Section Eleven • Choosing Strategic Direction - Marketing Strategies (Ansoff's) Flashcards
What is strategic direction?
1) Strategic direction is the general path a business takes, based on its mission and achieving its objectives.
What does strategic direction influence?
The strategic direction influences how a business’s strategy develops and affects all areas of the business
What are key factors in setting strategic direction?
3) Key factors in setting strategic direction are the choices of which markets to compete in,
what products to offer and which direction the business should grow in.
What does the Marketing Strategy decide on?
Marketing Strategy decides on Markets and Products
What choices influence the choice of market? (5 points)
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Type of product - The products that a business offers will impact its choice of market. Certain products are more suited to B2B markets than B2C markets, niche markets than mass markets, etc.
Level of competition - Businesses will favour markets where there is a low level of competition. They will also prefer to compete in growing markets rather than saturated markets.
External factors - e.g. political, social, or economic factors could create opportunities in certain markets
Internal resources - e.g. it a business only has a small production facility, it might be more inclined to choose to compete in niche markets rather than mass markets.
Attitude to risk - businesses that take big risks are more likely to compete in new and unknown markets.
What choices influence the choice of product? (5 points)
Research and development (R&D) - a company with a strong R&D department can develop new, innovative products to sell.
Competitors - businesses need to react to the actions of rival companies. It a competitor has launched a new, successful product, they might choose to develop a similar product in order to compete
Technology - changes in technology could affect the products. A company making TVs will need to develop 8K resolution TVs to keep up with the rest of the market.
Finances - businesses that have healthy finances and working capital can afford to spend more money developing new products.
External factors - just like the choice of market, products are influenced by different external factors, like social economic or environmental factors
Explain the market strategies of the **Ansoff Matrix **(5 bullets)
1) Market penetration means trying to increase your market share in your existing market.
2) New product development is selling new products in your existing markets. It’s best when the market has good growth potential and the business has high market share, strong R&D and a good competitive advantage.
3) Market development is selling existing products to new markets. It can be done through
repositioning - this means that a business focuses on a different segment of the market.
4) Market development can also be done by expanding into new geographical markets to exploit the same market segment (e.g. in a different country)
5) Diversification means selling new products to new markets. Diversification is a very risky strategy, as it involves moving into markets that the business may have no experience of
What does the Ansoff matrix look like?
What is an advantage of Ansoff’s?
The advantage of Ansoff’s matrix is that it doesn’t just lay out potential strategies for growth - it also forces managers to think about the expected risks of moving in a certain direction.
What is a disadvantage of Ansoff’s?
One disadvantage of the matrix is that it fails to show that market development and diversification strategies also tend to require significant change in the day-to-day workings of the company.
Explain an example of Ansoff’s matrix’s market development through KFC.
KFCs expansion from the USA market to the UK market is an example of market development.
KFC began operating in the USA in 1952 and extended their market by opening an outlet in Preston, UK in 1965. This was the first American fast food chain to open in the UK.
There are now over 750 outlets across the UK and Ireland. These outlets were run as a franchise by an independent company, KFC GB Ltd, until it was bought by PepsiCo in 1986
Ansoff’s matrix shows that KFC% market development strategy is the result of taking an existing product, their fast food business model, and developing it in a new market, the UK.
This is a safer option than diversification, particularly since the UK had no other fast food chains in 1965 so there was no competition.
