3.1.2 Theories of corporate strategy (Ansoff Matrix Inc)

Question 1

Corporate strategy

Answer 1

A unique plan that is long term in nature, designed with an objective to gain a competitive advantage over other market participants while delivering stakeholders promises

Question 2

Ansoff’s Matrix

Answer 2

A tool that businesses use to help assess the degree of risk associated within certain strategies

Question 3

Ansoff’s matrix allows a business to consider a number of what?

Answer 3

Factors that will determine it’s corporate strategy

Question 4

What 4 factors does Ansoff’s matrix consider?

LOI
T
G
LOR

Answer 4

1) -Level of investment in existing and new products
2) -The exploitation of different Markets
3) -Growth strategy for the business
4) -The level of risk the business is willing to accept

Question 5

Risk becomes greater when?

Answer 5

Risk becomes greater the further a firm stays away from its core of existing products , consumers and markets

Question 6

How many possible strategies did Ansoff reveal that a business can adopt?

Answer 6

4

Question 7

What are the 4 strategies Ansoff said a business can adopt?

Answer 7

Market penetration
Product development
Market development
Diversification

Question 8

What is market penetration?

Answer 8

It’s when you hope to achieve growth and increase sales in existing markets with existing products

Question 9

5 ways to achieve growth in existing markets

Answer 9

1) -Increase brand loyalties for customers so they use substitutes less frequently
2) -Encourage consumers to use products more frequently -e.g eat breakfast cereal at night
3) -Encourage consumers to consume for of product-e.g produce mini sized crips instead of standard
4) -Improve promotion and marketing
5) - Lower prices - so consumers are attracted to ur product

Question 10

What is product development?

Answer 10

Product development is concerned with marketing new/modified products in existing markets

Question 11

Where is this an appropriate strategy to adopt?

Answer 11

Where the product is short, or where trends or tech change quickly

Question 12

What is product development associated with?

Answer 12

Product innovation + continuous development

Question 13

Product development requires significant investment in where and why?

Answer 13

In research and development as there is high level of risk in developing new products

Question 14

Does promotion have to be required for product development?

Answer 14

Yes, heavy investment in promotion may be required as customers may not know the new product.

Question 15

4 Advantages of Product development

Answer 15

1) -You keep pace with changing times
2) -Seize consumer opportunities as their taste + preferences evolve
3) -Provides opportunities to attract + keep talented employees as you build an operation where creative individuals have the chance to be involved in innovation
4) Customers will be excited to try your product-there will be a buzz

Question 16

4 Disadvantages of Product development

Answer 16

1) -Riskiness-New products come with uncertainty
2) Extra cost-Can be expensive e.g Marketing,R+D,More operation processes
3) Evolving market-Risk that consumer taste + preferences may change as you’re developing your product
4) -Competition-Competitors are working just as hard as you to develop their products + gain customers

Question 17

What is Market development?

Answer 17

It involves the marketing of existing products in new markets e.g different geographic locations

Question 18

What does Market development rely on?

Answer 18

Relies on on the business knowing the market that you are entering in their habits, tastes, and needs

Question 19

4 advantages of Market development?

Answer 19

1) -Expansion of base of customers
2) -Can increase revenue as you have more customers
3) -Allows a business/firm to grow
4) -Gain edge over rivals/competitors

Question 20

3 disadvantages of Market development

Answer 20

1) -Requires capital investment in expansion
2) -Risky-don’t know if new market will give a profit or loss
3) -Time consuming-Need to R+D for consumer tastes, preferences + habits

Question 21

What is diversification?

Answer 21

It’s the development of new products for new markets

Question 22

Diversification enables a business to move away from the reliance off what?

Answer 22

The reliance upon existing markets and products

Question 23

Diversification allows a business to what?

Answer 23

Allows a business to spread risk which increase safety.
E.g if one product in one market fails/faces difficulty then a successful product in another market may prevent the business from facing problems.

Question 24

4 Advantages of Diversification

Answer 24

1) -Increased sales and revenue
2) -Brand recognition
3) -Less reliance in one market/product-spreads risk

4) - increased customer base

Question 25

3 Disadvantages of Diversification

Answer 25

1) -Risky-entering a market you are not familiar with
2) -Costly e.g Marketing,R+D,Time consuming
3) -Can confuse customers-Confuse/convince customers that you are not a leader in your market anymore

Question 26

Market penetration advantages

Answer 26

1) -More Market Share as you provide a competitive advantage
2) -Increased sales + Revenue
3) Improved product positioning?
4) Improved image?

Question 27

Market penetration disadvantages

Answer 27

1) -Faltering brand image-you are reducing price.This may look bad from customers POV
2) Creates undue pressure on departments within the business e.g Manufactures must be able to lower costs and Producers must be efficient in processes.