Unit 8 Flashcards
what is strategic direction ?
relates to the course of action that it is hoped will lead to the achievement of the goals and mission of an organisation.
this involves decisions about which markets to operate in and what products to offer.
how can a SWOT analysis help influence the strategic direction of a business ?
it examines the internal strengths and weaknesses and external opportunities and threats.
this analysis can be used in choosing the organisations strategic direction, seeking to build on its strengths or develop any opportunities identified.
alternatively it may wish to address any weaknesses or threats.
what is Ansoff’s Matrix ?
a strategic or marketing planning tool that was designed to help managers consider how to grow their business through existing or new markets and existing or new products.
what are the 4 main strategies that Ansoffs Matrix identifies ?
. market penetration (existing market, existing product)
. market development (new market, existing product)
. product development (existing market, new product)
. diversification (new market, new product)
what is market penetration ?
increased market share in existing markets achieved by selling more products to either existing customers or new customers.
what is market development ?
involves finding new markets for existing products using market research and segmentation to identify new groups of customers.
what is product development ?
involves producing new products for existing markets.
what is diversification ?
the most risky strategy, involving new products in new markets.
what are the following factors likely to have an impact on the choice of strategic direction ?
. objectives and attitude to risk
. cost (budget available)
. barriers to entry
. competitors actions
. ethics involved (CSR)
what are the reasons and values of choosing market penetration ?
+ this strategy can be implemented quickly with limited risk.
+ it avoids the commitment of expenses and the time involved in developing new products and analysing unfamiliar markets.
what are the drawbacks of choosing market penetration ?
- requires there to be potential for growth within the market
- heavy promotion is needed to entice customers away from competitors (expensive)
what are the reasons and values of choosing market development ?
+ good strategy for a well established business, with a strong brand image, should make entry into the new markets easier.
+ avoids the development of new products which is expensive
what are the drawbacks of choosing market development ?
- depends on market being accessible
- could be costly if modifications are required to suit the new markets
what are the reasons and values of choosing product development ?
+ good strategy for a well established business, with a strong brand image
+ possibility for new innovative products to be developed
what are the drawbacks of choosing product development ?
- this approach may involve producing and selling products that a business has limited expertise with
what are the reasons and values of diversification ?
+ expertise in related market
+ chose a growing industry
what are the drawbacks of choosing diversification ?
- lack of expertise in a market or product
- greater risk
once a business has determined the strategic direction of a business, what needs to be done next ?
the business needs to decide how it wishes to be perceived in the market (strategic positioning).
what is strategic positioning ?
to how a business is perceived relative to other business in the same industry.
what are the 2 models that suggest how strategic positioning and how to compete can be examined ?
. porters generic model
. bowmans strategic clock
what are Porters Generic Strategies ?
ways of gaining a competitive advantage, that can be applied to all industries and organisations.
what are Porters 3 generic strategies ?
. Low cost strategy (be cost leader in market)
. differentiation strategy (differentiated products and processes, making a business more attractive than competitors)
. focus strategy (focusing on a specific niche in the market)
what are the influences on where a business chooses to position itself ?
. businesses size, skills, assets, culture, strengths
. competition (strengths and weaknesses of competitors)
. customers (customer needs and trends)
. external environment (PESTLE)
what is a competitive advantage ?
is gained by an organisation when it provides the same value as its competitors but at a lower price, or a premium price due to its greater value provided through differentiation.
what are the benefits to the business of having a competitive advantage ?
+ greater sales
+ increased brand loyalty
+ higher profit margins (low-cost strategy)
+ shareholder value increased
what are the value of a businesses competitive advantage dependent on ?
the sustainability of the competitive advantage
the willing fullness of a business to invest in research and development
what are the difficulties of maintaining a competitive advantage ?
+ developments in technology (expensive, and failing to keep up can lead to the loss of a competitive advantage)
+ investment
+ HR (high skilled workforce and loyal workforce provides advantages, but this may be hard sustain and therefore the competitive advantage may be lost.
+ financial constraints
+ short-termism
