3.8 Choosing Strategic Direction Flashcards
What is strategic direction?
Strategic direction is the general path of business takes, based on its missions and achieving its objectives
What are the key factors in setting a new direction?
Key factors in setting a new direction include the choices of which markets to compete in, what products to offer and which direction the business should grow in
What five factors influence the choice of market?
Type of product Level of competition External factors Internal resources Attitude to risk
What are five factors that influence products?
Research and development Competitors Technology Finances available External factors
What is Ansoff’s matrix used for?
Ansoff’s matrix is a tool for comparing the level of risk involved with the different growth strategies and it helps managers to decide on a direction for strategic growth
What are the two axes labelled as on the Ansoff matrix?
Products (existing and new) and markets (existing and new)
What are the four quadrants of the Ansoff matrix?
Market penetration
Product development
Market development
Diversification
What is market penetration? (Ansoff matrix)
Market penetration means trying to increase your market share in your existing market
What is product development? (Ansoff matrix)
Product development is selling new products in your existing markets
What is market development? (Ansoff matrix)
Market development is selling existing products to new markets
What is diversification?  (Ansoff matrix)
Diversification means selling new products to new markets. This is the most risky strategy
What is strategic positioning?
Strategic positioning means choosing how to compete with the other businesses in the market. A business says positioning strategy is part of the marketing strategy – the choice influences the general direction the business develops in and affects all areas of the business
What are the two types of competitive advantage that Porter identified?
Cost advantage and differentiation advantage
What is cost advantage?
A business can get a competitive advantage by selling a similar product at a lower cost than its rivals
What is differentiation advantage?
Selling better products at the same or a slightly higher price compared to competitors creates a competitive advantage. Offering a product that consumers see as different from competitors products can make consumers think it’s better
What are the three generic strategies that Porter suggested to gain advantage?
Cost leadership
Differentiation
Focus
What does Porter’s strategic matrix help decide on?
Porter strategic matrix helps decide on a competitive strategy
What does Bowmans strategic clock show?
Pricing and differentiation strategies
What does position 1 in the Bowmans strategic clock correspond to?
Position 1 corresponds to a strategy of low-priced products with low added value – this will only be successful if the product sell in a high volume
What does position 2 on Bowman’s strategic clock correspond to?
Position 2 corresponds to the cost leadership section of Porter’s strategic matrix
What does position 3 on Bowman’s strategic clock represent?
Position three is the hybrid area – modest prices with a relatively high perceived added value
What do positions 4 and 5 on Bowman’s strategic clock correspond to?
Position 4 corresponds to the differentiation section of porters strategic matrix and position five corresponds to the differentiation and focus section
What do positions 6 to 8 (the grey area) represent on Bowman’s strategic clock?
Positions 6 to 8 combine a high price with fairly low perceived added value. Unless a company has a monopoly, if it adopts these positioning strategies it will ultimately fail
