29th March exam Flashcards
corporate strategy definition
it is a medium to long term action a business takes to achieve its aims
what are the different parts of ansoff’s matrix?
Ansoff introduced 4 main growth strategies for businesses which have a varying amount of risk tied to them.
Market penetration- bringing your existing product to your existing market, this is the safest option
Product development- the process of introducing a new product to your existing market
Market development- introducing your current product to a new market
Diversification- introducing a new product to a new market, this is the riskiest strategy
what are the 4 parts of porter’s strategic matrix?
1) Cost leadership (lower cost in broad market, e.g. ford)
- this is done by being the lowest cost producer and they aim for cost advantages through EOS or implementing superior working practises
2) Differentiation (differentiation in broad market, e.g. apple)
- they aim to create unique products that if done successfully they will be able to charge a premium price and build loyalty to its brand
3) Cost focus (lower cost in narrow market, e.g. Poundshops)
- achieve a cost advantage in niche segments
4) Differentiation focus (differentiation in narrow market, e.g. Bentley)
- seeks to create highly customised/unique products in niche segments
he assumes that differentiation will mean higher prices
explain porter’s strategic matrix
‘Strategy is about making choices, trade-offs, it’s about deliberately choosing to be different’
- porter argues that a business should adopt a competitive strategy which is intended to achieve some form of competitive advantage for the business
- The main challenge for business strategy is to find a way of achieving a sustainable competitive advantage over the other competing products and firms in a market, e.g. through offering lower prices or giving them greater benefits that justifies higher prices
- You either choose low cost (cost efficiency, lean production) or differentiation through standing out (ethics) and whether to go for a broad (mass) or narrow (niche) market
what is Taylor’s motivation
theory?
- His theory is associated with manufacturing and factory work
- He believed that people only work for money and so emphasised the need for managers to maximise efficiency to generate a higher profit and so the workers will be able to be payed a higher wage
- Workers don’t enjoy work and so they should be closely supervised
- High division of labour is needed
- Workers should be paid by piece rate so they are encouraged to work hard and maximise productivity
What is Mayo’s motivation theory?
- An experiment he undertook showed that employees are motivated by relational factors rather than monetary rewards
- Workers must believe that the managers are interested in them, this is known as the ‘hawthorne effect’
- He concluded the main things needed for motivation are better communication, greater participation from managers and more teamwork
- Involving workers in decisions means they will be more motivated
What is Maslow’s motivation theory?
- He believed that there is a hierarchy of needs where people have different methods of motivations depending on where they are on the pyramid, when employees earn enough to satisfy their needs they have a new method of motivation
- The levels of hierarchy go from physical needs to safety needs to social needs to esteem needs to self-actualisation
- In very low-paid jobs, money may be a motivator but once money needs have been met health, safety and job security become more important
What is Herzberg’s motivation theory?
- He asked employees for 5 changes that would increase motivation and for 5 changes that would decrease motivation
- Things that increased motivation included recognition for achievement, work itself, responsibility, advancements and achievement whilst things that decreased motivation included working conditions, interpersonal relations, salary, supervision, company policy and administration
- He believed a business has to provide the hygiene factors otherwise employees will be dissatisfied, these increase pay, working conditions and social status
- He introduced the method of job enrichment which was a way of motivating staff. This was down by varying jobs to make it more varied and challenging.
what is Handy’s theory?
- Handy implied that there are 4 types of cultures within a business: power, role, task and person
what is a power culture?
- Power cultures involved an autocratic leadership style where power is concentrated at the centre where it allows for quick decision making and only a few people have decision making power
what is a role culture?
- Role cultures links to having a tall structure and long chain of command whereby employees have clearly defined roles within a formal structure and high control, it has a autocratic/paternalistic style with power deriving from someone’s role in the business
what is a task culture?
- Task cultures involve a paternalistic/democratic style where they operate a matrix organisation where teams are formed to solve problems/work on projects, power comes from expertise within a project and has a very dynamic culture where organisational structure changes depending on the project, flat structure
what is a person culture?
