Lecture 12

Question 1

Product development

Answer 1

• Product modification
• Product extension
• Product expansion

Question 2

Product modification

Answer 2

Small, evolutionary modifications of existing products in terms of quality, function or style

Question 3

Product extension

Answer 3

Extending a successful brand to similar but different products that might be purchased by the same customers

Question 4

Product expansion

Answer 4

Developing product variations that meet the needs of different market segments

Question 5

Diversification

Answer 5

The strategy of expanding the company’s range of products or markets.

This expansion can be in terms of introducing new products or services, entering into new markets or industries or a combination of both.

Question 6

Diversification goal

Answer 6

Reduce risk by spreading the company’s interests across different areas so that it is not overly dependent on a single product line or market

Question 7

Key reasons for diversification

Answer 7

• Escape from fluctuations
• Escape from declining or stagnant industries
• Risk reduction
• Move into more profitable industries
• Synergetic reasons
• Ambidexterity

Question 8

Conglomerates

Answer 8

Diversified companies spread risk across different industries. Investors in public companies can do this themselves in “efficient” markets

Question 9

Sources of economies of scope

Answer 9

1. Tangible assets & Related fixed costs are spread across more products/services
2. Intangible assets (e.g. brands) can be profitably extended across more products/services
3. Organizational capabilities can be extended across more products/services

Question 10

Growth stalls

Answer 10

Successful companies lose momentum for four main reasons. All are within management’s control if spotted in time.

Question 11

Causes of Growth Stalls

Answer 11

1. Premium position backfires (strategy and successful strategies)
2. Innovation Management breaks down
3. Core business is abandoned prematurely
4. Company lacks a strong talent bench

Question 12

Successful strategies

Answer 12

• Strategy should emphasize something that makes you as unique as possible and delivers as much value as possible to the customer. - The best chance of doing this comes from differentiation with the aim of dominating your market and to do this effectively and quickly.
• Then to continue to innovate based upon your differential advantage.

Question 13

Strategy implications (diversity)

Answer 13

• Identify & reinforce through marketing, particularly branding, elements of differentiation that are important to customers
• Build product/service development & innovation on differential advantages
• If part of a niche strategy, have clear understanding of customer needs & react quickly to changes