Tools Flashcards
What are internal threats?
Constraints within a firm’s own control
What are examples of internal constraints?
finance
people
marketing
production
Go over each of the SWOT factors.
Strengths - things the business does well/better than competitors
Weaknesses - things that the organisation does not do so well
Opportunities - external factors that provide prospects for success
Threats - external factors that hold back the business
Advantages of using SWOT
- useful and visual
- broad range of applications
- helps managers to understand market position
- helps to reflect
- examination of strategic opportunities
- facilitates strategic thinking
Disadvantages of using SWOT
- static, only a snapshot, can be quickly outdated
- requires honesty
- may be errors/biases/omissions
- does not guarantee a strategy’s success
- needs to be used with others
What is a SWOT analysis?
a bus management tool that provides a framework for strategic analysis and decision making
What is the Ansoff matrix?
a strategic decision-making tool used to devise product and market growth strategies for an organisation
What is market penetration?
developing existing markets with existing products.
increase sales revenue and market share.
What are features/advantages of market penetration?
- relatively low risk
- strategies to increase usage rate of existing customers
- little need for investment expenditure/market research
- to gain market dominance in growing markets or reduce competition in mature markets
What is market development?
selling existing products in new markets
What are features of market development?
relies on a greater distribution network to go to different places
riskier - might not succeed
may be expensive, especially if overseas
What is product development?
introducing new products to existing customers
What are features of product development?
product differentation
remain/improve competitiveness
riskier - can be expensive
products developed to replace others
marketed at current customers
What is diversification?
organisations moving into new markets with new products
Is diversification risky?
It is high-risk since they company does not have experience/expertise in the market, rivals may have already established themselves with brand recognition and customer loyalty
What are the two types of diversification?
related and unrelated
What is related/unrelated diversification?
related- orgs. operate within the same industry
unrelated- orgs. enter new industries
What is unrelated diversification?
orgs enter new industries
Summary of market penetration - brief
low risk
familiar markets
changing marketing mix
competitors retaliate
Summary of product development - brief
medium risk
product extension
acquisition
brand extension
Summary of market development - brief
medium risk
familiar product
new supply chains
changing marketing mix
unknown markets
Summary of diversification - brief
high risk
spread risks
new products
new markets
high reward prospect
loss of focus on core
What are some limitations of the Ansoff matrix?
only considers 2 dimensions of growth
doesn’t quantify risks/rewards
still requires further research and analysis
What are sociocultural factors? (STEEPLE)
all sociocultural characteristics of a region
demographics, lifestyle, beliefs, values
affects what people choose to buy
What are technological factors? (STEEPLE)
new technologies changes how a business operates and the products it makes
technological development
includes infrastructure
What are economic factors? (STEEPLE)
changes in economic conditions, GDP
cycles of GDP - business cycle
income increase/decrease changes what people want to buy
What are environmental factors? (STEEPLE)
natural disasters or conditions may affect products
businesses that rely on natural resources
climate change
increased protection of nature may be harmful to businesses
What are political factors? (STEEPLE)
may change laws
unstable government
Green parties
What are legal factors? (STEEPLE)
multinational companies - home country and host country laws
complying with laws
What are ethical factors? (STEEPLE)
conflict between growth/profit and social/environmental responsibilities
Cash flow for stars
slightly positive or 0, since there is high growth
Cash flow for cash cows
positive - the highest
What are cash cows?
high market share + low market growth
successful products in mature markets
high sales revenue
established customer base
high customer loyalty
less money needed for marketing and R&D
promotion likely to focus on replacement products and maintaining loyalty
What are dogs?
low market share + low market growth
end of PLC, or niche products in low-growth markets
may still be useful if cash flow is positive
What are stars?
high market share + high market growth
increasing revenues
requires significant investment to sustain growth
marketing focus on attracting new customers + establishing a brand image
may have a negative cash flow due to expenses in operations growth and sales
strategies for stars
continued investment to maintain market share, hoping it turns into a cash cow
strategies for dogs
if it is still useful, keep it, if there is a positive cash flow
when it becomes useless, kill it
not worth any further investment
strategies for problem childs
has potential - if money is available, invest it
if there is not much potential/funds, sell it
strategies for cash cows
milk it! extension strategies if possible
less money is needed for marketing. Promotion focused on replacement products and maintaining loyalty.
what are cash cows?
High market share + Low market growth
successful products in mature markets
high sales revenue from an established customer base
customer loyalty is high
what are problem children?
low market share + high growth markets
- often recently launched in response to competitors revenue
- likely to have a negative cash flow due to necessary investment
what are dogs?
low market share + low growth markets
- at the end of their product life cycle
- or niche products competing in mature low-growth markets
what are stars?
high market share + growing markets
- Revenues increasing
- requires significant investment to sustain growth
- Marketing will focus on attracting new customers + establishing a brand image
- Profitability will depend on how much is reinvested in growth
- spending heavily to keep expanding their operations and sales
- possible for a star to have a negative cash flow
uses of the BCG matrix
- consider different strategies for different products
- identify which products have potential
- guide some investment decisions
limitations of the BCG matrix
must be used with other tools
useless with unclear data on market share/growth - becomes subjective
does not take external factors into account
Uses of Porter’s generic strategies
- helps businesses consider how to respond to their external competitive environment
- help find a competitive advantage
What is cost leadership
- cheapest production in the market
- for markets with standardised products and less opportunity to differentiate through product quality, branding or promotion
What is differentiation
- a business is able to make its product better or different from competitors
- identify the USP to make the product the best in the industry on that point
- successful business should sell more products and could even charge a premium price
- profits may also increase, but only if the business keeps the production/promotion costs under control
What is cost focus in a niche market
- business becomes the low-cost producer in a niche market
- usually a product that is relatively basic, perhaps a lower-cost copy of a popular and higher-priced product
What is differentiation focus in a niche market
- business is producing a specialised, or differentiated, product for a niche market
- eg very high quality, exclusive or a special characteristic that the niche market wants
- business must understand the needs and wants of the niche market very well
- business charges premium prices to increase revenues and compensate for the small market size
What happens when a business is stuck in the middle in Porter’s generic strategies
- not differentiated enough to convince consumers to buy its product/high prices compared to competitors
- low profits or losses
What is linear regression analysis and its use
a mathematical way to sort out the possible factors that might impact future sales, or other elements of a business
What do regression models do
describe the relationship between two variables by fitting a line of best fit
uses of simple linear regression
analyse how effective the marketing strategies of some businesses have been
allows businesses to estimate how a dependent variable changes as the independent variable changes
Benefits of a scatter diagram plot (linear regression)
easy to plot
show non-linear patterns with ease
easy to observe and interpret the pattern
maximum and minimum values are easily determined
Limitations of a scatter diagram plot (linear regression)
cannot give you the exact extent of correlation
cannot take more than two variables into account
only depicts quantitative data
Uses of time series in linear regression
- can know the trend of the sales, rising or falling over time
- understanding any seasonal fluctuations
- business can pay attention to any cyclical fluctuations
