3.1.2 Theories of corporate strategy Flashcards
what are the four segments of Ansoff’s matrix?
market penetration
market development
product development
diversification
what is market penetration?
a growth strategy where a business aims to sell existing products into existing markets
what is market development?
a growth strategy where the business seeks to sell existing products to new markets
what is product development?
a growth strategy where the business seeks to sell new products to an existing market
what is diversification?
a growth strategy where a business seeks to sell new products to a new market
what are the approaches for market penetration?
-maintain/increase market share of current products
(increase sales through branding/advertising)
(encourage products to be bought more often through loyalty schemes)
-restructure a market by driving out competitors
what are the risks of market penetration?
-market may already be saturated
-relatively short term
-cannibalisation (products put out too soon, kills sales for another product)
what are approaches for market development?
-new country
-new dimensions
(going from single size to family size)
-new distribution channels
(e-commerce vs retail)
-different pricing policies
(attract new customers so new
what are evaluations of market development?
-logical idea where existing markets are saturated or in decline
-usually higher risk than product development
(particularly expansion into international markets)
-existing products may not suit new markets
(depends on customer needs)
what are the risks of market development?
-alienation of current customers
-may not be understood
-may not be accepted in a new market
what are the approaches of product development?
-launch improved versions of existing products
-introduce complementary products
-new innovations
what are the risks of product development?
-cannibalisation
-may shorten the product life cycle of existing products
-damage to brand (high R&D costs)
what is needed for product development to be successful?
-first to market
-R&D and innovation
-detailed insights to customer needs
(and how they change)
what are the approaches of diversification?
-R&D is needed for new products/markets
-acquisition of other businesses
what are the risks of diversification?
-relies on heavy investment
-may be cultural differences
-brand name can be diluted
(however it can strengthen trust with customers)
what are the uses of Ansoff’s matrix?
-businesses can identify all their current products/services and their markets
-considers future options for expansion
(also considers risk)
-new markets/marketing strategies can be identified
what is Porter’s strategic matrix?
a matrix that categorises the marketing strategies a business can adopt to try and achieve a competitive advantage
(analyses low cost vs differentiation)
what is Porter’s basic premise?
to be one thing or the other, not stuck in the middle
what are the approaches for Porter’s strategic matrix?
-cost leadership
-differentiation
-focus
what is cost leadership?
making products at the lowest cost
(can include outsourcing/lean management)
(lowest cost, mass market)
what is the importance of cost leadership?
if selling prices are broadly similar, the lowest producer will enjoy the highest profit
what are the attributes cost leadership?
-high levels of productivity/capacity utilisation
-lean production methods (JIT)
-effective use of technology in the production process
what are suitable markets for a cost leadership strategy?
-standard product
-little product development
-branding relatively unimportant
what is cost focus?
lowest cost, niche market
what is the importance of cost focus?
-business seeks lower cost advantage, in just one or a small number of segments
-basic product (similar to high priced products and market leader)
what is differentiation?
product/service is unique and the USP adds value to a product
(highest differentiation, mass market)
what is the importance of differentiation?
-business targets much larger markets and aims to achieve competitive advantage across the whole of an industry
-involves selecting one or more criteria used by buyers in a market
-not easy, requires substantial/sustained investment
what is the importance differentiation focus?
-business aims to differentiate within one or a small number of target market segments
-needs: market segmentation and high quality
what is focus?
a product/service will have a specific niche and high costs are passed onto customers
(no substitutes)
(divided into cost focus and differentiation focus)
what is cost focus?
lowest cost, niche market
what is differentiation focus?
highest differentiation, niche market
what is the boston matrix?
a marketing planning tool that helps managers plan a product portfolio
(focuses on a product’s market share/growth)
what is a star product?
-usually in the growth phase, so have high market share and growth
-production should be consistent
what is a cash cow product?
-mature products, have customer loyalty
-produced until sales fall
what are question mark products?
-have high market growth but low market share
(recent product?)
-should be invested
what are dog products?
-in a decline phase
(declining sales in a declining market)
-should be removed from sale
what are the uses of a boston matrix?
-good to review existing product line to decide future strategy and budgets
-analyse future opportunities or problems with their product portfolio
-can draw conclusions from the analysis
(transfer surplus from cash cow to others and close down/ sell off the dogs)
what is kay’s distinctive capabilities theory?
argued that three capabilities can create added value and give a business competitive advantage
what are kay’s distinctive capabilities?
-architecture (relationship with shareholders)
-reputation (customer experience)
-innovation
what does thinking strategically mean?
-long term direction of the business
-what businesses do to meet aims & objectives
-proactive decision making
-forward thinking, future planning
what does thinking tactically mean?
-short/medium term decisions
-how the business will implement its strategy
-reactive to competitor’s actions
-present day thinking (what is happening now that needs dealing with)
