7: Corporate strategic options and their evaluation Flashcards
What is SWOT analysis?
analyse the business into strengths, weaknesses, opportunities and threats to see present position of business.
How are Strengths and Weaknesses identified in a SWOT analysis?
- Strengths and weaknesses are diagnosed by the internal analysis,
How are Opportunities and Threats identified in a SWOT analysis?
Through environmental (external) analysis
What is meant by ‘Matching’ in a SWOT diagram?
Aligning strengths with opportunities or weaknesses with threats to find strategic value.
What is ‘Conversion’ in a SWOT context?
Turning weaknesses into strengths or threats into opportunities.
What is the purpose of Weirich’s TOWS Matrix?
To turn SWOT insights into possible strategic options by matching elements in various combinations.
What strategy is used for Strengths + Opportunities in the TOWS Matrix?
Use strengths to capitalise on opportunities (short term).
What strategy is used for Strengths + Threats in the TOWS Matrix?
Use strengths to counter threats (medium term).
What strategy is used for Weaknesses + Opportunities in the TOWS Matrix?
Address a weakness and turn it into an opportunity (long term).
What strategy is used for Weaknesses + Threats in the TOWS Matrix?
Avoid threats and minimise weaknesses (medium term).
What is gap analysis?
The comparison between an entity’s ultimate objective and the expected performance from projects both planned and under way, identifying means by which any difference (gap) might be filled.
What is the role of strategic management in relation to gap analysis?
To set targets for the organisation that push it beyond its current trajectory.
What is the gap in strategic management?
The difference between the target and where the organization would otherwise end up.
What strategies can be used to close the gap?
- Efficiency strategies
- Expansion strategies
- Diversification strategies
What might cause the appearance of a gap?
- Targets are too ambitious
- Underperformance of the product portfolio
- Change in trading conditions
What is the purpose of market penetration strategy?
To sell more of the same product to the existing customer base.
List some strategies suitable for market penetration.
- Increase market share through price adjustments
- Drive out competitors
- Increase usage by existing customers
What is product development strategy?
Selling a new product to customers you already have.
What does market development involve?
Taking existing products to new markets or new market tiers.
- New geographical areas
- Different sized packaging
- Differential pricing policies
What are the two classes of diversification identified by Ansoff?
- Related diversification
- Unrelated (conglomerate) diversification
What are the types of related diversification?
- Vertical diversification - integrates supplier or customer chain activities.
- Horizontal diversification can be broken down into:
- Competitive products - takeover of competitor to increase market share
- Complementary products to ones being sold already
- By-products from a production process, non-core to squeeze profit
What is unrelated (Conglomerate) diversification
creates a portfolio of businesses with no common theme. Success depends upon the ability of management to extract value from the various companies that make up the group.
What are the advantages of operating as a conglomerate?
- Balances financial profits and losses
- Quick growth through surplus funds
- Easier access to capital markets
- Strong brand identity
Risk averse if a product becomes less trendy
What are the disadvantages of unrelated diversification?
- Lack of common identity
- Business failure can affect the entire group
- Lack of management experience in target markets
