3.1.2 Theories of corporate strategy

Question 1

what are the four segments of Ansoff’s matrix?

Answer 1

market penetration
market development
product development
diversification

Question 2

what is market penetration?

Answer 2

a growth strategy where a business aims to sell existing products into existing markets

Question 3

what is market development?

Answer 3

a growth strategy where the business seeks to sell existing products to new markets

Question 4

what is product development?

Answer 4

a growth strategy where the business seeks to sell new products to an existing market

Question 5

what is diversification?

Answer 5

a growth strategy where a business seeks to sell new products to a new market

Question 6

what are the approaches for market penetration?

Answer 6

-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

Question 7

what are the risks of market penetration?

Answer 7

-market may already be saturated
-relatively short term
-cannibalisation (products put out too soon, kills sales for another product)

Question 8

what are approaches for market development?

Answer 8

-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

Question 9

what are evaluations of market development?

Answer 9

-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)

Question 10

what are the risks of market development?

Answer 10

-alienation of current customers
-may not be understood
-may not be accepted in a new market

Question 11

what are the approaches of product development?

Answer 11

-launch improved versions of existing products
-introduce complementary products
-new innovations

Question 12

what are the risks of product development?

Answer 12

-cannibalisation
-may shorten the product life cycle of existing products
-damage to brand (high R&D costs)

Question 13

what is needed for product development to be successful?

Answer 13

-first to market
-R&D and innovation
-detailed insights to customer needs
(and how they change)

Question 14

what are the approaches of diversification?

Answer 14

-R&D is needed for new products/markets
-acquisition of other businesses

Question 15

what are the risks of diversification?

Answer 15

-relies on heavy investment
-may be cultural differences
-brand name can be diluted
(however it can strengthen trust with customers)

Question 16

what are the uses of Ansoff’s matrix?

Answer 16

-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

Question 17

what is Porter’s strategic matrix?

Answer 17

a matrix that categorises the marketing strategies a business can adopt to try and achieve a competitive advantage
(analyses low cost vs differentiation)

Question 18

what is Porter’s basic premise?

Answer 18

to be one thing or the other, not stuck in the middle

Question 19

what are the approaches for Porter’s strategic matrix?

Answer 19

-cost leadership
-differentiation
-focus

Question 20

what is cost leadership?

Answer 20

making products at the lowest cost
(can include outsourcing/lean management)
(lowest cost, mass market)

Question 21

what is the importance of cost leadership?

Answer 21

if selling prices are broadly similar, the lowest producer will enjoy the highest profit

Question 22

what are the attributes cost leadership?

Answer 22

-high levels of productivity/capacity utilisation
-lean production methods (JIT)
-effective use of technology in the production process

Question 23

what are suitable markets for a cost leadership strategy?

Answer 23

-standard product
-little product development
-branding relatively unimportant

Question 24

what is cost focus?

Answer 24

lowest cost, niche market

Question 25

what is the importance of cost focus?

Answer 25

-business seeks lower cost advantage, in just one or a small number of segments -basic product (similar to high priced products and market leader)

Question 26

what is differentiation?

Answer 26

product/service is unique and the USP adds value to a product (highest differentiation, mass market)

Question 27

what is the importance of differentiation?

Answer 27

-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

Question 28

what is the importance differentiation focus?

Answer 28

-business aims to differentiate within one or a small number of target market segments -needs: market segmentation and high quality

Question 29

what is focus?

Answer 29

a product/service will have a specific niche and high costs are passed onto customers (no substitutes) (divided into cost focus and differentiation focus)

Question 30

what is cost focus?

Answer 30

lowest cost, niche market

Question 31

what is differentiation focus?

Answer 31

highest differentiation, niche market

Question 32

what is the boston matrix?

Answer 32

a marketing planning tool that helps managers plan a product portfolio (focuses on a product’s market share/growth)

Question 33

what is a star product?

Answer 33

-usually in the growth phase, so have high market share and growth -production should be consistent

Question 34

what is a cash cow product?

Answer 34

-mature products, have customer loyalty -produced until sales fall

Question 35

what are question mark products?

Answer 35

-have high market growth but low market share (recent product?) -should be invested

Question 36

what are dog products?

Answer 36

-in a decline phase (declining sales in a declining market) -should be removed from sale

Question 37

what are the uses of a boston matrix?

Answer 37

-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)

Question 38

what is kay’s distinctive capabilities theory?

Answer 38

argued that three capabilities can create added value and give a business competitive advantage

Question 39

what are kay’s distinctive capabilities?

Answer 39

-architecture (relationship with shareholders) -reputation (customer experience) -innovation

Question 40

what does thinking strategically mean?

Answer 40

-long term direction of the business -what businesses do to meet aims & objectives -proactive decision making -forward thinking, future planning

Question 41

what does thinking tactically mean?

Answer 41

-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)