Theme 3 LOAs Flashcards
Ansoff matrix - reason to use market penetration
-existing products in existing markets
-lower risk approach to growth according to Ansoff
-as requires least amount of investment in market research
-as existing markets needs should be understood
-less strain on cash reserves
-high current assets and current ration
-good liquidity
Ansoff matrix - reason not to use market penetration
-existing products in existing market
-least amount of growth potential
-not extending product portfolio
-or targeting new market segment
-sales less likely to growth in comparison to other Ansoff strategies
-less likely to achieve EOS
-FC or marketing spread less
-lower unit FC
Ansoff matrix - reason to use product development
-new product in existing market
-e.g updated version
-help improve customer loyalty
-as customers return to purchase improved version
-having high customer loyalty will make customers less sensitive to changes in price
-inelastic LOA
Ansoff matrix - reason not to use product development
-new product in existing market
-e.g updated versions
-requires regular investment into r&d
-may require recruiting experienced engineers
-increasing outflows for high wages of engineers
-strain on cash reserves
-lower current assets + ratio
-poor liquidity
Ansoff matrix - reason not to use market development
-selling existing product in new market
-require valid market research
-to understand needs in new market
-as may be cultural differences that need to be understood
-increased expenses
-reducing OP margin
-less retained profit
-used to invest into….
Ansoff matrix - reason to use market development
-selling existing product in new market
-allows business to spread risk across different markets
-makes them less vulnrable to changes in PESTLE
-such as fall in income in one country
-still have inflows from sales from customers in additional markets
-high current assets + ratio
-good liquidity
Ansoff matrix - reason to use diversification
-selling new products in new market
-greatest growth opp
-increased size of product portfolio and target new segment
-experience increase in sales
-achieve EOS
-FC of marketing spread over more
-lower unit FC
-increased OP margin
Ansoff matrix - reason not to use diversification
-selling new products in new markets
-greatest risk according to Ansoff
-to successfully diversfiy will need heavy investment into marketing
-as new markets needs will need to be identified through valid market research
-product developed through r&d
-place strain on cash reserves
-lower current asset + ratio
-poor liquidity
Benefit of high barriers to entry
-if operates in market with high barriers to entry
-e.g requires significant r&d, presence of copyright, existing business have EOS
-will reduce threat of new businesses entering market
-reducing level of competition
-making market more inelastic
-inelastic LOA
Drawback of high barriers to entry
-if business wants to compete in market with high barriers to entry
-will require significant investment into r&d (if applicable)
-may need to source additional capital
-such as bank loan
-increasing non current liabilities
-regular outflows
-liquidity LOA
SWOT - benefit of identifying strengths
-if business completes SWOT analysis
-may be able to identify their strengths
-can then focus their resources on
-increasing their level of differentiation
-gain comp adv porter
-inelastic
SWOT - identifying strengths drawback
- cost of focusing on strengths e.g cost of r&d or building scale
SWOT - identifying weakness benefit
-if completes SWOT analysis
-able to identify weaknesses
-can then focus their resources on improving weakness
-reduce chance of business failure
SWOT - identifying opportunity benefit
-if completes SWOT analysis
-able yo identify potential future opportunities
-mean business could increase capacity
-increasing output
-FC spread less
-lower unit FC
SWOT - identifying threats benefit
-if completes SWOT analysis
-able to identify potential future threats
-would be able to allocate resources to reduce threat
-e.g diversifying their product portfolio
-allowing business to spread risk
-less vulnerable to changes to external threats
-so if threat materialises they don’t experience fall in demand
-reduce SP
-increase OP margin
SWOT - general drawback
-completes SWOT analysis
-will require significant investment in market research to identify SWOTs
-increase businesses expenses
-reducing OP margin
-less profit to retain and reinvest into other marketing activities
-reducing competitiveness
impact of low threat to substitutes/amount of existing competition
-if business operates in market with low threat of substitutes
-due to having highly differentiated product
-reduce threat of customers switching to alternative businesses
-as there is reduced level of competition in market
-making market inelastic
-inelastic LOA
impact of high threat of substitutes/amount of existing competition
-if business operates in market with high threat of substitutes
-due to not having a highly differentiated product
-will increase opportunities for customers switching to alternative businesses
-as if high level of competition in market
-making market elastic
-elastic LOA
impact of high supplier power
-if market has high power of suppliers
-due to limited number of suppliers/high comp for raw materials
-suppliers will be able to negotiate higher prices for goods
-and demand short credit periods
-high cash outflows
-poor liquidity LOA
