Paper 2- Theme 3.1 Business objectives and strategy (3.1.2)

Question 1

Define corporate strategy

Answer 1

a medium to long term plan of action a business, uses to meet aims

Question 2

define Ansoffs Matrix

Answer 2

a model used to

Question 3

4 quadrants of Ansoffs Matrix

Answer 3

• market development - new market, existing product
• market penetration - existing market, existing product
• product development - existing market, new product
• diversification - new market, new product

Question 4

pros and con of market development

Answer 4

pros
•

cons
•

Question 5

pros and cons of market penetration

Answer 5

pros
•

cons
•

Question 6

pros and cons of product development

Answer 6

pros
•

cons
•

Question 7

pros and cons of diversification

Answer 7

pros
•

cons
•

Question 8

define Porter’s Generic Strategies (Strategic Matrix)

Answer 8

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

Question 9

4 quadrants of Porter’s generic strategies

Answer 9

• 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

Question 10

what are the two axes for porters generic strategies

Answer 10

• source of competitive advantage (cost, diffferentiation)

* competitive scope - broad focus (mass), narrow focus (niche)

Question 11

describe the stuck in the middle strategy, suggested by Porter

Answer 11

• 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

Question 12

ways for firms to differentiate

Answer 12

• quality of product or service
• brand perception
• wide distribution- across all major channels
• renowned product development
• USP

Question 13

define portfolio analysis

e.g.

Answer 13

• a tool used by firms to evaluate their product and identify the strategy to implement

-e.g. Boston matrix or product life cycle

Question 14

describe the aim of portfolio analysis

Answer 14

to input resources into products that are deemed more profitable and phase out the ones that are less profitable

Question 15

define the Boston Matrix

Answer 15

a tool used by businesses to analyse their product portfolio, and helps decide where investment should be allocated

Question 16

describe the four quadrants of Boston Matrix

and the strategy for each one

Answer 16

•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

Question 17

strengths and weaknesses of the Boston Matrix Model

Answer 17

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

Question 18

why does a business want a balanced portfolio

Answer 18

allows businesses to position themselves so they can take advantage of current and future market growth opportunities, when they arise

Question 19

define a distinctive capability

Answer 19

• special qualities within a business that are better than their rivals and cannot be easily copied.

• can provide competitive advantage

Question 20

define a tactical decision

Answer 20

a short term response to opportunities or threats

• easier to change, less permanent

Question 21

define a strategic decision

Answer 21

a long term plan of action by a business to achieve aims and objectives

• harder to change, more permanent

Question 22

describe John Kay’s model for distinctive capabilities

Answer 22

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

Question 23

examples of strategies for a business focusing on market penetration

Answer 23

• 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

Question 24

examples of strategies for a business focusing on market development

Answer 24

• 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

Question 25

examples of strategies for a business focusing on product development

Answer 25

• 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

Question 26

examples of strategies for a business focusing on diversification

Answer 26

• acquire existing business in new market
• rebrand business in new market
• develop new solutions through product development