Unit 8 Flashcards
What is strategic direction?
Involves deciding the direction in which a business should move and the methods by which it should pursue its plan
What is the the method used for strategic direction
Ansoff’s Matrix
What does the Ansoff Matrix represent?
the different options open to a marketing manager when considering new opportunities for sales growth
Draw the ansoff’s matrix
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Why is the ansoff’s matrix used?
A useful framework for analysing a range of strategic options in relation to risk and rewards
What are the 4 growth strategies from ansoff’s matrix?
- market penetration
- market development
- product development
- diversification
What is the objective of market penetration?
Higher market share in existing markets - get more of the same customers
How do you achieve market penetration?
- Reduce prices
- Promote product range
- Sales force push
- Altering products - ie different sizes
- Increase buying options - online
What are the advantages of market penetration?
- already has good knowledge on markets and products due to experience
- less likely to need R&D
What is product development?
involves taking a new or modified product and developing it in existing markets
How can products be developed?
New products to replace current products
New innovative products
Product improvements
Product line extensions
New products to complement existing products
Products at a different quality level to existing products
When is product development used?
- the firm has strong R&D capabilities
- the market is growing
- the firm can build on existing brands
- competitors have better products
What are the advantages of product development?
- is the first firm in the market
What is market development?
strategy of selling an existing product to new markets. This could involve selling to an overseas market or a new market segment.
How can markets be developed?
- Selling the same product to different people
- Entering new markets or segments with existing products
- Gaining new customers, new segments, new markets
- Entering overseas markets
When is market development used?
- Untapped markets are beckoning
- The firm has excess capacity
- There are attractive channels to access new market
What are the disadvantages of market development?
- riskier than product development
- existing product might not suit new markets
What is diversification?
the process of selling a different or a new unrelated product in an unrelated market
What are the 2 types of diversification?
- related
- unrelated
What is related diversification?
where a business expands its activities into product lines that are similar to those it currently offers
What are the advantages of related diversification?
- builds on assets or activities the firm already has
- reduces risk
What are the 3 types of related diversification?
- vertical
- horizontal
- concentric
What is vertical diversification?
when an organisation decides to move into its suppliers or customers’ business
What is horizontal diversification?
when new products are introduced into current markets
What is concentric diversification?
when new products closely related to existing products are introduced to new markets
What is unrelated diversification?
growth in products and markets that are completely new
What are the disadvantages of diversification method?
risky - little knowledge
costly - R&D
What is strategic positioning?
is how a business perceives itself in relation to its competitors
What are the 2 methods used to analyse strategic positioning?
Porter’s strategies
Bowman’s strategic clock
What are the 2 strategies that Porter suggested?
cost-leadership strategy
differentiation strategy
What is the cost leadership strategy?
involves becoming the lowest cost producer in the industry
What are benefits of a cost leadership strategy?
lower costs = higher profits
How can a cost leadership strategy be achieved?
- lower input costs
- economies of scale - bargaining power
- high levels of productivity
- lean production
What is differentiation leadership strategy?
when the business targets larger markets and aim to achieve a competitive advantage through differentiation
How can a differentiation leadership strategy be achieved?
- superior product quality
- branding
- consistent promotion
- effective distribution channels
What is the differentiation focus strategy?
where a business aims to differentiate within just one or a small number of target market segments
What is the cost focus strategy?
where a business seeks a lower-cost advantage in just one or a small number of market segments
What does the Bowman’s strategic clock do?
plot the options of strategic postioning for a business
What are the 2 axis on the Bowman’s strategic clocl?
perceived value to a customer
price
What are the 8 different positions on the Bowman’s clock?
1 - low price and low added value 2 - low price 3 - hybrid 4 - differentiation 5 - focused differentiation 6 - risky high margins 7 - monopoly pricing 8 - loss of market share
What influences a positioning strategy?
- competitors position
- external environment
- the strengths and competencies of a business
How can a business protect its competitive advantage?
- legal protection
