8.1 Strategic direction (includes Ansoffs Matrix)

Question 1

What does strategic direction involve?

Answer 1

• Deciding the direction in which a business should move and hthe methods by which it should persue its plan.
• The strategic direction of a business refers to the decisions made regarding the markets it competes in & the products it offers.

Question 2

Why will the strategic direction of a business change?

Answer 2

With continuous internal & external change, managers must regularly review were their business is at any moment & where it should be headed.

Question 3

What is Ansoffs Matrix ?

Answer 3

Its a marketing planning model that helps a business determine its product and market growth strategy.

It is a long term business strategy.

Question 4

What does Ansoffs matrix provide a useful framework for?

Answer 4

For analysing a range of strategic options in relation to risks and rewards.

Question 5

What are the two variables in strategic marketing decisions?

Answer 5

• The market in which the firm will operate.
• The product intended for sale.

Question 6

What is the output from the matrix?

Answer 6

A series of 4 suggested growth strategies which set the direction of the business strategy.

Question 7

What are the 4 generic growth strategies?

Answer 7

Market penetration

Market development

Product development

Diversification

Question 8

What is market penetration?

Answer 8

The name given to a growth strategy where the business focuses on selling existing products into existing markets.

Question 9

What four objectives does market penetration seek to achieve?

Answer 9

• Maintain or increase the market share of current products- can be achieved through combination of competitive pricing strategies, advertising, sales promotion & more resources dedicated to personal selling.
• Secure dominance of growth in markets.
• Restructure a mature market by driving out competitors - would require larger promotional campaign.
• Increase usage by existing customers e.g. introducing loyalty schemes.

Question 10

Market penetration

How can you get more of the same customers?

Answer 10

Reduce prices.

Promote product range.

Sales force push.

Altering products i.e. different sizes.

Increasing buying options - online.

Question 11

Market penetration - evaluation?

Answer 11

• The business is focusing on markets & products it knows well.
• Likely to have good information on competitors & customer needs.
• Unlikely to need significant new research.
• But will the strategy enable firms to achieve its growth objectives??

Question 12

What are the possible ways of approaching market development?

Answer 12

• New geographical markets/ selling the product to new people; for example exporting the product to a new country.
• New product dimensions or packaging: for example
• New distribution channels (e.g. moving from selling via retail to selling using e-commerce and mail order)
• Different pricing policies to attract different customers or create new market segments
• Entering new markets or segments with existing products.
• Gaining new segments, new customers & new markets.

Question 13

Market development will require changes to marketing strategy. What does this include?

Answer 13

• New distribution channels (e-commerce & mail orders).
• Different pricing policy.
• New promotional strategy to attract different types of customers.
• New product dimensions, sizes & flavours.

Question 14

When is market development used?

Answer 14

Untapped markets are beckoning.

The firm has access to capacity.

There are attractive channels to access to new markets.

Question 15

Market development evaluation?

Answer 15

• Often riskier than product development.
• Existing products may not suit new markets (exporting issues).
• A logical strategy where existing market is saturated or in decline.
• Significant government support - keen to encouage international trade.

Question 16

What is product development?

Answer 16

• Growth strategy where a business aims to introduce new products/ modify existing products into existing markets.
• The strategy may require the development of new cometencies & requires the business to develop modified products which can appeal to existing markets.

Question 17

What may the new products be?

Answer 17

New products to replace current products.

New innovative products.

Product improvements.

Product line extensions.

New products to complement existing products.

Products a a different quality level to existing products.

Question 18

When is product development used?

Answer 18

The firm has strong R&D capabilities.

The market is growing.

The firm can build on existing brands.

Competitors have better products.

Question 19

Product development- evaluation?

Answer 19

• A strategy that often plays to the strengths of an established business.
• Strong emphasis on effective market research (customer needs) and successful innovation.
• Great way of exploiting existing customer base.
• Being first to market is important.

Question 20

Market development

What is this strategy?

Answer 20

Strategy of selling existing products to new markets- could involve selling to an overseas market / a new market segment.

Question 21

What is diversification?

Answer 21

• The process of selling different or unrelated goods or services in unrelated markets.
• This is the most risky strategy and allows a movement away from a reliance on current products and existing markets.

Question 22

What is involved within diversification?

Answer 22

It is where there are two unknowns:

• New products sold to new markets.
• New products for new customers.

It can be divided into unrelated and related.

Question 23

Diversification- related

What does this involve?

Answer 23

• This is development beyond present market but still within the broad confines of the industry.
• Markets and products share some commonality with with existing products.
• Builds on assets or activities the firm has already developed.
• Harnessing existing product/ market knowledge.
• This can help reduce the risk.

Question 24

What are the different types of related diversification?

Answer 24

Horizontal diversification - new products are introduced into current markets.

Vertical diversification- when an organisation decides to move into its suppliers or customer’s business.

Concentric diversification- when new products closely related to existing products are introduced to new markets.

Question 25

Diversification -unrelated?

Answer 25

• Growth in products & markets that are completely new.
• Development beyond the present industry into products and markets that which bear little relation to the present product market mix.
• No commonality with existing products and markets.

Question 26

Evaluation- Diversification?

Answer 26

• Risky- no direct experience of product or market, few economies of scale (SR), but if successful, overall risk of business is spread.
• Approaches - Innovation and R&D - develop new solutions, acquire an existing business in the market and extend an existing brand in the market.

Question 27

Ansoff matrix and the risk involved with each type?

Answer 27

Market Penetration- Little risk

Market development- Moderate risk.

Product Development- Moderate risk.

Diversification- High risk.

Question 28

Ansoffs matrix- What determines what strategy to select?

Answer 28

• Expected costs.
• Expected returns.
• The risk.
• The fit with the resources & strengths of the business.
• The impact on stakeholders.
• The ethical issues involved.