3.1.2 Theories of corporate strategy Flashcards
describe corporate strategy
Corporate strategy is the course or route that a business has chosen to follow in order to achieve its corporate objectives
This will in part be informed by an assessment of the business’ internal strengths and weaknesses and external opportunities and threats
Corporate strategy will influence which markets a business chooses to compete in and which products to offer
This will be influenced by:
Corporate objectives Distinctive capabilities Competitive environment Leaders’ attitudes to risk Local, national and global economic environment
describe Igor Ansoff’s Matrix
Ansoff looked at the degree of risk and potential for reward from different strategic options
He recognised that as a business moved away from what it knows best i.e. its current product and current market the degree of risk increased
However trying to just sell more of an existing product in an existing market is unlikely to bring about substantial growth opportunities
describe Igor Ansoff’s Matrix 4 potential strategies
Market penetration
Market development
New product development
Diversification
describe Ansoff’s Matrix – market penetration
Trying to sell more of an existing product to the existing market
Low risk strategy but limited potential reward
describe Ansoff’s Matrix – market penetration
possible approaches
Gain market share from competitors
Encourage customers to buy/consume more
Changes to the marketing mix
Extension strategies
describe Ansoff’s Matrix – market penetration
potential dangers
Competitors’ reactions
Relatively short term only
Market may already be saturated
Cannibalisation
describe Ansoff’s Matrix – product development
Selling new and better products to existing customers
Risk comes from not knowing the products, high R&D costs and competitors’ reactions
Ansoff’s Matrix – product development
possible approaches
Launch substantially improved version of existing products
Introduce complementary products
New product innovations
Ansoff’s Matrix – product development
possible dangers
Risk of cannibalisation
May shorten product life cycle of existing products
Damage to brand
describe Ansoff’s Matrix - diversification
Selling new products to new markets
High risk strategy as 2 elements are unknown - the market and the product
High risk but also greatest potential for reward
Ansoff’s Matrix - diversification
possible approaches
R&D into new products and market research into new markets
Acquisitions of other businesses
Ansoff’s Matrix - diversification
possible dangers
Relies on heavy investment
Cultural differences may exist
brand name may be diluted
National and global ; global contexts of market penetration
A business already operating internationally has wider potential
Existence in a segment of a market may help market penetration e.g. a foothold in Europe
National aND global contexts of product development
May tap into expertise for R&D
Identify country leading in product development
National AND ; global contexts of market development
Identify rising star countries
Easier if new areas have similar expectations and cultures
National and global contexts of diversification
Continues to be highest risk strategy especially in an international context
Michael Porter’s Strategic Matrix(generic strategy
A matrix that categorises the marketing strategies a business can adopt to try and achieve a competitive advantage
Analyses low cost v. differentiation
Porter’s basic premise is to be one thing or the other and not stuck in the middle
He emphasises the danger of the middle ground, almost as if it is a “no mans’ land” where there is little protection
He believes that businesses must put their flag in one camp and remain clearly focused on this
Marketing messages must be clear and non contradictory
describe porters generic strategy - low cost
Porter states that a strategy of low cost can be successful in either a mass or niche market
He refers to this as cost leadership, in the mass market, and focused cost leadership, in a niche market
Cost leadership means being able to offer your good or service at the lowest cost possible
Price is a key element in the marketing mix
Both operational and financial objectives must focus on cost minimisation
A business that operates with the lowest cost can charge the lowest prices but does not necessarily have to
describe porters generic strategy - differentiation
Porter states that a strategy of differentiation can be successful in either a mass or niche market
He refers to this as differentiation, in the mass market, and focused differentiation, in a niche market
Differentiation means being able to offer a good or service that stands out from the competition
Product – has to appear better than the competition e.g. USP or patents
Promotion – create desire, exclusivity, brand loyalty
Operational objectives will focus on R&D and innovation
define product portfolio analysis
looks at the range of products and brands that a business has under its control
This type of analysis can help a business identify where every single one of its products is positioned in the market
aims of portfolio analysis include
Reach a wide audience through product and market development Spread risk Objective of growth Identify and fill gaps in the market Economies of scale
Achieving competitive advantage through distinctive capabilities
Combined expertise, knowledge and experience of the leaders and founders of a business
Collective learning and technical expertise
Leads to a competitive advantage
Unique characteristics to a business
Architecture – the relationship with key stakeholders
Reputation – based on customer experience
Innovation – new products and process
Difficult to imitate by others
Effect of strategic and tactical decisions on human resources
Workforce planning
Training
Flexible workforce
Organisational design
Leadership
Motivation
Entrepreneur to leader
Effect of strategic and tactical decisions on physical resources
Productivity
Efficiency
Capacity utilisation
Stock control
Quality management
Effect of strategic and tactical decisions on financial resources
Internal and external finance
Liquidity
Profitability
Budgets
what are porters 5 forces
Threat of new entrants to a market
Bargaining power of suppliers
Bargaining power of customers ("buyers")
Threat of substitute products
Degree of competitive rivalry
