3.8.1 Strategic direction: choosing which markets to compete in and what products to offer Flashcards
what does strategic direction show?
Strategic direction sets out which markets a business will compete in and what products it will offer.
what are strategic choices ?
Strategic choices involve deciding the direction in which a business should move and the methods by which it should pursue this plan.
what is strategic direction informed by?
- the business’s SWOT
- Corporate objectives
- Core competences
- Competitive environment
- Leaders‘ attitudes to risk
- Local, national and global economic environment
what is Ansoff’s Matrix?
A marketing planning model that helps a business determine its product and market strategy.
what is Ansoff’s Matrix used for?
It can be used to analyse the strategic direction of a business
Draw out Ansoff’s Matrix
double check the word document
what is market penetration?
A growth strategy where a business aims to sell existing products into existing markets
what are the benefits of market penetration?
- aim?
- how?
- Aim is to increase market share
- By selling more of existing products to the same target customers
- Get existing customers to buy more
- Widen the range of existing products
Evaluate market penetration
- businesses focuses on markets and products it knows well
- can exploit insights on what customers want (and competitors)
- unlikely to need significant new market research
- but will the strategy allow the business to achieve its growth objective
what is product development?
A growth strategy where a business aims to introduce new products into existing markets
what is the benefit of product development?
The business may respond to changes in customer requirements or anticipate future changes
when is product development used for?
It is used when a business wants to broaden their product portfolio, and if sales of existing products is in decline.
what are some examples of product development strategies?
- Brand extensions are common examples of product development strategies
- Technological innovation provides significant opportunities for product development strategies
what are some examples of market penetration strategies?
- Rapid organic growth in the UK targeting the same customer base with new stores
- Effective use of e-commerce to encourage existing customers to buy more pizza!
Evaluate product development
- A strategy that often plays to the strengths of an established business
- Strong emphasis on effective market research (insights into customer needs) and successful innovation
- A great way of exploiting the existing customer base
- Being first to market is usually important
what is market development?
A growth strategy where the business seeks to sell its existing products into new markets
what are some examples of some approaches to market development?
- New geographical markets; e.g. exporting to emerging markets
- New distribution channels (e.g. using e-commerce and mail order)
- Different pricing policies to attract new customers in different segments
what are some examples of market development strategies?
- Starbucks expansion into China is a classic example of a successful market development strategy
- Tesco’s market development strategy to enter the US grocery supermarket sector was a disaster for shareholders
Evaluate market development
- A logical strategy where existing markets are saturated or in decline
- Often more risky than product development – particularly expansion into international markets
- Existing products may not suite new markets: depends on customer needs
what is diversification?
The growth strategy where a business markets new products in new markets
Evaluate diversification
+ Inherently risky strategy
- No direct experience of the product or market
- Few economies of scale (initially)
- However, if successful, overall risk of the business is spread
What are some approaches to diversification?
- Innovation & R&D: develop new solutions
- Acquire an existing business in the market
- Extend an existing brand into the new market