3.1.2 - Theories of Corporate Strategy Flashcards
What is Ansoff’s Matrix?
Tool for businesses with an objective of growth
What is Ansoff’s Matrix used for?
Used to identify an appropriate corporate strategy and identify the level of risk associated with the chosen strategy
What strategy is existing markets and existing products?
Market Penetration Strategy
What is Market Penetration Strategy?
(Def, Ex, Pros, Cons)
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
What is Market Development Strategy?
(Def, Ex, Pros, Cons)
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
What is Product Development Strategy?
(Def, Ex, Pros, Cons)
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
What is Diversification?
(Def, Ex, Pros, Cons)
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
What strategy is existing markets and new products?
Product Development
What strategy is new markets and existing products?
Market Development
What strategy is new markets and new products?
Diversification
What is Porter’s strategies?
Identifies a range of strategies a business might adopt considering
- Its source of competitive advantage and its scope of the market
What are his 3 strategies and the middle?
- Differentiation
- Cost Leadership
- Focus
- Stuck in the middle
What is differentiation and pros/cons?
Offering a unique product
PROS
- Brand can stand out from competitors
- Adds value so can increase price
CONS
- Other businesses may copy the strategy
What is cost leadership and pros/cons?
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