- Person culture has a democratic style and is when individual employees believe themselves to be superior to the business and employees are highly skilled with professional qualifications and training and experience, here they have a laissez-faire approach and it is seen in partnerships and in the law and accountancy industry
explain the Boston matrix
It is a product portfolio strategy
- It helps a business to identify where to invest as well as identifying gaps in the market
- dogs are low growth and low market share, get rid of them
- stars, high market share in high growth
- question marks, low share in high growth
- cash cows, high share in low growth
in terms of using it for markets, it can be used through high/low growth and high/low wealth
what are the methods of market penetration?
- Advertise/promote the product
- Use sales promotion techniques such as coupons, competition and BOGOF
- Reduce price, or use promotional prices
- Expand the channels of distribution, e.g. direct to customers as well as through retailers and wholesalers
- Open more stores
- Sign up more retailers to stock your product
what are the pros and cons of market penetration?
Pros:
- Business focuses on markets and products it knows well and so low risk
- Can exploit insights on what customers want (and competitors)
- Unlikely to need significant new market research
Cons:
- But will the strategy allow the business to achieve its growth objectives?
- Still some risk to this strategy
what are the methods of product development?
- Product extension strategies- modification/improvement to an existing product to increase sales after saturation
- Umbrella brands/brand proliferation- when a business launches independent sub-brands under an overall umbrella brand, e.g. PG Tips tea and Wallis ice cream
- Brand extension- new products are added under an existing brand, e.g. dove soap, bubble bath
what are the pros and cons of product development?
pros:
- Add to brand perception
- Growth strategy
- Competitive advantage
- Can be low risk if you are an established business with brand loyalty, easy to persuade customers
Cons:
- Market saturation may not leave a gap in the market, may not be successful
- Can be expensive to research, develop and launch a new product
- May not be first to the market, which could reduce the effectiveness of the launch
- If customers do not like the new product it can affect the brand image
what are the methods of market development?
- Re-branding an existing product to appeal to a new customer, e.g. grab-and-go soup, to healthy option aimed at a different market segment
- Selling into a new country by setting up retail outlets, e.g. M&S opening stores in India
- Selling into a new country by using a local distribution partner or licensing agreement, e.g. Coca Cola in India
what are the pros and cons of market development?
Pros:
- Effective where existing market is saturated or in decline (push factor) or where there is huge potential in emerging markets (pull factors)
- Increases global reach and brand awareness when targeting footloose customers
Cons:
- Often more risky, particularly into international markets as external environment and culture may be very different
- Existing products may not suit new markets, depends on customer needs, e.g. ethnocentric vs geocentric approach
what are the methods of diversification?
- Innovation and R&D: develop new solutions, e.g. amazon moving into cloud computing
- Acquire an existing business in a new market through conglomerate integration, e.g. the virgin group buying Telewest
- Extend an existing brand into the new market, e.g. Tesco Fresh ‘n’ easy stores in the US
what are the pros and cons of diversification?
Pros:
- High growth potential
- If done successfully, reduces risk of one product or market failing (risk bearing economies of scale)
Cons:
- Inherently risky as they have no direct experience of the product or market
- May not have economies of scale initially
definition of a competitive advantage
it is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and services that justifies higher prices
what type of strategies are ansoff and porter’s?
strategies for growth (ansoff) competitive strategies (porter)
definition of a distinctive capability with examples according to John kay
A distinctive capability is a form of competitive advantage that is sustainable as it is difficult for other firms to replicate this,
John Kay says there are three types of distinctive capability:
1) architecture (strength of relationships within an organisation between employees but also with suppliers)
2) reputation (building strong brand image)
3) innovation (developing new products or processes)
why is it important to assess the types of products you have in your portfolio? yes and no
yes
- can help businesses understand which products and markets are growing
- can help businesses direct their investment towards areas that are growing, using revenue from cash cows to fund that investment
no
- can be difficult to separate different markets, e.g. running shoes from fashion shoes
- assumes that market share and market growth data is available
- it is not the only way to develop a corporate strategy- ansoff’s and porter’s matrix can also be used
what are the different strategies for the Boston matrix?
Dog- get rid of them
Cash cow- get their revenue in order to invest in other products, lower investment
Question mark- you would need to invest a lot into it in order to increase market share, could become a star
Star- nurture them, invest in them to develop them, promote them using marketing mix, loyalty schemes, extension strategies
