10 - Strategic choices

Question 1

What is required to be carried out prior to the development of strategy?

Answer 1

Understanding of the organisation as it stands now through research and development activities
(such as research into business environment and competition)

Question 2

2 variables to manipulate when looking at strategic direction

Answer 2

Products/services

Customers (markets)

Question 3

Ansoff’s product/market grid - explain/draw diagram

Answer 3

• Products/services on top (existing on left column, new on right column)
• Markets on left (existing on top row, new on bottom row)
• Top left = market penetration
• Top right = product development
• Bottom left = market development
• Bottom right = diversification

Question 4

Ansoff’s product/market grid - what does it capture?

Answer 4

That there are two variables an org can manipulate when moving to future - products/services and customers

Question 5

Why does Ansoff’s product market grid no longer have lines separating quadrants?

Answer 5

4 different aspects are more malleable than boxed lines indicates

Question 6

Ansoff product/market grid - market penetration

Answer 6

• Growth through increase of market share in current product/market mix

Question 7

2 forces restricting growth through market penetration (product/market grid)

Answer 7

• Retaliation from competitors
• Legal restrictions on monopolistic dominance

Question 8

Ansoff product/market grid - product development

Answer 8

Using the knowledge of the existing customer base and markets to provide different, evolved or complementary products

Question 9

Ansoff product/market grid - market development

Answer 9

Taking existing products or services into new markets

Question 10

What is often required prior to market development (product/market grid)

Answer 10

Significant pre-emptive market and consumer research, possibly some product development to tailor existing product

Question 11

Ansoff product/market grid - 4 types of diversification

Answer 11

Horizontal diversification

Vertical diversification

Concentric diversification

Conglomerate diversification

Question 12

Ansoff product/market grid - diversification - horizontal diversification

Answer 12

New product marketed to customers of competitors

Question 13

Ansoff product/market grid - diversification - vertical diversification

Answer 13

Org acquires new supplier or customer to broaden depth and breadth of commercial control

Question 14

Ansoff product/market grid - diversification - concentric diversification

Answer 14

New closely related product introduced by an org, often times to support sale of existing product and vice versa

Question 15

Ansoff product/market grid - diversification - conglomerate diversification

Answer 15

Completely new and unrelated products introduced by org wishing to take advantage of its markets

Question 16

Why is diversification the highest risk option within Ansoff’s product/market grid?

Answer 16

It requires significant research and market intelligence in terms of both aspect of development

Question 17

What is a strategic business unit (SBU)?

Answer 17

A grouping of certain areas/subsidiaries within one organisation, often due to location or customer/supplier focus

Question 18

Classic definition of an SBU

Answer 18

A fully functional unit of a business with its own vision and direction, operating as a separate unit but often still reliant upon the organisational centre for ultimate direction

Question 19

2 benefits of creating formal SBUs

Answer 19

• Focused and aligned strategy
• Agility to react quickly in decision-making

Question 20

Porter - 3 fundamental methods to achieve competitive advantage

Answer 20

• Lower costs
• Differentiation
• Focus - particular area of market (age, wealth, geography) or broad scope

Question 21

What is meant by being a cost leader in an industry/sector?

Answer 21

Becoming the lowest cost organisation while maintaining quality - there can only be one!

Question 22

4 key cost drivers to take into consideration when aiming to be cost leader

Answer 22

Input costs - need to minimise cost of labour and raw materials

Economies of scale - reduction of fixed costs through greater quantities

Experience - cumulative experience and knowledge of people can ensure efficiency

Design - efficiency can be built into the core design of product/process

Question 23

3 risks of cost leadership - causes of failure

Answer 23

• Restricted and insufficient supply base that is shared by all competitors
• Easy imitation of strategy by competitors
• Detriment in quality due to cheaper supplies

Question 24

Financial benefit of product differentiation

Answer 24

Charging a price premium

Question 25

Garvin - 8 dimensions of differentiation quality

Answer 25

Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived quality

Question 26

5 natural dangers of pursuing strategy focused on differentiation

Answer 26

- Too much differentiation causing confusion - Too high a price premium - Easy imitation by competitors - Differing perceptions of the meaning of quality between buyers and sellers - Striving for a uniqueness that fails to bring sufficient added value

Question 27

What is the aim of strategic focus? (competitive advantage)

Answer 27

To achieve competitive advantage by giving a better service to target customers than which is achieved by competitors who are aiming for a broader customer base

Question 28

What should management focus on after deciding how the org is to gain or maintain competitive advantage?

Answer 28

How to design and implement the strategy to achieve the required objectives

Question 29

Differentiate between business level and corporate level

Answer 29

Business level refers to single business operating within defined boundary Corporate level refers to a number of businesses operating within a wider boundary

Question 30

What does portfolio analysis involve?

Answer 30

The grouping together of a range of similarly performing products (or businesses) to help decision-makers consider where best to build their organisation or business

Question 31

BCG (Boston consulting group) approach to portfolio analysis - draw or explain diagram

Answer 31

- Market share on top (High on left column, Low on right column) - Market growth on left High on top row, Low on bottom row) - Top left = STARS - cash neutral - Top right = PROBLEM CHILD - cash user - Bottom left = CASH COWS - cash generator - Bottom right = DOGS - cash neutral * cash generator/user is in relation to that org

Question 32

Benefit of BCG (Boston consulting group) model

Answer 32

Plot and monitor movement of different products between four statements, and to analyse how this aligns with the product lifestyle

Question 33

Lynch - 3 difficulties with BCG matrix

Answer 33

- Defining market growth and understating what is perceived as high or low - Defining market itself - Understanding what is meant by relative market share

Question 34

4 potential drivers of internationalisation as a business strategy

Answer 34

Market drivers - potential customer reach of expansion Cost drivers - reduction of operational costs Government drivers - potential gov support to enable international operation Competition drivers - development and maintenance of competitive advantage may require an organisation to develop its markets. if it is dealing with international customers, then it is likely that it will need to also develop an international strategy. *note on competition drivers - not sure if this makes sense but is from textbook and used in model answer.