Unit 8-Strategic Direction

Question 1

Strategic direction

Answer 1

The general path the business takes, based on mission and objectives

Question 2

Ansoff’s Matrix

Answer 2

Outlines different strategies to grow, generalised through 2 categories, markets and products, and ranked in risk

Question 3

4 strategies in Ansoff’s Matrix

Answer 3

Market penetration
Product development
Market development
Diversification

Question 4

Market penetration and where it works best

Answer 4

Selling existing products in existing market. Aim to increase MS. Works best in growth market, not a saturated market

Question 5

3 Market penetration strategies

Answer 5

Attracting customers who have not become regular users (brand loyalty)
Attacking customer sales
Increase consumption from existing users

Question 6

Product development and when its good

Answer 6

Selling new similar products in existing markets. Good in growth markets with high MS, as established CA/brand.

Question 7

Market development

Answer 7

Selling existing products in new markets. Requires research
Identifying users in different markets with similar needs, can be abroad. E.g new distribution channels
Identifying users who would use a different way. E.g repacking/resizing

Question 8

Diversification and when its used

Answer 8

New products in new markets. Risky, as no experience, used to reduce dependence on limited range. May be attempted when funds available and opportunity spotted, or saturated/concentrated market

Question 9

Strategic positioning

Answer 9

How to compete with other businesses in the market

Question 10

4 Porters generic strategies

Answer 10

4 ways to establish competitive advantages (an advantage over competitions)
Cost focus
Cost leadership
Differentiation focus
Differentiation

Question 11

Cost leadership

Answer 11

Being lowest cost producer. Usually large firms with E.O.S. Either offer lowest price for market share or enjoy higher profit.

Usually for standard no frills products, where lots of competition and elastic demand

Question 12

Differentiation

Answer 12

Making product different to competitors in the eyes of customers. Adds value for premium prices

Question 13

Focus and when is it suited

Answer 13

Concentrates on niche markets, either to achieve cost advantage or differentiation.

Suited for firms with fewer resources

Question 14

Bowman’s strategic clock

Answer 14

Shows different positioning strategies through combinations of price and added value

Question 15

8 types:

Answer 15

1. Low price, low added value (no frills)
2. Low price
3. Hybrid
4. Differentiation
5. Differentiation focus
6. Increased price/standard value (risky high margins)
7. Monopoly pricing (high price low value)
8. Low value standard price (loss of market share)

Question 16

What does market penetration require

Answer 16

Knowledge of customers, non users and competitors

Question 17

What does market development require

Answer 17

Research into new market, and careful advertising to position in new market

Question 18

Disadvantages of cost methods (Porters)

Answer 18

Perceived quality

Question 19

Differentiation pros and disadvantages (3,2)

Answer 19

Premium price
Brand loyalty
Reduce threat of comp

• hard to find ways that are hard to imitate (difficult and costly)
• tastes change

Question 20

Focus pros (2,3)

Answer 20

Better understanding of customer needs, respond faster
Premium prices (large firms don’t compete)

• Lower volumes of sales
• risk of imitation
• vulnerable to market change