3.1.2 Corporate strategy Flashcards
Corporate strategy
Corporate Strategy is medium to long term actions a business takes to achieve its aims
Market penetration
When a business sells more of its existing products to its existing customers
Product development
When a business launches a new product to its existing customers
Market development
When a business sells its existing products into a new market
Diversification
When a business sells new products in new markets
Method 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
Aims of market penetration
to increase market share by selling more existing products to the same target customers
Pros of market penetration
Business focuses on markets and products it knows well, so its low risk
Can exploit insights on what customers want (and competitors)
Unlikely to need significant new market research
Cons of market penetration
But will the strategy allow the business to achieve its growth objectives?
Still some risk to this strategy
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. Unilever have PG Tips tea and Walls ice cream
- Brand extension – new products are added under an existing brand e.g. Dove soap, deodorant, bubble bath, moisuriser, shampoo, conditioner etc.
Pros of product development
- A strategy that often plays to the strengths of an established business where brand loyalty is already established – it is relatively easy to persuade customers to try your new product
- Market research techniques can be used to gain insights into your existing customers needs
Cons of product development
- Can be expensive to research, develop and launch a new product
- May not be first to market, which could reduce the effectiveness of the launch
- If customers do not like the new product it can affect the brand image
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
Pros of market development
- An effective strategy where existing markets are saturated or in decline (push factors) or where there is huge potential in emerging markets (pull factors)
- Increases global reach and brand awareness when targeting footloose customers
Cons of market development
- Often more risky than product development – particularly expansion 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
