3.1.2 Corporate strategy (Porters Strategic Matrix) Flashcards
What was Porters strategic matrix developed for?
Developed to identify the sources of competitive advantages that a business might achieve in a market
How many business strategies did Porter suggest that could be followed in order to gain a competitive advantage?
2
Competitive advantage meaning
An advantage over competitors gained by offering consumer greater value, either by means of lower pricers or by providing greater benefits and service that justifies higher prices
What was the two strategies to gain competitive advantage?
Differentiation and Low cost
What is meant and what is the aim with a low cost strategy?
Aim is to become lowest cost operator in a market or industry.
This typically involves production on a larger scale which enables the business to exploit economies of scale (Which therefore reduces unit costs)
2 Advantages of using low-cost strategy
1) If selling prices are similar in a market , the lowest-cost operator will enjoy the highest profits
2) Lowest cost operator can also offer the lowest prices (Therefore they gain more/most market share)
3 Suitable markets for a low-cost strategy
1) Where the product being produced is standard
2) Little product differentiation
3) Where branding in relatively unimportant
5 key features of businesses using a low cost strategy.
- high levels of productivity and efficiency
- high capacity utilisation -
- large scale production so economies of scales can be achieved
- Great negotiators- Demand lowest prices from suppliers
- Lean production methods + low cost culture
Differentiation strategy
When businesses aim to offer a product that is distinctively different from the competition
Why differentiate a product?
Because customers are willing to pay more that difference
3 ways in a business can differentiate a product/ service
1) -superior product quality (features ,durability, reliability)
2) -Branding (Strong customer recognition + desire ; offering brand loyalty)
3) Sustained promotion
