Unit 8 Flashcards
Ansoff matrix
Existing/ New market
Existing/ New product
Looks at the riskiest strategy for growth
Market penetration
Existing Existing
Product development
New product
Existing market
Market development
Existing product
New market
Diversification strategy
New product
New market
Market penetration
Target existing to existing
Marketing mix - 7ps
product- slight alteration, new colours,
Promotion -sales offers, special offers
Place , in store displays
Market penetration is a less risky option, and is a cheap way for a business to grow. When there is an increase in the market, or competitors are weak, market penetration gives b. an opportunity to steal market share
It is building on already established core competencies, advancing them.
It involves a company who has a lot of experience in that market with their existing products, so they move more along the experience curve, leading to a fall in average costs, allowing them to gain economies of scale
Market development
Existing product, new market
You could change the packaging to make it more appealing to the new - product
Emphasising benefits of product- promotion
Use market development when your existing product is already successful. Maybe a new comp is in your market, so want to move markets but keep same product, similarly there may be masses of growth is other markets, want to join and hopefully grow market share fro your product.
May have a profitable product, have funds available, to expand.
Maybe capacity is not 100% and want to increase capacity utilisation, reduce spare capacity - increase profitability
But
Need market research
May face cultural difficulties
Diseconomies of scale, too big, lack for communication , loose coordination
Product development
New product, existing market(customers)
Use marketing mix
Product- updates, new versions, new product - APPLE, LOTS OF NEW TECH TO EXISTING CUSTOMERS - r and d , innovation
Promotion- informative ads to highlight new product
Place- use existing distribution channels, email, ads, members,
A b. May do product development when they want to replace products that are in their DECLINE PHASE of the PRODUCT LIFE CYCLE, to ensure revenue for future.
They could also do some product development when they want to maintain a strong demand, and customer loyalty, keep customers on their toes with new products, keep them interested, likely to come back, especially in competitive market, otherwise may move to competitors, so need to defend market share
Product development can create a competitive advantage for their business through patents and intellectual property - legal protection, prevent copyright infringement, ensures that company earns profits through product development
But
Expensive, requires extensive R and D
Risk of failure
Diversification
Highest risk
Dyson- hair dryer, vacuum, patent on hair dryer
New market, new product
7ps- product - Diversification needs a lot of market research and Research and development. Businesses who use diversification to grow, transfer a lot of their core competencies into new use, ie Dyson- core competence really good at design, transferred these skills over many markets and products
Promotion- informative advertisement, use of PR
Place- new distribution channel
Even though diversification is very high risk, businesses liek Dyson may use it as tehy belive that their core competence, in Dyson case, their design techniques, can be successful in new ,markets, with new products. Dyson, has diversified, through vacuums, hairdryers, fans.
If the business has a trusted brand image that is transferable across a new market, high trust- ie VIRGIN, core comp of entertainment, trusted stakeholders
But
- highest risk, no guarantee, dont know customers
-expensive, require high levels of market research and R and D
-could damage brand image if unsuccessful
- colgate lasagne
Porters generic strategies
By having a clear strategy, can find the right strategy
Competitive scope - niche, mass markets
Competitive advantage - low cost, differentiation
Cost leadership
Differentiation
Cost focus
Differentiation focus
Competitive advantage
Brand image
Economies of scale
Product design
Customer service
Strategic positioning
Purposely planning to position themselves in market in which they compete
Low price - cheaper, not bad quality
High level of perceived benefits, unique
Example of cost leadership
Mass, low cost
Primark
Aldi
- needs to take advantage of economies of scale (tech machinary, highly skilled managers so can lower average costs, bulk buying low price of raw materials)
-focus on cost minimisation, - labour productivity high as possible to spread employee wages over as many units as possible
-low cost materials
-distribute products as low as possible
But
Gonna be making low profit margins as selling for low so sp will be similar to costs- therefore need to have a high number of sales , to have higher revenue and higher profit margins
Products must also be a reasonable quality, so consumers dont switch good value for money
Barriers to entry needed, as products will be relatively basic as not spending money to differentiate, so need to stop people from entering market like brand loyalty, prevent new entrants from stealing market share
Example of focused differentiation
Niche, differentiation
Tailored clothing
David Lloyd - Hugh price, focus on premium
Ferrari
Need a strong brand image, expensive to make - advertise -promotion
Highly differentiated product
Market research and high knowledge of niche market
Ability to innovate
Example of cost focus
Niche, low cost
Poundland
Cars-polo and golf
Example of differentiation
Mass, differentiation
Apple
Dyson
- need strong brand image- as targeting premium buyers within a mass market, difficult
- need a large group of consumers willing to pay a premium price
- has to be highly innovative and investing huge amount into market reserach and R and D in order to know what customers want and then provide customers with innovation, can be expensive
+ and - to cost leadership
+appeals to price sensitive consumers
+effective in a recession as selling inferior goods (YED), incomes down, q sold rises
+unappealing for new entrants which is good, they see that we have economies of scale, brand loyalty, brand image, relatively low profit margins
-basic product, not really any R and D, so vulnerable to copy
-price elastic, difficult to raise prices,
-if importing raw materials, price increased, and with relatively low proft margains, might want to increase selling price , which is hard to do in elastic products, so consumers are every responsive to price changes- if price goes up, demand might fall even more, and consumers switch to a substitute
- low margins, little cash to reinvest
+ and - to differentiation focus
+little competition in niche market
+ low threat of entrants, as not attarctive, brand loyalty
+ability to make high profit margains - consumers not that price sensitive , appeals to them, so able to charge premium price, high profit margaisn
- relatively few sales
- targeting limited no. Of customers
-constant high costs, branding, market research, staff training, customer service, 7ps - high R and D costs, people expect high quality and highly differentiate products
+ and - to cost focus
Niche, low cost
+target niche, so less competive
+not many other options
+allows smaller businesses to compete- economies o scale
- few sales, target market limited
- need to generate enough economies of scale to keep cost low, can be hard in small market
- difficult to change brands image
- hard to grow, limit to expand in future
+ and - to Differentiation
+high sales, possibly at premium price , lots of units for high price , maximise revenue
+the premium price will allow b to get money to reinvest into further development which is cruicial for their strategy of innovation and R and D and market research
- high cost, promotion, market research , innovation, development - as market is highly competitive- ie apple and Samsung- all want products for premium pricing
Bowman’s strategic clock - 1
1= low price, low value - Poundland , income elastic inferior goods, useful in recession, loose sales in recession or boom - relies on econ of scale
Bowman’s strategic clock - 2
2=low price, cost leader (PORTERS GENERIC FORCES), so aim to be the cheapest leader in mass market ,
USP= low price
Relies on large selling volume
Essential for economies of scale, so can produce at lowest price and therefore sell at lowest price
Bowman’s strategic clock - 3
Hybrid
- High value, low price
Sainsbury’s (“live well for less” )
Target consumers who want quality low price
- differentiate and low price, difficult
Bowman’s strategic clock - 4
Differentiation
-Dyson , apple
Similar to Porters generic DIFFERENTIATION
- high profit on each sale, premium price, and large number of sales
But
High profit margin not guaranteed, high costs of R and D, anticipating what customers want , lost money on promotion
