Raj: Product Market Place and Diversification

Question 1

what is diversification

Answer 1

It is one of the 4 growth strategies in the Ansoff Matrix,

It involves achieving growth by developing new products for completely new markets

Question 2

Is diversification riskier than just developing a new product for the same market?

Answer 2

• Yes, because by definition the company has no experience in the new market.
• The company also has none of the skills required to operate in the new market
• Diversification is usually done by acquiring a company that already exists in the market

Question 3

Describe the Ansoff matrix

Answer 3

it’s a 2x2 matrix, with new/existing products and new/existing markets on the axis
- diversification comes under new product new market

Question 4

Name the types of diversification

Answer 4

• Forward
• Full
• Backward

Question 5

Explain Forward Diversification

Answer 5

This is where the organisation diversifies into the products or services that relate to a later stage that follows the current market the organisation is in

Question 6

Give an example of forward diversification

Answer 6

The company Disney released their own movie platform Disney plus
Apple released apple stores so the manufacturer became teh seller too

Question 7

What is full diversification

Answer 7

This is when an organisation decides to start offering a new product in a new market

Question 8

Give an example of full diversification

Answer 8

Harley Davison the motor bike company diversified into fragrances

Question 9

What is backward diversification

Answer 9

This is when an organisation decides to diversify by offering a product or service that relates to the preceding stage of the current product/service.

Question 10

Give an example of backward diversification

Answer 10

A bakery taking over a wheat farm

Question 11

Give an example of a company with a good corporate strategy

Answer 11

ZARA- it is accelerated the time clothes take to get to market from 6 months to 3 weeks, meaning if fashion changes they are up to date, regularly new items available, which creates brand loyalty and interest and also theres low risk due to the low amount of stock in the shops

Question 12

Give an example of a company with a bad corporate strategy

Answer 12

KODAK, invented the roll film, but failed to see the potential of digital photography so diversified elsewhere and lost everything

Question 13

when should firms decide to make things in house or buy

Answer 13

when market cost exceeds the cost of in house production they should vertically integrate

Question 14

What are the benefits of vertical integration

Answer 14

• Lowers costs
• Improves quality of goods
• Facilitates better scheduling and planning
• secures critical supplies and distribution channels

Question 15

risks of vertical integration?

Answer 15

• Increase in costs as internal suppliers lose incentives to compete
• reduced quality as a single customer reduces feedback and market exposure
• reduced flexibility they may be slow to respond to changes in technology and demand

Question 16

what is taper integration?

Answer 16

This involves choosing to buy from an outside supplier instead of the organisations own in house supplier due to excessive costs or quality reduction
and the same for distribution , so outsourcing distribution to other stores rather than selling the product at the organisations stores

Question 17

What is strategic integration? with an example

Answer 17

Moving 1 or more sectors of the organisation outside the firm boundaries to other firms, for example outsourcing IT support to an indian IT firm because its much cheaper

Question 18

what is product, geographic and product market diversification

Answer 18

product - when a firm diversifies to have several products in different categories
Geographic - when a firm is active in several different countries
Product market - when a firm is active in a range of countries and markets

Question 19

what is the best level of diversification?

Answer 19

moderate diversification, too high or too low = lower performance

Question 20

Describe the Ansoff matrix

Answer 20

Markets are on the Y axis and Products on the left
- TL: Market penetration: The least risky strategy, this being to continue offering existing products in the existing market
BL: this is the next level of risky (Market development strategy), offering a existing product in a new market
TR: (Product development strategy) This is also the same level of risky, offering a new product in an existing market
BR: This is the most risky, offering a new product in a new market (full diversification)

Question 21

Give an example of the Ansoff matrix

Answer 21

MacDonald’s:
Market penetration strategy: McDonalds continue to offer their big macs in all stores
Market development: McDonalds combine with UberEATS to offer a delivery service with existing products reaching a new market
Product development: McDonalds offer a vegan burger in their restaurants, so an existing market
Diversification: McDonalds starts selling sushi street food