8.1/8.2 Flashcards
What is Strategic Decision?
Deciding the direction in which a business should move and the methods by which it should pursue its plan. This refers to the market and products they sell.
What is the Ansoff Matrix?
Represents the different options open to a marketing manager when considering new opportunities for sales growth. A long term business strategy developed in 1957 by Igor Ansoff
What are the 2 variables in strategic marketing decisions?
The market in which the firm operates in
The product intended for sale
4 Strategic Decision results?
- Market Penetration
- Market Development
- Product Development
- Diversification
What does market penetration aim to do and how does it do this?
- Secure dominance of growth markets
- Increase market share of products
- Restrict competitors
- Encourage consumers to use more
- Reduce prices
- Promote product range
- Sales force push
- Altering products
- Increase buying options
Evaluation of market penetration?
- Business is focusing on markets and products that it knows well
- Likely to have good information on competitors and consumers wants
- Unlikely to need significant new research
What is product development and when will it be used?
Taking a new or modified product and developing it in existing markets.
- product line extensions
- improvements
- new products to replace old ones
Used when:
- Firm has strong R&D capabilities
- Market is growing
- Firm can build existing brand
- Competitors have better products
Evaluation of Product Development?
- Strategy that plays to the strengths of an established business
- Exploiting existing customer base
- Successful innovation and strong R&D
What is Market Development and how can it be done?
Selling an existing product to new markets, selling over sea or a new market segment
How:
- Selling the same product to different people
- Entering new markets or segments with existing products
- Gaining new customers, new segments, new markets
- Entering overseas market
- New distribution channel
- New promotional strategy
- Firm has excess capacity
Market Development Evaluation?
Riskier than product development
Existing products may not suit new markets
When market is saturated
Significant government support
What is Diversification?
Selling unrelated goods in an unrelated market, most risky strategy.
Related or Unrelated
Diversification Evaluation?
Risky - no direct experience of product or market
Approaches - Innovation and R&D
What determines which strategy to use from Ansoff Matrix?
- Expected costs
- Expected returns
- The risk
- Fit with the resources and strengths of a business
- Impact on stakeholders
- Ethical issues involved
What is strategic positioning?
How a business perceives itself in relation to its competitors
What’s porters 2 type strategy?
Markets where business competes
Source of Competitive Advantage
4 Porters 2 Type Strategy Results?
Cost Leadership - Broad, Cost
Differentiation Leadership - Broad, Differentiation
Cost Focus - Narrow, Cost
Differentiation Focus - Narrow, Differentiation
Why is cost leadership important?
Many market segments in the industry are supplied with the emphasis placed on minimising costs. If the achieved selling price can at least equal the average for the market, then the lowest-cost producer will enjoy the best profits.
How can cost-leadership be achieved?
- Lower input costs
- Economies of Scale
- Experience
- Product/process design
- High levels of productivity
- Effective use of technology
- Access the most effective distribution channels
What are the numbers of Bowman’s Clock?
- Low price & low added value
- Low price
- Hybrid
- Differentiation
- Differentiation Focus
- Risky High Margins
- Monopoly Pricing
- Loss of market share
Whats Low Price and Low Added Value?
Not competitive, hope nobody can undercut you in order to make a profit.
Very little satisfaction and price
What’s Low Price?
Low Cost Leaders in a Market
- Cost Minimisation is required, associated with economies of scale
- Profit margin on each product is low, but high sales can produce high revenues
- Price wars
What’s Hybrid?
Some elements of low price but also product differentiation.
Persuade customers there is good added value through reasonable price and acceptable product differentiation
What’s Differentiation?
Highest level of perceived added value.
Branding is key
High quality product with strong brand awareness
What’s Focused Differentiation?
High price level, high added value
Luxury brands with premium price by highly targeted segmentation, promotion and distribution
Can lead to very high profit margins
What’s Risky High Margins?
Unsustainable
High prices, no added value
Better positioned products will take away customers
What is Monopoly Pricing?
One business offering the product, there are no alternatives so price can be set to whatever.
Monopolies are tightly regulated
What is Loss of Market Share?
Standard price for a low added value product, is unlikely to win over many customers, as there are many better options
How do Porter and Bowman’s strategies differ?
Focusses on the prices to customers rather than the cost to the business
Highlights the full range of options open to a business whereas Porter has only a few options
What influences positioning strategy?
- Competitors position
- External environment
- Strengths and competences of the business
How may a business protect its competitive advantage?
- Legal protection
- Control over resources
- Particular culture
- Innovation
- Reputation
- Architecture
What are the 3 main sources of competitive advantage?
Innovation
Architecture
Reputation
