Unit 8 Flashcards
Order strategic:
positioning
implementation
direction
methods
Direction
Positioning
Methods
Implementation
Five things a strategy should be
based on the strengths of the business
realistic and achievable
based on consideration of market potential and the businesses resources
based on consideration of economic and social factors
company specific, related to the individual circumstances of the business
Are strategic decsions long, medium or short term
Long
Name and describe a useful technique when connsidering a strategic decision
Ansoffs matrix considers risks involved in a strategic decision
X axis (Products) existing and new
Y axis (markets) existing and new
Existing Product, Existing market = market penetration
Existing Product, New market = market development
New Product, Existing market = product development
New Product, New market = diversification
In ansoffs matrix how and why does risk increase and what may be the benefit of risk.
According to Ansoff risk increases from existing to new (so market penetration is least risky and diversification is the most risky). This is because the risks involved in strategic decisions are related to the level of knowledge regarding the market, competitors and customers, both now and in the future.
However, the greater the risks, the greater the potential reward
Define Competitive advantage
Is a superiority that a business possesses over its rivals that may allow it to achieve objectives, such as increased market share or profitability.
What are two commonly used models for strategic positioning
Porters generic strategies
Bowmans strategic clock
Describe Porters generic strategies
A matrix suggesting that all markets operate in the same way. They can be segmented in two ways: mass versus niche markets and lowest cost versus differentiation strategies.
Name each component of Porters generic strategies
Low-Cost strategy
Differentiation strategy
Focussed Low-Cost strategy
Focussed Differentiation strategy
Describe Porters Low-Cost strategy
Business aims to be the lowest-cost operator in its market. The focus is upon cost minimisation achieved through high levels of efficiency (lean production?). Being the lowest-cost operator is a source of competitive advantage because it enables the business to charge lower prices than its rivals.
Describe Porters differentiation strategy
based on the concept of added value. The business aims to provide a good or service that consumers consider to be superior to that of its rivals. Consequently, consumers are prepared to pay a premium price. Differentiation strategy is often dependent upon the business achieving a strong brand image, resulting in brand loyalty.
Describe Porters Focussed Low-Cost strategy
Porter’s focused low-cost strategy is adopted by businesses in niche markets. Consequently, it tends to be used by small or medium-sized businesses.
Describe Porters focussed differentiation strategy
Porter’s focused differentiation strategy is used in niche markets. It is often found in luxury markets for products such as expensive clothing and jewellery. To be successful this strategy needs to be based upon an exclusive image, enabling the business to charge extremely high prices.
According to porters strategies what is the key to long term success after deciding on a strategy
A business must maintain the source of its competitive advantage. Businesses that adopt a low-cost strategy must consistently be able to operate more efficiently than their rivals, while a differentiation strategy is reliant upon the business maintaining its USP.
What must a business avoid when choosing its strategic position according to Porter
Avoid being ‘stuck in the middle’, a business must choose one or the other( low-cost or differentiation) and fully commit to be profitable.
