3.1 - Objectives and Strategy Flashcards
Objectives
Statements of specific outcomes that are to be achieved
Hierarchy of business objectives
- Individual
- Team
- Functional
- Corporate
- Mission
Corporate objectives
Objectives that relate to the business as a whole
Purpose of corporate objectives
- Provide strategic focus
- Measure performance of the firm as a whole
- Inform decision making
Functional objectives
Objectives set for each key business function and are designed to ensure corporate objectives are achieved
External influences on corporate objectives and decisions
- Short termism
- Economic environment
- Competitors
- Social and technological change
- Political and legal environment
Ansoff’s matrix
Marketing planning model that helps a business determine its product and market strategy
Features of Ansoff’s matrix
- Market penetration
- Product development
- Market development
- Diversification
Market penetration
When a business aims to sell existing products into existing markets
Advantages of market penetration
- Uses existing products and services, so the risk is relatively lower compared to new product development
- Increased market share can result in economies of scale
- Penetrating the market can improve a company’s competitive advantage
Disadvantages of market penetration
- Aggressive pricing strategies can lead to price wars, damaging long-term profitability
- Market may become saturated, making further growth more difficult
- More businesses may enter the market, intensifying competition
Product development
When a business aims to sell new products into existing markets
Advantages of product development
- Developing new or improved products can help a business gain a competitive advantage
- Offering innovative products can help retain existing customers and attract new ones
- Unique products can help the business differentiate themselves in a crowded market.
Disadvantages of product development
- Product development can be expensive, requiring significant investment in research, design and marketing
- No guarantee that a new product will be successful and the business may face financial losses
- Developing a new product often takes time, delaying potential revenue generation
Market development
When a business aims to sell existing products into new markets
Advantages of market development
- Allows businesses to expand their customer base and increase sales without creating new products
- Reduces reliance on a single market, spreading the business risk across multiple markets
- Brand can become more widely known in different markets, improving overall brand equity
Disadvantages of market development
- Expanding into new markets often requires substantial investment in marketing, distribution and logistics
- When entering international markets, businesses may face cultural differences, legal regulations and political challenges
- New market might already be saturated, making it difficult to gain traction or achieve a competitive advantage
Diversification
When a business aims to sell new products into new markets
Advantages of diversification
- Operating in different industries or markets, a company can reduce its dependence on a single market or product, spreading its risk
- Allows businesses to exploit new opportunities and respond to market changes
- Entering new markets or product areas provides additional revenue streams
Disadvantages of diversification
- Entering a new market or creating a new product involves significant costs for research, development, marketing and production
- Diversification into unfamiliar markets can create operational hurdles and risk failure due to cultural differences, market dynamics and a lack of experience
- Expanding into new areas may divert attention from the company’s core operations and could lead to inefficiency
Features of Porter’s strategy matrix
- Low cost
- Differentiation
Competitive advantage
An advantage over competitors gained by offering consumers greater value, either through lower prices or providing greater benefits and service that justifies a higher price
Low cost strategy
Objective of becoming the lowest cost operator, this typically involves production on a large scale enabling the business to exploit economies of scale
Features of a low cost operator
- High levels of productivity and efficiency
- High capacity utilisation
- Use of bargaining power to negotiate lower prices from suppliers
- Lean production methods and culture
Differentiation strategy
Aims to offer a product that is distinctively different from the competition, with the customer valuing that differentiation
Ways for a business to achieve differentiation
- Superior product quality
- Branding
- Wide distribution
- Sustained promotion
Boston matrix
Tool used by business to analyse their product portfolio and make strategic decisions based on market growth and market share
Features of the Boston matrix
- Dog (low market share and low market growth)
- Question mark (low market share and high market growth
- Cash cow (high market share and low market growth)
- Star (high market share and high market growth)
Kay’s distinctive capabilities
The strengths that give a business a sustainable competitive advantage over rivals
Features of Kay’s distinctive capabilities
- Architecture (strong relationships with employers, suppliers and customers)
- Innovation (ability to develop new products, services or processes ahead of competitors)
- Reputation (business’ brand image and customer perception)
SWOT analysis
Helps a business assess its competitive strength and the nature of its external environment
Features of SWOT analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
Porter’s five forces model
Framework used to analyse the level of competition within an industry, helping businesses assess their competitive position and develop strategies to improve profitability
Features of Porter’s five forces model
- Threat of new entrants
- Threat of substitute products
- Bargaining power of suppliers
- Bargaining power of customers
- Intensity of rivalry within the industry
Factors determining the intensity of rivalry within the industry
- Number of competitors in the market
- Market size and growth prospects
- Product differentiation and brand loyalty
- Barriers to entry and exit
