3.1.2 Theories of corporate strategy Flashcards
What is a strategy?
long term and refers to achieving an overall goal or target of a business
What is Ansoff’s Matrix?
A matrix that shows that a business’ attempts to grow depending on whether its market/promotes new or existing products in a new or existing market.
What does Ansoff’s Matrix show?
It shows that a selected method is a series of suggested growth strategies which give direction to a business. It is essentially a marketing planning model that helps a business determine its product and market growth strategy.
What are the strategies in Ansoff’s Matrix?
1) Market penetration
2) Product development
3) Market development
4) diversification
What do businesses develop their corporate strategy around?
They base them off basic strategies shown in Ansoff’s Matrix and Porter’s Matrix. OR a business can go international
What is market penetration in Ansoff’s Matrix?
It is when a business focuses on selling existing products into an existing market.
What are the main objectives for market penetration in Ansoff’s Matrix?
1) maintain or increase market share
2) secure growing markets
3) restructure a mature market by eliminating competition
4) Increase usage by current customers
What is required for market penetration in Ansoff’s Matrix?
It requires small investments into research as its existing. Most of the investment should be put into developing marketing campaigns and advertising to deter competition and increase usage.
What are positives and negatives of market penetration in Ansoff’s Matrix?
+ fast growth, less risk, low costs, accounts for degree of competition
- missed opportunities, greater dependence, customers are harder to gain, degree of competition
What is market development in Ansoff’s Matrix?
Where businesses growth using existing products and sell them in new markets.
What are some methods of market development?
1) New geographic markets
2) New distribution channels (agent?)
3) New target market
Also could slightly alter products via glocalisation, price differently,
What are positives and negatives of market development in Ansoff’s Matrix?
+ new customers, increased revenue, first-mover advantadge, company growth in size (physically new locations?)
- riskier, higher costs, no demand?, existing competition
What is product development in Ansoff’s Matrix?
When businesses introduce new products into existing markets.
What is required for product development in Ansoff’s Matrix?
- large investments into R+D and innovation
- market research in customer demands
- being flexible to changes in the market
What are the positives and negatives of product development in Ansoff’s Matrix?
+ incentivises innovation, increased customer loyalty, seizes opportunity, modern product
- risky, extra costs, evolving markets, competition, staff aren’t motivated, reliant on existing brand loyalty
What is diversification in Ansoff’s Matrix?
When a business enters a new market with new unrelated products.
What is important about diversification in Ansoff’s Matrix?
it is the riskiest strategy of growth as the business is venturing into a market and developing a product with no experience. Therefore, it is important to assess al risks and what the possible outcomes are. (scenario planning, risk assessments…)
What are the different approaches to diversification?
Concentric = similar products to existing businesses
Horizontal = new unreleased products to existing consumers
Conglomerate (riskiest) = new products that are significantly unrelated.
What are the positives and negatives of diversification in Ansoff’s Matrix?
+ market share gains, first-mover advantadge, no competition, spread risk, gain synergies, shows risk taker entreprenuer, high return
- very risky, shift in business focus, unexpected costs, lack of expertise, over-extension, less motivation, Very dependent on the strength of the brand and loyalty.
