Strategic direction: choosing which markets to compete in and what products to offer Flashcards
What is strategic direction?
The course/route that a business has chosen to follow in order to achieve its corporate objectives.
This will in part be informed by an assessment of the business’ internal strengths and weaknesses and external opportunities and threats.
What influences strategic direction?
Corporate objectives
Leaders’ attitudes to risk
Local, national and global economic environment
Core competences
Competitive environment
What is Ansoff Matrix?
A marketing planning model that helps a business determine its product and market strategy.
Consists of: market penetration, product development, market development, diversification.
What is market penetration?
A growth strategy where a business aims to sell existing products into existing markets.
This is about increased market share.
Most common and safest strategy.
It concentrates on existing products and markets as the business should know this.
What is product development?
A growth strategy where a business aims to introduce new products into existing markets.
This involves innovation to differentiate their products from competitors.
Is market penetration the right strategy?
Business focuses on markets and products it knows well.
Can exploit insights on what customers want (and competitors).
Unlikely to need significant new market research.
But will this strategy allow the business to achieve its growth objective?
Is product development the right strategy?
Often plays to the strengths of an established business.
Strong emphasis on effective market research and successful innovation.
A great way of exploiting the existing customer base.
Being first e.g. Dyson gives a competitive advantage.
What is market development?
A growth strategy where the business seeks to sell its existing products into new markets.
This is about finding new geographical markets for existing products e.g. exporting to emerging markets.
New distribution channels (e.g. using ecommerce and mail order).
Is market development the right strategy?
A logical strategy where existing markets are saturated or in decline.
Often more risk than product development- particularly expansion into international markets.
Existing products may not suite new markets, depends on customer needs.
What is diversification?
A growth strategy where a business markets new products in new markets.
Risky strategy as both the markets and the products are new to the company.
Is diversification the right choice?
Inherently risky strategy:
no direct experience with the product/market
few economies of scale initially
if successful, the overall risk of the business is spread.
What are approaches to diversification?
Innovation and R+D (develop new solutions)
Acquire an existing business in the market
Extend an existing brand into the new market
What factors would a business consider before selecting a strategy?
Expected returns and costs
Opportunity costs
Risks
Ethical issues involved
Impact on stakeholders
Does it fit with the resources and strengths of the business?
Why does strategic direction matter?
Strategic decisions are long-term, high-risk decisions that determine the success of an organisation.
Strategic direction needs to be clear to everyone in the organisation to provide a focus for all staff.
What is strategic positioning?
Refers to how it is perceived to other businesses in the industry.
