Paper 2- Theme 3.1 Business objectives and strategy (3.1.2) Flashcards
Define corporate strategy
a medium to long term plan of action a business, uses to meet aims
define Ansoffs Matrix
a model used to
4 quadrants of Ansoffs Matrix
- market development - new market, existing product
- market penetration - existing market, existing product
- product development - existing market, new product
- diversification - new market, new product
pros and con of market development
pros
•
cons
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pros and cons of market penetration
pros
•
cons
•
pros and cons of product development
pros
•
cons
•
pros and cons of diversification
pros
•
cons
•
define Porter’s Generic Strategies (Strategic Matrix)
DEFINITION - tool that managers can use to strategically position their business in a market
EXPLANATION - model that highlighted importance of product differentiation or cost minimisation, to gain competitive advantage
4 quadrants of Porter’s generic strategies
• cost leadership - (mass market, low cost strategy)
- low production cost- EoS, capital intensive, control over suppliers, cost minimisation
- charge competitive price but low production cost, so high profit margin
• differentiation leadership - (mass market, differentiation strategy)
- unique in industry- usp, quality, brand image and loyalty
- premium price, paying for added value
• cost focus - (niche market, low cost strategy)
- focus on one segment
• differentiation focus - (niche market, differentiation strategy)
- focus on one segment
what are the two axes for porters generic strategies
- source of competitive advantage (cost, diffferentiation)
* competitive scope - broad focus (mass), narrow focus (niche)
describe the stuck in the middle strategy, suggested by Porter
- where firms aren’t focusing on individual strategies but addressing them all to a low extent
- leads to mediocre business performance
- unsustainable stagey for successful firms
ways for firms to differentiate
- quality of product or service
- brand perception
- wide distribution- across all major channels
- renowned product development
- USP
define portfolio analysis
e.g.
• a tool used by firms to evaluate their product and identify the strategy to implement
-e.g. Boston matrix or product life cycle
describe the aim of portfolio analysis
to input resources into products that are deemed more profitable and phase out the ones that are less profitable
define the Boston Matrix
a tool used by businesses to analyse their product portfolio, and helps decide where investment should be allocated
describe the four quadrants of Boston Matrix
and the strategy for each one
•rising star - high MS, high MG
- HOLD
- need heavy investment to maintain market share, & defend from competitors
•problem child - low MS, high MG
- BUILD
- must decide which ones to heavily invest into so they become stars
•cash cow - high MS, low MG
- MILK
and invest revenue into maintaining star’s MS, and increasing problem child’s MG
•dog - low MS, low MG
- DIVEST
- or use extension strategies
strengths and weaknesses of the Boston Matrix Model
pros
• can identify what strategy is needed for each product
• quick and easy way to examine all products together
–> can make sure they have a balanced portfolio
cons
• doesn’t consider profitability, or future prospects of the products
• strategies may not suit all businesses
•doesn’t consider whether the competitive advantage a product may have is sustainable
why does a business want a balanced portfolio
allows businesses to position themselves so they can take advantage of current and future market growth opportunities, when they arise
define a distinctive capability
• special qualities within a business that are better than their rivals and cannot be easily copied.
- can provide competitive advantage
define a tactical decision
a short term response to opportunities or threats
- easier to change, less permanent
define a strategic decision
a long term plan of action by a business to achieve aims and objectives
- harder to change, more permanent
describe John Kay’s model for distinctive capabilities
distinctive capabilities require 3 important ideas:
- architecture - managerial skills that build good consumer, staff and supplier relationships
- reputation - customer perception of brand/ product
- innovation - development of new and improved products/ technology
- suggested that the more distinctive capabilities a business has, the more sustainable their competitive advantage is
examples of strategies for a business focusing on market penetration
- new pricing strategy (promotional prices)
- new marketing strategy (e.g. person selling or increased advertising)
- open more stores
- expand distribution, to more retailers or use direct distribution
- increasing repeats purchases using loyalty cards
examples of strategies for a business focusing on market development
- new distribution method in international market
- focus on new segment
- new pricing methods
- joint venture or merger in new country
- allow licensing of product in new country
examples of strategies for a business focusing on product development
- focus on R&D
- may create new distinctive capabilities in production to create different, appealing products
- product extension strategies
- brand proliferation - launch independent sub brands under umbrella brand
examples of strategies for a business focusing on diversification
- acquire existing business in new market
- rebrand business in new market
- develop new solutions through product development
