Book House The Lead

On Management Consulting Tools: SWOT Analysis, PESTLE Analysis, and Porter’s Five Forces Analysis

  • The book “The Mind of A Consultant” by Sandeep K. Krishnan gives readers an insider’s view of the management consulting world.


  • This book opens into the world of Management Consulting through the story of Samanta Thomas, a character based on countless excellent consultants, through whom we get a peek inside the very mind of a consultant and their journey.


  • The objective of the book is to help business professionals in various stages of their careers to hone the key skills that can propel them into success, and this book will help consultants and aspiring consultants understand the various key skills that make for a successful consultant and professional.


  • Read an excerpt from the book below.


Over the years Samanta spent at Pinnacle, she used multiple management tools and practices to help her build structure and solve client problems. Some of these tools and practices are well known and have stood the test of time. A few of these include:

SWOT Analysis

When new clients come up with a problem, consultants often conduct a SWOT analysis. A SWOT analysis looks at the ‘Strengths’ and ‘Weaknesses’ inside the firm, and the ‘Opportunities’ and ‘Threats’ outside of it. The SWOT analysis is an important step for strategy formulation.

It helps to:

1. Identify one’s strengths and weaknesses

2. Leverage opportunities aligned with one’s interests

3. Plan for threats in future

4. Make efforts to reduce the impact of one’s weaknesses

An interesting client case Samanta worked on involved a mobile-phone provider. The company had a market share of almost 18 per cent and was growing at a rapid pace. The lowcost-high-features strategy was working well. The company had hired Pinnacle to help it expand its growth potential. One of the weaknesses Samanta pointed out was the product innovation and design team slowing down and causing the new models to take more time getting to the market. Unfortunately, the client team didn’t take the warning to address the issue seriously. As a result, three Chinese companies entered the market and came up with multiple brands at a cheaper price with comparable or better features. In just eighteen months, the client experienced a 50 per cent drop in market share.

Samanta also suggested leveraging one of the e-commerce platforms for a broader reach to potential buyers. The client dragged its feet in implementing the idea, since it already had a strong retail engine. However, new brands entering the market capitalized on the available technology and used multiple e-commerce platforms to conduct exclusive launches. Their reach broadened dramatically within a short period of time.

Often, a SWOT analysis done with strong data to back it up can help companies make wise decisions for the future.

PESTLE Analysis

The PESTLE analysis is a helpful tool in understanding five key elements of the external environment and how they impact an industry or a firm. These are Political, Economical, Technological, Legal and Environmental. The PESTLE analysis can work hand in hand with SWOT, since it helps identify the Opportunities and Threats an organization could face.

Samanta remembered a time when she used the PESTLE analysis to help an automobile manufacturer in South Korea. The Korean firm wanted a risk analysis of its operations over the next five years. This took place during the early stages of ride-sharing services such as Uber. Various analyses indicated that global trends could have a major influence on the firm’s performance over the next five to ten years. Samanta’s team recommended that the firm start preparing for change based on five trends that were directly predictive:

1. Increasingly, millennials were spending less on owning cars.

2. Ride-sharing services were growing, most likely in conjunction with millennials’ preference.

3. The Internet of Things and other technology were set to have an impact on high-end cars in the near future.

4. The push for sustainable and environment-conscious technologies would mean stricter emission requirements, resulting in the need for electric/eco-friendly fuel-source usage.

5. The increase in the number of female drivers could result in a need for different design choices.

These trends opened up many opportunities for the firm. For example, the ride-sharing services would result in a larger market of drivers becoming car owners. The firm needed models in place that would fit its needs and budgets. Electric and hybrid technologies needed to be squeezed for more efficiency, which would open up a bigger market for the firm. It could think ahead of the curve on the impact of the Internet of Things (IoT) on cars and be pioneers in that area. However, if it took no action at all based on these trends, it could mean crippled growth in the medium-term.

Porter’s Five Forces Analysis

Porter’s Five Forces analysis is one of the most well-known models of industry analysis. It helps assess the competition in the industry.

Samanta had worked hard to gain specialized knowledge in market-entry strategies. The Five Forces model was one of her go-to tools for assessing the feasibility of entering a new market. The five forces that shape an industry are:

1. Competition and rivalry in the industry

2. Threat of substitutes

3. Threat of new entrants

4. Bargaining power of suppliers

5. Bargaining power of customers

One of the most interesting clients Samanta worked with using this tool was a South East Asian airline attempting to enter the Indian market. The airline industry is considered one of the most unattractive industries in the world to enter. Competition is high—including price and service competition—substitutes exist, there are constantly new entrant possibilities, there are fewer suppliers in certain areas, which causes the suppliers to demand more control, and the customers themselves are very demanding. However, after doing a thorough analysis, Samanta recommended that the airline enter the low-cost market in the country. The main reasons included the growing number of air travellers, increased government investment in infrastructure and the flattening of fuel costs over time. An established player could make good use of these market dynamics as they applied their expertise to a new venture.

Excerpted with permission from The Mind of A Consultant: Leveraging a Consulting Mindset for Professional Success, Sandeep K. Krishnan, Penguin India. Read more about the book here and buy it here.

 

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