3.1.2 Theories of corporate strategy Flashcards
Whats corporate strategy?
The overall scope and direction of a business
Ansoffs matrix
Tool for comparing the level of risk with different growth strategies
Involves:
- Market penetration
- New product development
- Market development
- Diversification
Market penetration
Trying to increase your market share in an existing market
Works well in growth markets, not saturated ones
Least risky
New product development
Selling new products in existing markets
Good when the market has good growth potential
The business has: High market share, strong ARE&D and a good competitive advantage
Market development
Existing products to new markets
Can be done through repositioning
Business focuses on a different segment of the market
Needs good market research
May involve new promotions or different channels of distribution EG; e-commerce
Diversification
New products to new markets
Highly risky strategy
New markets that the business has no experience of
Evaluation of Ansoff’s Matrix
- Fails to show market development and diversification require a significant change in day to day workings of the business
- Oversimplifies options for growth
- isn’t a dynamic tool
+ Requires managers to think about potential risks
+ Useful for small or medium-sized businesses
Porters strategies to gain advantage
- Cost leadership
- Differentiation
- Focus
Cost Leadership
Calls for the lowest cost of production for a given level of quality
Good for big firms with large and efficient facilities
Differentiation
Requires a product with a unique attribute which customers value
Believe its better than rival products
Risks include imitation by competitors
Focus
Concentrates on niche markets
Either minimising costs or showing differentiation
Target markets with specific needs
Usually has loyal customers making it hard to compete
