Strategy and implementation - business growth Flashcards
What is the ansoff matrix
it is a strategic tool used by a business to achieve growth
How does the ansoff matrix help a business to achieve growth
1 It focuses of profitability and sales
2 outlines the options open if the business wants to grow by increasing profitability and sales
3 it helps to determine its strategy
What is the main consideration of the ansoff matrix
Whether the marketing strategy is targeted at existing or new customers and if existing products should be used or an alternative new product
What does the matrix look like
What are the 4 strategies or options according to the product range
1 market penetration - concentrating on sales of existing products to existing markets
2 market development finding and developing new markets for existing products
3 developing new products for existing markets
4 diversification— developing new products and new markets
Identify 3 market penetration strategies
1 attracting customers who have not yet become regular users by increasing brand loyalty
2 attacking competitor sales - often in a mature market where increased sales for a market come from competitors - adjusting the marketing mix
3 increasing consumption amongst existing users maybe reducing the price
State 2 ways market development - develop markets for existing products can be achieved
1 identifying users in different markets with similar needs to existing customers eg a different geographical location
2 identifying new customers who would use products in a different way
State ways in which product development (new product for existing markets) help with market penetration
1 budsiness tries to increase profits by introducing new products to existing customers
2 have to create a new product
3 can develop existing products to extend their lif
State 2 ways a business growth can be categorised
1 organic
2 external
What is organic growth
1 sometimes called internal growth
2 expansion of the business by selling more products
3 a less risky strategy as doesn’t involve any other business and uses existing resources but takes longer
What are the strategies for organic growth
1 most common opening up new factories or retail outlets to increase capacity
2 expanding product range
3targeting new markets
4 expanding distribution network making product available in more places eg internet
5 benefit from economies of scale which reduce costs so prices of product can be reduced and attract more customers
What does success of organic growth an indication of
Managers have used internal resources to grow profits
Managers have used their skills to improve business
How can inorganic or external growth be achieved
1 takeover (acquisitions)
2 merger
What is a takeover
1The acquisition of one business by another
agree or can be hostile
2 can be agreed of hostile
3 happens when a business sells more than 50% of its shares
What is a merger
Process by which 2 companies become 1
Usually companies of equal size and agree on shared ownership of the new business
Why are public limited companies vulnerable in takeover than private limited
Their shares are bought and sold on the stock market private limited are less open to take over as shareholders have to invite and agree the selling of their share
State the ways in which companies can merge or be taken over
1 backwards vertical
2 horizontal integration
3 forward vertical
4 conglomerate integration
What is horizontal integration
When a business merges or takes over another in the same industry at the same stage in production process
What is the objective of horizontal integration
To benefit from economies of scale, reduce costs and increase profits
The word synergy is often used to describe this type of growth what does synergy imply
That 2 merged businesses will be more profitable together than apart
Who are CMA and what do they do
1Competition and Markets authority
2 investigate mergers and anti competitive practices in markets that could give rise to a huge lessening of competition.
3They have the power to stop mergers or impose conditions
Describe backward vertical integration
When a business merges or takes over a business at the previous stage in the production process in the same industry eg business takes over a supplier
What is the objective of backward vertical integration
To reduce costs or secure a supplier
What is forward vertical integration
When a business merges or is taken over by a business in the next stage of the production process (THEY TAKE OVER THE CUTOMER) EG oil company buying petrol station
What is the objective of forward. Vertical integration
Allows a business to be closer to the consumer giving greater control of the market place
What is a conglomerate
When a business merges or takes over another business with no connection to the product or the market
What is the objective of a conglomerate
When a company wants to diversify
What are the wider effects of mergers and take overs
Senior managers may see the take over as a threat if it is a hostile take over and it can result in their redundancies
2 workforce may suffer job loses
What are the reasons for mergers and take overs
1 access to new markets - especially overseas
2 increased market share leading to increased market power in the market
3 diversification
4 acquiring new products and technology that may be protected by patent, or may be expensive or time consuming to develop internally
5 economies of scale are derived from becoming larger
6 synergy - by combining 2 businesses, total profits can be increased by reducing duplicated services such as head office costs
7 cost saving - takeovers are often followed by significant numbers of redundancies. To convince shareholders the takeover is in their interest
8 underperforming management teams can be removed giving a boost to performance
9 higher returns for shareholders
What is franchising
A strategy for growth
2 it is the legal right to use a brand name, product and business style of an existing business eg McDonalds
3 the business model is duplicate by selling the rights to other people to run the business rather than the owner
What are the problems of a franchise model
1 loss of control
2 not all profits return to franchisor
3 potential for loss of reputation
4 growth may occur to quickly with possibility of diseconomies of scale
What are the advantages for the franchisor (person selling franchise)
1 fast growth with low risk
2 economies of scale can happen quickly
3 increased income from franchise fees
4 the franchisee who are committed to the success of the business and are lively to be hard working
What is outsourcing
When outside suppliers are involved on things that could happen internally in a business,
Supp;ire’s are not employed by the business
What is the aim of outsourcing
Can lead to increased efficiency and lower costs
What is offshoring
When jobs are moved outside the business - sometimes abroad
Why has offshoring grow In the last 10- 15 years
China has entered fully into the world trading economy
More businesses taking advantage of manufacturing in low cost efficient markets like Romania
What are the advantages of outsourcing
1 greatly reduces staffing costs
2 well trained staff form outsourced companies reduce
HRM costs
3 existing workload and stress levels reduced
4 less investment risk
5 capital needs are reduced
6 lower costs increase profits giving more capital for research and development
What are the disadvantages of outsourcing
1 potential of poor customer service
2 existing employee may feel demotivated if they believe their job is at risk
3 quality of production can not be guaranteed
4 more difficult to implement JIT systems
5 can be breakdown of communication in the production chain
6 loss of security of data
7 loss of tax revenue to home government
