3.1.2 - Theories of corporate strategy Flashcards
What is corporate strategy
• The overall scope and direction of a business and the way in which its various business operations work together to achieve particular goals
who was igor ansoff
• Igor Ansoff was a business professor, who back in the 1950’s, had a theory relating to how a company looking for growth can choose their marketing strategy – all of which can be expressed in a diagram.
What would be Existing product or service , AND Existing Market
Market Penetration (Low risk)
Increase sales to the existing market, or penetrate it more deeply - sell more to the same customers – encourage them to order more often – loyalty schemes e.g. Boots Advantage card
What is Existing product or service AND New market
Market Development (moderate risk)
Existing product or service sold to new market e.g. Colouring books sold to adults (see next slide)
What is New product or service AND Existing Market
Product or Service Development (moderate risk)
New product or service developed for existing market: means R&D of new products to sell to your existing customers e.g. Herbal essences new shampoo
What is New product or service AND New Market
Diversification (high risk)
New product or service sold in new markets (new to the company):
How can Ansoffs Matrix help Identify new markets
A business can identify all their current products or services and their markets, then consider their future options for expansion using the matrix shown, considering opportunities, associated costs, benefits and risks
Ansoff’s matrix helps to identify potential new markets or marketing strategies for a business
What are the limitations of Ansoffs Matrix
• The Ansoff’s matrix has some limitations;
• It only shows part of the picture
• It oversimplifies the market
• Large MNCs may need thousands of sub options and strategies
• Any organisation using Ansoff’s matrix as an analysis tool to help decide on a company strategy should also conduct a SWOT and a PESTLE analysis to get a better idea of the whole picture, to see the issues from more than one angle
What is Porters Strategic Matrix
• 1979 Michael Porter suggested that there were 3 generic business strategies that would get competitive advantage. These were:
• Cost leadership; making products at the lowest cost, may include outsourcing, lean management, standard no frills low cost products
• Differentiation; the product or service is unique and the USP adds value to the product
• Focus; the product or service will serve a very small specific niche, high costs are passed on to customers, no close substitutes (Divided into cost focus and differentiation focus)
• He also said that if a business failed to select one of these strategies that they would be in danger and “stuck in the middle”
What is Broad Target AND Lower Cost in Porters Startegic Matrix
Cost Leadership
• Useful in highly competitive markets where there are homogenous products
• Customers may frequently switch supplier to gain best value
• New entrants to the market will use low process to build a customer base
What is Broad Target AND Differentiation in Porters Startegic Matrix
Differentiation
• Useful strategy in highly technological markets where there are rapidly changing and evolving features of products and services
• Where customers needs are very diverse
• Where the competitors in the market are all following a similar differentiation strategy
What is Narrow Target AND Lower Cost in Porters Startegic Matrix
Cost Focus
• Useful strategy when the business wants to offer very low prices to a small market segment
• Niche marketing but at very low cost
What is Narrow Target AND Differentiation in Porters Startegic Matrix
Differentiation Focus
• Useful strategy when the business wants to offer products and services to a small market segment
• Products or services will be differentiated and aimed at a niche market
What are the uses of Porters Strategic Matrix
• Those in support of Porter’s Strategic matrix (generic strategies) say that it establishes a clear direction for the business to go in
• Identifies when a business may be in trouble e.g. Woolworths and BHS both got “stuck in the middle”
What are the limitations of porters strategic matrix
• This is only a tool for a business to look at their strategy and as such has some limitations;
• Not as relevant in very dynamic markets
• May not be useful in a crisis situation • Over simplifies the market structure
• Can be possible for a store or business to offer a range of products to a range of customers and not get stuck in the middle e.g. Debenhams
