3.1.2 Theories of corporate strategy Flashcards
triangle
mission statement
corporate obj
functional obj
strategy
corporate strategy
medium to long term actions a business takes to achieve its aims (HOW business achieves aims)
market penetration
sells more existing product to existing customer/market
growth strategy
aim: increase market share, sell more existing product to same target customers
market development
sells existing product in new market
growth strategy
business seeks to sell existing product in new mkt
product development
bus launch new product to existing customers
aims to introduce new products in existing markets
growth strategy
diversification
sell new product new market
growth strategy
successful diversification = reduce risk = spread risk across different places
business markets new products in new markets
ansoff’s matrix
existing market:& existing product MP
existing market & new product PD
new market & existing product MD
new market & new product D
risk levels on Ansoffs matrix
least: market penetration (bus already know both customer and product and experience in area)
product development & marker development (more unknowns lack of knowledge and/or experience of product or market
most:
diversification (no knowledge and/or experience of either products/ or market - mistakes are easy to make = leading to failure
risk levels on Ansoffs matrix
least: market penetration (bus already know both customer and product and experience in area)
product development & marker development (more unknowns lack of knowledge and/or experience of product or market
most:
diversification (no knowledge and/or experience of either products/ or market - mistakes are easy to make = leading to failure
methods of market penetration
- advertise/promote product
- sales promotion techniques (coupons, competitions, BOGOFF)
- decrease price, use promotional prices
- expand channels of distribution e.g. direct to customers & through retailers/wholesalers
- open more stores
- sign up more retailers to stock product
ADV & DIS of market penetration
ADV:
business focus on market and product known = reduce risk
exploit insights on what customers want (& competitors)
unlikely to need significant new market research
DIS:
will strategy allow business to achieve growth objs?
still some risk to strategy
methods of product development
- product extension strategies (modification/ improvements to existing product/ increase sales after saturation)
- umbrella brands/ brand proliferation (business launches independent sub-brands under overall umbrella brand e.g. Unilever = PG tips and walls ice cream
- brand extension (new products added under an existing brand e.g. Dove
ADV & DIS of product development
ADV:
often plays to strengths of established business = brand loyalty already established = easy to persuade customers to try products
market research techniques = gain insight into existing customer needs
DIS:
expensive (research, develop, launch)
may not be 1st to market = decrease effectiveness of launch
customers dont like new product = affect brand image
methods of market development
- re-branding existing product = appeal new customer e.g. grab and go soup = aim at different mkt segment
- sell into new country setting up retail outlets e.g. M&S opening in India
- sell into new country = use local distribution partner or licensing agreement e.g, Coca Cola India or integrating with another business or through joint venture
ADV&DIS of market development
ADV:
effective strategy where existing mkts are saturated or in decline (push factors) or where huge potential in emerging mkts (pull factors)
increases global reach & brand awareness when targeting footloose customers
DIS:
more risky than PD = expansion into international = external env/cultures = different
existing product = not suit new market = depend on customer needs e.g. ethnocentric vs geocentric
methods of diversification
- innovation & R&D = develop new solutions e.g. Amazon - cloud computing
- acquire existing business in new market through conglomerate integration e.g. Virgin group buying Telewest
- extend existing brand into new market e.g. Tesco Fresh n easy stores in US
ADV&DIS of diversification
ADV:
high growth potential
done successfully = reduce risk of 1 product/market failing (risk bearing EOS)
DIS:
inherently risk strategy
no direct experience of product/mkt
have few EOS (initially)
food retailing market Boston matrix
cash cow = UK
rising star = China/vietnam
problem child = Libya
dog= democratic republic of Congo
range of countries as = spread risk, alternative revenue stream
porter’s generic strategies
find a way of competitive adv (2 strategies = differentiation, low cost) low cost = EOS
- cost leadership (selling prices = similar low cost = profit, low price = gain MS)
(successful; profit increase by cost decrease av prices) - cost focus (not viable)
- differentiation leadership
- differentiation focus (niche mkt)
competitive adv
adv over competitors gained by offering consumers greater value (either lower price/greater benefits/service justifying higher price)
cost leadership strategy suited for
- standard product
- little product differentiation
- branding unimportant
ways to achieve low cost
- bargaining power = negotiate low price
- LEAN
- efficient, high productivity
- high CU
- large scale = economies
- distribution access wide/important
ways to achieve differentiation
product distinctively different from competitors (customers value)
- branding (loyal)
- wide distribution (major channels)
- superior product quality (features)
- sustained promotion (advertise/sponsor)
product differentiation
business uses to make product stand out from competing products
marketing
design
quality
point of differentiation cant be copied
lose competitive adv = customer loyalty = fail strategy
mass vs niche market.
mass: mkt for goods on large scale for significant no of consumers
niche: segment of larger mkt defined by own unique needs/preference/identity = different from larger mkt
distinctive capability
form of competitive advantage that is sustainable as it is difficult for other firms to replicate this
3 types of distinctive capability
John Kay foundation of corporate success (1995)
- architecture (strength of relationships within organisation between employees, also with suppliers)
- reputation (build strong brand image)
- innovation (develop new products/processes)
strategy
long term
refers to achieving an overall goal or target of a business
e. g. ansoffs, porters, Boston
e. g. mergers/takeovers/joint ventures
tactic
shorter term actions
help achieve strategy
e. g. existing distribution channel = reach new mkt
e. g. method of promotion
e. g. which SOF
e. g. whether to drop price
e. g. which retailers to sell through
functional areas
- human (recruit, re-skilling, training, redundancy, restructure)
- physical/operations (purchase new equip/machines, location, outsource)
- financial (costs, cash flow, new SOF)
