, the choice of staff and their skills play an important role in company development because when the right people with the necessary skills are found, they have good opportunities to complete their work at a high level (Gökdeniz, Kartal & Kömürcü 2017). Despite the evident benefit of this model to cover several organizational elements and their interaction, McKinsey 7-S lacks the investigation of external factors and clarification of variables according to which success or failure is defined.

SWOT

The method when strengths (S), weaknesses (W), opportunities (O), and threats (T) are identified is one of the most frequently used company analysis tools, known as SWOT. These internal and external factors must be identified to clarify if a company has enough resources for its development, if a situation is favorable to its progress and if there are enough people who set goals and complete tasks. Therefore, it is important to know how to use this assessment tool and evaluate each factor. According to Fajar (2016 cited in Hatta, Riskarini & Ichwani 2018), strengths are natural resources and advantages that can provide a competitive advantage. Weaknesses, on the other hand, are the limitations and lack of skills and sources to contribute to successful organizational performance (Hatta, Riskarini & Ichwani 2018). Opportunities are external factors that introduce profitable situations like a technological advantage, ecology, or location. Threats, in their turn, are the opposite factors that signalize negative or challenging situations that can hardly be controlled but must be determined, understood, and stopped (Hewitt 2019). An interview with employees and customers is the best way to conduct SWOT.

The advantage of this method is the possibility to be applied to any organization by one person or a team. Being simple, cheap, and easy to complete, SWOT focuses on the company’s objectives and resources to introduce a multi-level analysis and integrate a variety of quantitative and qualitative data. However, it is important to remember the ambiguity of this tool due to the use of subjective information and analysis. Biases of participants, personal understandings, and the absence of metrics and parameters may confuse an employee and influence expected outcomes.

PESTLE

Many organizations pay attention to existing external elements that may help or challenge growth, including political, economic, social, technological, legal, and environmental influences, also known as PESTLE. It is used to identify if the environment supports or prevents the development of a company. Political issues deal with the government, tax policies, or trade conditions that may provoke migration, industrialization, and urbanization (Rastogi & Trivedi 2016). Economic factors depend on the country’s economy like exchange rates, inflation, or interest rates. Social items consider people and their role in the industry, including their cultural preferences, population dynamics, or health. Technological factors define innovations and achievements that may influence the company’s activities and awareness of clients. Legal aspects like laws, regulatory changes, and legislation define the conditions under which people work, earn money, and store their resources (Davis 2017). Environmental factors like weather, climate, geographical location, or global changes cannot be ignored as they describe the conditions under which an organization exists and works. Despite the existing benefits like simplicity, identification and reduction of threats, and understanding of the business environment, shortages of regular updating, assumption basis, and missed information have specific outcomes.

Porter’s Five Forces

Porter’s Five Forces introduced competitive aspects that influence the level of profitability and understanding of the sources of pressure on organizational performance. The threat of new entrants explains the risks new competitors may introduce to a company and barriers that can be established to control a working process (Hewitt 2019). The threat of substitution signalizes the existing products and services from other fields that serve as alternatives in response to quality or price changes. The bargaining power of buyers assesses the possibilities of clients to control prices and supply of services and products. The bargaining power of suppliers is similar to the previous force with the only distinction – the role is performed by suppliers. Competitor rivalry is the major driver for a company to develop its services, introduce products and improve performance and market attractiveness compared to competitors (Hewitt 2019). This model is advantageous for modern organizations due to the possibility to plan activities, define competitors and predict the relationships with clients and suppliers. Still, its one-sided (competitor) nature, the impossibility to be applied to all industries, and the constant presence of negative aspects are the disadvantages of this tool.

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Effective Combinations

Each tool mentioned in this project has its strong and weak sides, which provides managers with an opportunity to choose between them in regards to the existing environment and available resources. Many methods can be applied to the evaluation of the airline industry. A combination of SWOT and PESTLE is one of the best solutions for such business in the modern world. Davis (2017) recommended these two models as a possibility to thoroughly analyze external factors (PESTLE) and encourage planning efforts using the identification of strengths, weaknesses, opportunities, and threats. Expected benefits of this combination vary, depending on the chosen sources of information, access to statistical and annual reports, and abilities of employees to create objective and unbiased interpretations. SWOT-PESTLE assessment promotes the identification of new opportunities for improvements in political, economic, social, and other spheres. It is a chance to identify the background for a strategy where the role of employees and customers is properly defined. Finally, this combination does not require much time to be implemented because its components are easy and simple, and credible information is available.

Conclusion

In general, any modern organization has to understand the details of several assessment tools. SWOT, PESTLE, Porter’s Five Forces, and the McKinsey 7-S framework are not the only models for analysis. Still, in the majority of cases, managers prefer these frameworks to understand their threats and opportunities and discover how to use their strengths or hide their weaknesses. There are many external factors like economy, politics, society, or law that determine the environment where a company exists. Therefore, company assessment turns out to be an obligatory activity to improve performance and help employees discover their skills. The combination of SWOT and PESTLE is a common decision for many organizations, and this choice is approved by the fact that much credible information has to be analyzed.

Reference List

Davis, S 2017, ‘How leaders can adapt to an environment of change’, Forbes, Web.

Gökdeniz, I, Kartal, C & Kömürcü, K 2017, ‘Strategic assessment based on 7S McKinsey model for a business by using analytic network process (ANP)’, International Journal of Academic Research in Business and Social Sciences, vol. 7, no. 6, pp. 342-353.

Hatta, IH, Riskarini & Ichwani, T 2018, ‘SME business development strategy: SWOT and EFE-EFI analysis’, Journal of Applied Management, vol. 16, no. 3, pp. 537-543.

Hewitt, E 2019, Technology strategy patterns: architecture as strategy, O’Reilly Media, Sebastopol, CA.

Rastogi, N & Trivedi, MK 2016, ‘PESTLE technique – a tool to identify external risks in construction projects’, International Research Journal of Engineering and Technology, vol. 3, no. 1, pp. 384-388.

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StudyCorgi. (2021, July 18). How to Use Company Assessment Tools. Retrieved from https://studycorgi.com/how-to-use-company-assessment-tools/

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StudyCorgi. 2021. "How to Use Company Assessment Tools." July 18, 2021. https://studycorgi.com/how-to-use-company-assessment-tools/.

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StudyCorgi. (2021) 'How to Use Company Assessment Tools'. 18 July.

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