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A-LEVEL Business Paper 2 > 3.1.2 Theories of Corporate Strategy > Flashcards

3.1.2 Theories of Corporate Strategy Flashcards

1
Q

What does a successful corporate strategy help provide?

A
  • It helps provide a business with a competitve advantage
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2
Q

What does an effective corporate strategy provide?

A
  • Requires careful consideration of a range of internal factors & the external environment in which a business operates
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3
Q

What are the internal and external factors within a corporate strategy?

A
  • Internal Factors include the human and capital resources avaliable
  • External Factors include the economic and political environment.
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4
Q

What are the two strategic models used to develop a corporate strategy?

A
  • Ansoffs Matrix
  • Porters strategic matrix
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5
Q

What is Ansoffs Matrix?

A
  • Ansoffs Matrix is a tool for business with a growth objective
  • It is used to identify an approprite corporate strategy and identify the level of risk associated with the chosen strategy
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6
Q

What elements is Ansoff’s matrix broken down into?

A
  • The market- existing and new markets
  • The product- exisitng and new products
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7
Q

What are the 4 strategies within Ansoff’s Matrix?

A
  • Market Penetration
  • Market Development
  • Product Development
  • Diversification
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8
Q

What is market penetration?

A
  • Involves selling more products to existing customers by encouraging:
  • More regular use of the product
  • Increased usage of the product
  • Brand loyalty of customers

The least risky strategy to achieve growth

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9
Q

What are the pros and cons of market penetration?

A

Pros:
- 4P’s can increase marketing
- Promotes awareness- Influence- Loyalty so all of this can help to therefore increase sales & AAR lead to greater market share

  • Done at a lower cost than the other strategies as investment is not needed to research & develop a new product or investigate the needs of a new market.
  • Business knows their product & market well & is comfortable w their needs
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10
Q

What is market development?

A
  • Involves finding and exploiting new market opportunities for existing products by:
  • Entering new markets abroad
  • Repositioning the products by selling to different customer profiles (selling to other businesses as well as other customers)
  • Seeking complementary locations e.g. M&S food has achieved significant growth since teaming up w fuel retailers such as BP
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11
Q

What are the pros & cons of market development?

A

Pros:
- No development cost for the product
- New people to sell to = increased sales
- Market may not have competition/ be saturated, your product may be new into the market

Cons:
- New market may have existing businesses that consumers already go to & have loyalty with
- May be really hard to get consumers to switch to your product
- If you go into new market w same product that you have & dont alter it for cultural differences it might not be successful

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12
Q

What is product development?

A
  • Involves selling new or improved products to existing customers by:
  • Developing new versions or upgrades of existing successful products
  • Redesigning packaging & aesthetic features
  • Relaunching heritage products at commercially convinient intervals

e.g. Cadbury relaunches Christmas-themed products each year, often with a subtle design change, to recapture the interest of customers

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13
Q

What are the Pros & Cons of product development?

A

Pros:
- Can develop competitive advantage- USP
- Create a product that competitors dont have
- Could also gain first mover advantage which could increase market share
- Less risk as knowns needs & wants of cutomers & have already established customer loyalty- consumers are more likely to buy product= more success

Cons:
- Customers may not like new product
- V costly to develop new product - millions could go into research & development & product could fail or could still have loads of competition

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14
Q

What is diversification?

A
  • Often involves targeting new customers with entirely new or redeveloped products
  • The most risky growth strategy

e.g. tesco launching a range of financial products including current accounts and credit cards

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15
Q

What are the pros and cons of diversification?

A

Pros:
- Very useful when current market is saturated & you have exhausted all other options
- If you have a strong brand rep people would be likely to buy your products
Cons:
- Biggest risk as you have to invest in developing a new product
- R&D costs & also needs to research a whole new market
- But if successful could be most rewarding

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16
Q

What is Porters Generic Strategic Matrix?

A

Idenitfy’s a range of strategies a business might adopt considering:
- It’s source of competitive advantage (cost or differentiation)
- The scope of the market in which it operates (mass or niche)

17
Q

What did Porter argue with these strategies?

A
  • Failing to adopt one of these strategies risks a business being stuck in the middle and unable to compete successfully with rivals in the market
18
Q

What are Porters Strategies?

A
  • Cost Leadership
  • Differentiation
  • Focus - (cost& differentiation)
19
Q

What is cost leadership?

A
  • Be the most cost competitive business in a large market

Competing to try and have the lowest price

20
Q

What is differentiation?

A
  • Be distinctive - stand out on:
  • quality
  • innovation
  • brand identity
  • customer service
21
Q

What should businesses operating in a mass market do?

A
  • They should adopt either a cost leadership or differentiation strategy, depending on what it is that makes them stand out from their competitors
  • Businesses that have a significant cost advantage over competitors should exploit this as much as possbile to achieve success- cost leadrship
  • Businesses that are unable to operate as the most competitive on cost should adopt a strategy of differentiation.
22
Q

What should a business that operates in a Niche market do?

A
  • Should adopt a focus strategy that closely meets the needs of its specific group of customers
  • A cost focus involves being the lowest cost competitor within the market niche
  • A differentiation focus involves offering specialised products within the niche market
23
Q

What is the aim of portfolio analysis?

A
  • Involves business carrying out a detailed evaluation of its full range of products
  • & the rate of growth within the market where each product is sold
24
Q

What is the Boston Matrix?

A
  • A portfolio analysis tool
  • Considers the relative market share of a firms products
  • & the rate of growth within the market where each product is sold.
25
Q

What are the two axis on the Boston Matrix?

A
  • Market growth (left)
  • Relative market share (top)
26
Q

What are the 4 components that make up the boston matrix?

A
  • Stars
  • Question Mark
  • Cash Cows
  • Dogs
27
Q

What are star products?

A
  • Sold in high growth markets
  • Have a high level of market share
  • Require on going investment to maintain market position

If managed well could become cash cows
Market penetration strategy is likely to be appropriate

28
Q

What are cash cows?

A
  • Sold in lower growth markets
  • Have high market share
  • Generate more cash than they need to maintain their market position
  • & Can be used to fund the development of other products in the portfolio

Businesses may seek new markets for this if relatively risk free

29
Q

What are question marks?

A
  • Sold in high growth markets
  • Have relatively low market share
  • Require significant investment if they are to improve their market share & become stars
  • Risk that QM’s may become dogs when market growth rates slow
30
Q

What are dog products?

A
  • Sold in low growth markets
  • Have relatively low market share
  • Have little potential for future growth & should be divested so finance & effort can be invested into other products
31
Q

What is a distinctive capability and how do people achieve a competitive advantage through these?

A
  • Distinctive Capability- When a business has a strength that is very difficult for other competitors to copy
32
Q

What are some examples of distinctive capabilities?

A
  • Operational skills & Expertise within the business
  • Relationships & networks established in & around the business
  • Reputation & Image of the business
  • Innovation & the ability to change
33
Q

What is strategic decision making?

A
  • Establishes the actions that the business intends to take to achieve its goals
  • Also shows the impact on human, financial & production resources

A-LEVEL Business Paper 2 (33 decks)

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