3.1.2 Theories of corporate objectives Flashcards
What is a corporate strategy?
A plan or policy developed to meet a company’s objectives which affect the overall direction of the business
Draw Ansoff’s Matrix
What is market penetration?
Marketing existing products in existing markets
What are 2 main objectives of market penetration?
- Maintain/ increase market share of current products
- Secure dominance of growth markets
- Increase usage by existing customers
- Restructure a mature market by driving out competitors
What is a positive of market penetration?
Doesn’t require much investment in new market research
How can a business achieve market penetration? (2)
- Increase brand loyalty
- Encourage more frequent use of product
What is diversification?
Marketing new products in new markets
What does diversification allow for?
Not relying on existing markets + products - risk spread
What is a positive of diversification?
If one product fails, a successful product in another market may prevent business overall facing problems
What is product development?
Marketing new products into existing markets
How can Ansoff’s matrix be used by businesses?
Helps them determine a product and market growth strategy
Draw Porter’s Strategic Matrix
How can businesses use Porter’s Strategic Matrix?
To identify the sources of competitive advantage a business might achieve in a market
Why might differentiation not be a guarantee of success?
Customers may not want to buy the differentiated product
What are the 2 forms of focus?
Cost focus
Differentiated focus
When does cost focus occur?
When businesses drive down its costs in the market segment to undercut the prices of competitors
What are 2 positives of Porter’s Strategic Matrix?
- Establishes a clear direction for the business to go in
- Identifies when a business may be in trouble
What are 2 negatives of Porter’s Strategic Matrix?
- Not as relevant in highly dynamic markets
- May not be useful in a crisis situation
Draw the Boston Matrix
How can the Boston Matrix help businesses?
Product portfolio tool which helps a business analyse their existing portfolio to decide which products should receive more/ less investment
What are stars (Boston matrix)?
- Market leaders
- Lots of sales
What are question marks (Boston matrix)?
- Sit in a growing market but have low market share
- Generally unprofitable
What are dogs (Boston matrix)?
- Low market share in low growth markets
- Kept as long as they continue to create cash
What are cash cows (Boston matrix)?
- In low growth markets e.g. mature
- High market share and profitability
Draw Kay’s model of distinctive capabilities
How can Kay’s model help businesses?
Helps them think about how they can stand out + beat competition
Explain reputation (Kay’s model)
- Powerful distinctive capability
- Not easy to develop
Explain innovation (Kay’s model)
- Helps companies stay ahead of competition
- Helps build brand loyalty
Explain architecture (Kay’s model)
- For architecture to become a distinctive capability, the structure of business needs to provide value to the business
What are strategic decisions?
Long term direction of business
What are tactical decisions?
Shorter term actions that help reach the strategy - how the business will implement its strategy
What 3 resources do strategic and tactical decisions affect?
HR
Physical
Financial
What is an example of a strategic decision that would affect physical resources?
Moving factory location to achieve long term objective of cost cutting + profit
What is an example of a tactical decision that would affect physical resources?
Moving factory layout to accommodate new product being manufactured
What is an example of a strategic decision that would affect human resources?
Hiring new staff as part of long term strategy to improve productivity
What is an example of a tactical decision that would affect human resources?
Having to hire new network manager because old one quit
What is an example of a strategic decision that would affect financial resources?
Issuing shares to raise capital to achieve long term objective of growth + expansion
What is an example of a tactical decision that would affect financial resources?
Agreeing an overdraft with the bank to cover a shortfall in a cashflow forecast
