3.8 Choosing Strategic Direction Flashcards
Strategy
Long term plan of action to meet business goals
Strategic direction and what influences it?
-Route business takes in order to meet corporate objectives
- Informed by an assessment of the business’ SWOT analysis
What does strategic direction influence?
The markets a business will choose to compete in and what products to offer
What does Ansoff’s Matrix do?
Helps a business determine it’s product and market strategy measure the degree risk and potential for reward.
How does Ansoff’s matrix look?
Market penetration Product Dev
Market Dev Diversifiation
Market penetration and it’s characteristics
Selling more of existing products to existing markets
low risk, limited reward
approaches to market penetration (3) and possible dangers (3)
Approaches
- Extension strategies
- Encouraging more buying from customers
- gain share from competitors
Dangers
- relatively short term
-risk of cannibalism
-could be highly saturated market
market development and its characteristics
existing product, new market
risky due to lack of knowledge of new customers
approaches to market development (3) and possible dangers (3)
approaches
-enter international markets
- change promotional tactics
- new distrubution methods e.g e-commerce
dangers
- product may not be desired or accepted
-business may not understand market well
- Alienation of current customers
Product development and its characterstics
new products, existing markets
risk due to High R&D costs, not knowing the product and how competitors will react
approaches to product development (3) and possible dangers (3)
approaches
- improve on existing products
- make complementary products
- innovate new products
dangers
- risk of cannibalisation
- may shorten life cycle of existing products
- damage to brand and it’s image
Diversification and its characteristics
new products, new markets
riskiest because everything is unknown, highest potential for reward
approaches to diversification (2) and possible dangers (3)
approaches
- acquisition of new business
- r&d into new products and markets
dangers
-brand name may be diluted
- cultural differences may exist
-high investments
Strategic Positioning and what it is based on?
Where the business wants to be in the market, relative to its competitors
based on consumer perception
What does Porter’s Strategic Matrix do?
Marketing strategies a business can adopt in an attempt to achieve competitive advantage
what are the four factors of porters strategic matrix?
- Cost leadership
- focused cost leadership
- differentiation
- focused differentiation
Low cost advantage
- if the market all has similar selling prices, the lowest cost operator will enjoy higher profits and higher market share
- Large scale/batch buying = economies of scale
what markets are suitable for low cost strategy? (2)
- where branding is relatively unimportant
- little product differentiation
what is differentiation according to Porter?
Having a good or service that stands out from the competition
Ways to achieve differentiation (4)
- Sustained promotion
- Superior Product quality (features, benefits etc)
- Branding ( strong customer recognition)
- Wide distribution
what does Bowmans strategic clock shows?
8 competitive positions based on price and perceived added value
what are the 8 competitive positions on Bowmans strategic clock
- low price, low added value
- low price
- Hybrid
- Differentiation
- Focused Differentiation
- Risky high margins
- Monopoly pricing
- Loss of market share pricing
what is low price, low added value
literally in the name…
think POUNDLAND
what is low price on Bowmans strategic clock
low price with moderate perceived value
ie Travelodge
