3.1.2 Theories of corporate strategy (Ansoff Matrix Inc) Flashcards
Corporate strategy
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
Ansoff’s Matrix
A tool that businesses use to help assess the degree of risk associated within certain strategies
Ansoff’s matrix allows a business to consider a number of what?
Factors that will determine it’s corporate strategy
What 4 factors does Ansoff’s matrix consider?
LOI
T
G
LOR
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
Risk becomes greater when?
Risk becomes greater the further a firm stays away from its core of existing products , consumers and markets
How many possible strategies did Ansoff reveal that a business can adopt?
4
What are the 4 strategies Ansoff said a business can adopt?
Market penetration
Product development
Market development
Diversification
What is market penetration?
It’s when you hope to achieve growth and increase sales in existing markets with existing products
5 ways to achieve growth in existing markets
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
What is product development?
Product development is concerned with marketing new/modified products in existing markets
Where is this an appropriate strategy to adopt?
Where the product is short, or where trends or tech change quickly
What is product development associated with?
Product innovation + continuous development
Product development requires significant investment in where and why?
In research and development as there is high level of risk in developing new products
Does promotion have to be required for product development?
Yes, heavy investment in promotion may be required as customers may not know the new product.
4 Advantages of Product development
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
4 Disadvantages of Product development
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
What is Market development?
It involves the marketing of existing products in new markets e.g different geographic locations
What does Market development rely on?
Relies on on the business knowing the market that you are entering in their habits, tastes, and needs
4 advantages of Market development?
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
3 disadvantages of Market development
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
What is diversification?
It’s the development of new products for new markets
Diversification enables a business to move away from the reliance off what?
The reliance upon existing markets and products
Diversification allows a business to what?
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.
4 Advantages of Diversification
1) -Increased sales and revenue
2) -Brand recognition
3) -Less reliance in one market/product-spreads risk
4) - increased customer base
3 Disadvantages of Diversification
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
Market penetration advantages
1) -More Market Share as you provide a competitive advantage
2) -Increased sales + Revenue
3) Improved product positioning?
4) Improved image?
Market penetration disadvantages
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.
