3.1.2-Theories of corporate strategy Flashcards
Corporate Strategy
The long term plan to achieve the aims of the business
Ansoffs Matrix Grid- label axis and the contents of the 4 boxes
Product
Existing New
Existing Market Product
Penetration Development
New Market Diversification
Development
Uses of Ansoffs Matrix
Level of investment in existing and new products
The exploitation of different markets
The growth strategy for the business
The level of risk the business is willing to accept
Limitations of Ansoffs matrix
• It only shows part of the picture
• It oversimplifies the market
• Large MNCs may need thousands of sub options and strategies
Porters strategic matrix - Label
Focus - Cost/Differentiation
Cost Leadership
Differentiation
Porters 3 strategies to gain competitive advantage
• 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)
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
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
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
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
Uses of Porters Strategic Mix
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”
Limitations of Porters Strategic Mix
• Not as relevant in very dynamic markets
• May not be useful in a crisis situation
• Over simplifies the market structure
Kay’s Distinctive Market
He also argued that there were 3 distinctive capabilities (DC) that could create added value and give a business competitive advantage.
These were:
Architecture – relationships with employees, suppliers, customers •
Reputation – through the customer experience
Innovation – bringing inventions to market
Market Penetration
Achieve Growth in existing markets
E.g
-Increase brand loyalty
-Encourage customers to use product more regularly
-Encourage customers to use more of the product
Product Development
Market New or Modified products in existing markets e.g Apple IPhone
Requires significant investment in R&D
High Risk - 1 in 5 may be successful
