3.1.2 - Theories of Corporate Strategy

Question 1

What is Ansoff’s Matrix?

Answer 1

Tool for businesses with an objective of growth

Question 2

What is Ansoff’s Matrix used for?

Answer 2

Used to identify an appropriate corporate strategy and identify the level of risk associated with the chosen strategy

Question 3

What strategy is existing markets and existing products?

Answer 3

Market Penetration Strategy

Question 4

What is Market Penetration Strategy?
(Def, Ex, Pros, Cons)

Answer 4

Boost sales of current products in current market
1. Increased promotion
2. Build brand image
3. Pricing
4. Improving customer loyalty

PROS
- Low risk
- Low investment

CONS
- Limited growth material
- Vulnerable if not innovative

Question 5

What is Market Development Strategy?
(Def, Ex, Pros, Cons)

Answer 5

Enter a new market with existing products to increase sales
1. Heavy promotion
2. Penetration pricing to enter new markets

PROS
- Potential for large growth
- No expensive product development

CONS
- Limited consumer understanding of needs
- Competing against established businesses

Question 6

What is Product Development Strategy?
(Def, Ex, Pros, Cons)

Answer 6

Developing new products for existing consumers
1. Market research
2. Invest in R&D

PROS
- Familiar with customers
- Can respond to customer needs

CONS
- Takes time
- Could be expensive

Question 7

What is Diversification?
(Def, Ex, Pros, Cons)

Answer 7

New products to new customers in a new market
1. Needs considerable financial resources and economics of scope
2. Merger or takeover

PROS
- Spreads risk by engaging in different markets

CONS
- Extremely high risk
- Costly
- No reputation or expertise in a new market

Question 8

What strategy is existing markets and new products?

Answer 8

Product Development

Question 9

What strategy is new markets and existing products?

Answer 9

Market Development

Question 10

What strategy is new markets and new products?

Answer 10

Diversification

Question 11

What is Porter’s strategies?

Answer 11

Identifies a range of strategies a business might adopt considering
- Its source of competitive advantage and its scope of the market

Question 12

What are his 3 strategies and the middle?

Answer 12

1. Differentiation
2. Cost Leadership
3. Focus
4. Stuck in the middle

Question 13

What is differentiation and pros/cons?

Answer 13

Offering a unique product

PROS
- Brand can stand out from competitors
- Adds value so can increase price

CONS
- Other businesses may copy the strategy

Question 14

What is cost leadership and pros/cons?

Answer 14

Advantages by being the lowest cost operator

PROS
- Can maintain selling price
- Lower price can gain market share

CONS
- Most businesses don’t compete directly on cost

Question 16

What is Focus and pros/cons?

Answer 16

Focusing on a specific group of customers (niche)

PROS
- Easier to target a narrow sector
- Better understanding of customers

CONS
- Needs loyalty so may not be enough customers

Question 17

What are distinctive capabilities?

Answer 17

When a business has a particular strength that is very difficult for competitors to copy

Question 18

What are 3 distinctive capabilities and explanation?

Answer 18

1. Innovation – Ability to create new and unique products
2. Architecture – Links to synergy between the business and their customers, suppliers
3. Reputation - Business may develop an excellent reputation for quality

Question 19

What is strategic decision making?

Answer 19

Involves medium- to long-term planning to achieve corporate and functional objectives and establishes the actions that the business intends to take to achieve its goals

Question 20

What does strategic decisions making have an impact on?

Answer 20

Business’s human, financial and production resources