ch2 Flashcards
business strategy
aims that are hoped to be achived via objectives
this requires a lot of planning
the first part of this is to use analytical tools
to understand the position of the business in the market
it should somehow give completive advantage
define corporate strategy
the plans and policies developed to meet a company’s objectives,concerned with the range of activities the business needs to undertake in order to achieve its goals
what is the corporate strategy?
the long-term plan to achieve the aims of the entire business
what will a successful strategy do?
give the firm an advantage in the competitive market place and fulfil stakeholders expectations
development of corporate strategy
takes time money and alot of research
what are the two developments of corporate strategy?
Ansoffs Matrix
Porters Strategic Matrix
define ansoffs matrix
A marketing planning model that helps a business determine its product and market strategy
factors that affect corporate strategy
-level of investment
-exploitation of different markets
-growth strategy of the business
-level of risk willing to take
what are the 4 statragies for ansoff
-market penetration
-market development
-product development
-devitrification
wat types of markets are used
existing
new
define market penetration
a growth strategy where a business aims to sell existing products into existing markets
this is for a susseful and they still belive that they can make more revenue
this does not invlove much risk due to familer market conditions
how can a business achieve growth using market penetration
-increase brand loyality so they avoid using competitors brand
-encourage customers to use products more regularly
-use more of the products
how is the risk level for market penetration
very low the lowest out of all
and the lowest amount of investment
define product development
a growth strategy where a business aims to introduce new products into existing markets
new or modified product s or everchanging markets
this requires alot of investment
high levels of risk
what comes along with product development?
Research and development costs of the new products
evaluate product development
plays to the strengths of an established business
strong emphasis on effective market research - insight into customer needs and successful innovation
a great way of exploiting the existing customer base
being first to market is important
How is Diversification defined?
Developing new products in new markets.
How is Penetration defined?
Using tactics such as the marketing mix to increase the growth of existing products in an existing market.
How is Product Development defined?
Marketing new or modified products in existing markets.
product development
Product development is concerned with marketing new modified products in existing markets
this might be an appropriate strategy to adopt where the product life cycle is traditionally short or where trends or technology change quickly
This strategy is associated with product innovation and continuous development, which some businesses have gained a successful reputation from doing s
there is more risk involved in product development and highest amount of investment
What is Market Development in Ansoff’s Matrix?
Market development involves the ,marketing of existing product in new market.
The most basic form of the strategy is entering geographically new markets.
This is not always simple as customers from different places may have different tastes and preferences.
even where market development is appropriate and successful it is often necessary to make slight modification to suit the new market, even if this is simply changing the name to more acceptable or accessible in a different language, or labelling the product differently to meet international laws
what is a way of adapting market development
changing geographics
and small adjustmants
diversification
Diversification occurs when new products are developed for new markets. It enables a business to move away from reliance upon existing market and products,
thus allowing the company to spread risk and increase safety.
if one product faces difficulties or fails, a successful product another market may prevent the business overall facing problems.
However, diversification will take a business outside its area of expertise, and for this reason it is the strategy with the highest risk.
this might mean that its performance in new markets is relatively poor compared with more experienced operators.
how is the risk with diveification
the risk is very spreed as more markets
but the business has no knowledge so its unfamiler environment
give advantages of the ansoff matrix
simple and easy to understand
allows a business to consider multiple marketing strategies to improve the business
helps analyse the different risks and levels of investment
give some disadvantages of ansoffs matrix
competition and actions are ignored
ignores external influences -> use with a SWOT/PESTLE analysis
lack of cost benefit analysis
difficult to predict the impact the strategies will have
What is Porter’s Strategic Matrix?
developed by Michael Porter to identity the source of competitive advantage that a business might achieve in a market.
Porter stated that any business that does not adopt one of these generic strategies is ‘stuck in the middle’ and unlikely to succeed
What does the Porter’s Strategic Matrix look like?
A triangle with the points labelled:
-Focus (cost focus and differentiation focus)
-Cost leadership
-Differentiation
What is Cost Leadership in Porter’s Strategic Matrix?
his involves striving to be the lowest- cost provider in the market.
This does not necessarily mean that the business will offer the lowest price,
although this may be an option. Generally speaking, the firm that is able to operate as the lowest-cost provider in am market will compete in two ways.
1 - Increase profits, while still charging market level prices.
2 - Increase market share, while charging lower prices ( still marketing a profit since costs are reduced)
it is generally held by only one business as it requires significant market share
the business can minimise costs by operating on a large scale it can leverage economies of scale,
negotiation with suppliers, efficiency and streamlining operations.
