8.1 Strategic direction (Choosing which markets to compete in & products to offer)

Question 1

Strategic direction

Answer 1

The course/route a business has chosen to follow in order to achieve its corporate objectives.
Informed by assessment of SWOT.
Strategic direction influences which markets business choses to compete in & which products to offer.

Question 2

Influences on business’ choice of market & products to offer:

Answer 2

-corporate objectives
-core competences (what they’re good at)
-competitive environment (PESTLEC)
-leaders attitudes to risk
-local, national and global economic environment

Question 3

Strategic choices

Answer 3

Deciding direction business should move in and methods it should pursue

Question 4

THEORY: Ansoff’s matrix

Answer 4

Looks at degree of risk and potential for reward from different strategic OPTIONS.
-As a business moves away from what it knows best-degree of risk increases.
Selling more of an existing product in an existing market is least risky.(market penetration)

Question 5

Market penetration (least risky)

Answer 5

Existing market, existing products.
Low risk strategy, limited potential reward.
Marketing efforts increased to try increase frequency of use by customers, increase market share and drive out competition.

Question 6

Possible approaches for market penetration

Answer 6

Gain share from competitors.
Encourage customers to buy/consume more.
Changes to marketing mix.
Extension strategies.

Question 7

Potential dangers to market penetration

Answer 7

Competitors reactions.
Relatively short term only.
Market may already be saturated.
Cannibalisation (stealing customers from others)

Question 8

Evaluating market penetration

Answer 8

Business focuses on markets it knows well (core competences)
Can exploit insights on what customers & competitors want.
Unlikely to need significant market research.
Will strategy allow business to achieve its growth objectives?

Question 9

Market development

Answer 9

New market, existing products.
Selling via new channels e.g Online.
Sell to new demographic, change pricing strategy.
Sell to new geographical areas.

Question 10

Product development

Answer 10

Existing market, new products.
Need to be first to market, must understand customer needs.
Lots of R&D is needed.

Question 11

Diversification (most risky)

Answer 11

New market, new products. Research into new market needed.
Development of new products.