Unit 8 Flashcards
Choosing strategic direction
What is strategic direction?
A course of action or plan that is hoped will lead to the achievement of long term goals.
What is Ansoff’s matrix?
A strategic or marketing planning tool that links a business’s marketing strategy with its general strategic direction.
What are the strategies in Ansoff’s matrix?
-market penetration: increased market share in existing markets achieved by selling more products to existing customers or new customers
-market development: finding new markets for existing products using market research and segmentation to identify new groups of customers
-new product development: producing new products for existing markets
-diversification: the most risky strategy, involving new products in new areas
Where are strategies positioned in Ansoff’s matrix?
market penetration
-established product
-established market
-lowest risk
new product development
-new product
-established market
-medium risk
market development
-established product
-new market
-medium risk
diversification
-new product
-new market
-highest risk
What is cost benefit analysis?
A process by which business decisions can be analysed, where the benefits and costs are quantified and then the costs subtracted from the benefits.
What factors will affect the choice of strategic direction?
-objectives and attitude to risk: some organisations may be risk averse
-cost
-barriers to entry
-competitors’ actions
-ethics involved
Reasons for and against choosing market penetration
-implemented quickly with limited risk
-avoids commitment of expense and time
-however does require there to be potential growth within the market
-if market is heavily saturated, heavy promotion may be needed to entice customers away from competitors
Reasons for and against choosing market development
-good strategy for well established brand name
-product is already proven
-avoids development of new products
-depends on markets being accessible
-could be costly if modifications are required to suit new market
Reasons for and against choosing new product development
-good choice for strong brand names that know their customer base
-new innovative products can be developed for the market
-may involve producing and selling products that a business has limited expertise with and there may already be established producers
Reasons for and against product differentiation
-may be chosen if the existing industry is in decline or has become more saturated
-can enable further growth for a business
-does involve greater risk as a business is moving into an area in which it has no expertise
What is strategic positioning?
How a business is perceived relative to other businesses in the same industry
What is Porter’s generic strategies model?
Describes how a business might pursue competitive advantage across its market using either a:
-low-cost strategy
-differentiation strategy
-focus strategy
What is low-cost strategy?
-this involves not just having low costs but being the leader in terms of cost in the industry.
-organisation must be confident it can maintain its leadership
-must have a sustainable low cost base and access to capital to invest in technology
What is differentiation strategy?
-making products different from and more attractive to those of its competitors
-methods of achieving this may be through quality, durability, functionality, customer service or a brand image that is valued by customers
-to be successful, it requires research and development, innovation and effective ales and marketing
What is focus strategy?
-an organisation focusing on a particular niche in the market
-within the niche it is important to decide how to achieve a competitive advantage and whether a low-cost or differentiation strategy will be chosen
Influences on the choice of a positioning strategy
-the business itself: size, skills, assets and culture
-the competition
-customers
-external environment
Benefits of having a competitive advantage
-sales
-brand loyalty
-profit
-shareholder value
Difficulties of maintaining competitive advantage
-developments in technology: an organisation may fail to see or embrace new technologies
-investment: research and development is expensive and a failure to update to constantly update products and processes may lead to cost and differentiation being lost
-human resources: if skilled workforce not maintained, competitive advantage may be lost
-financial constraints
-short termism: focus on short term could lead to a lack of focus on sustaining a long term competitive advantage