A cost leader will also offer a ‘ no frills’ product to minimise the cost and the level of service and variation in the product will he minimal and the scale associated with mass production
What is Differentiation in Porter’s Strategic Matrix?
Unlike cost leadership. a differentiation strategy may be adopted by any business providing it can deliver a defensive way of differentiating itself from competition
An advantage of operating under a differentiation strategy is that the business may be able to charge a premium price in customers value their USP.
However, it is difficult to guarantee that the rewards of differentiation will justify the additional cost as differentiating requires good and effective marketing.
Comparatively, differentiation is much easier to copy than cost leadership unless the differentiation is sustainable and defensible e.g. acquiring patents or trademarks.
methods to differentiate
business may add value to its product by having good quality, design brand identity or customer service
what is a advantage of using product differentiate
may be able to charge a premium price in customers value their USP.
disadavantge of diff
can increase costs alot
What is Focus in Porter’s Strategic Matrix?
The strategy involves targeting a narrow range of customers in one of two ways. A focus strategy is closely aligned to niche marketing. it tends to be used by small or very specialist firms.
by targeting a small market segment it can understand its customers specific need and create high level of customer satisfaction and loyalty.
Furthermore, by definition a focus strategy will result in less competition and higher profit margins,
On the other hand as the market is very small, a firm adopting this strategy tend to have low bargaining power with suppliers. A focus strategy can take one of two forms:
-Cost focus
-Differentiation focus
what market is cost leadership and diff for
mass market
cost foucus
emphasising cost-minimisation with a focused or niche market e.g. Aldi focuses on low price food even though they arent cost leaders
Differentiation focus
pursing different strategies within a focused market e.g. Ferrari targets a very small percentage of the popular for its Supercars
what market is foucus for
A focus strategy is closely aligned to niche marketing. it tends to be used by small or very specialist firms.
What is the Aim of Portfolio Analysis?
it is a method of categorising all of the products and services of a firm (its portfolio) so as to decide where each fits within the strategic plans.
What is the Boston Matrix?
The Boston Consulting Group created an advanced tool for portfolio analysis called the Boston Matrix/ Growth Share matrix
they categories these products into one of four different areas based upon their current and potential market share or market growth.
The Boston Matrix may be used to assist a business in identifying which strategy to adopt.
define the boston matrix
is an analysis tool which enables a business to identify where they are in terms of market growtrh and market share
parts of Boston matrix
The 4 areas are Stars, Cash cows, Question marks (problem child/ wildcats), Dogs.
What is the Star in the Boston Matrix?
are high-growth products that are strong compared to those of competitors .
Star require investments but the hope is that they will become cash cows
The product are then evaluated according to their competitive potential and potential growth - this involves a two step process:
The product are then evaluated according to their competitive potential and potential growth - this involves a two step process:
Step 1
Give a full and detailed overview of all of the products and services in the current business portfolio
Step 2
look at the performance of each of these products and service by examining
current and projected sales and cost
competitors activity and future competitions
risk that may affect performance
What is the Cash Cow in the Boston Matrix?
are low-growth products with high market shares.
- They generate more cash than they consume, and so can provide a return for investors and can fund investment in other areas
What is the Question Mark in the Boston Matrix?
are products with low market shares in high- growth markets.
they consume a lot of cash, but give little return.
however they have the potential to turn into stars, Keeping these lines requires a belief that there is a potential for growth
What is the Dog in the Boston Matrix?
are products with low market share in low-growth markets.
They may break-even, but nevertheless take up time and effort with little prospect of future growth.
They should be sold or divested
ad f boston matrix
useful tool for analysing product portfolio decisions
can help a business decide to invest or remove a product
help make desions
see if dogs should be disconnected
dix of Boston matrix
only a snapshot of current position
relative MS and MG are not the only dimensions important to a business
Doesn’t look at other factors
What is the difference between Strategies and Tactics?
-Strategies set out the long-term direction that a firm will take to achieve its objective
-Tactics are short-term responses to an opportunity or threat in the market.
- Most day-to-day decision in business are tactical and involve decision making responding to the current conditions
-by nature tactical decisions have to be made quickly without significant research or planning, for this reasons tactical decision can backfire if they are made poorly
what is a tactic?
short term response to an opp or threat in the market
managerial or supervisor level
supports the corp strategy
reactive to compp
made in isolation of the bigger picture
What will strategic and tactical decisions affect
-Human Resources
-physical resources
-financial resources
HR
Strategic will have Along lasting effect on the workforce
Tactical will have a short term one
Physical resources
Land raw materials equipment and factories
Large effect
Financial
Long term will have a large effect and take up a lot of time and resources
Tactical will have a small effect
