3.8 Choosing Strategic Direction

Question 1

What is strategic direction?

Answer 1

Strategic direction is the general path of business takes, based on its missions and achieving its objectives

Question 2

What are the key factors in setting a new direction?

Answer 2

Key factors in setting a new direction include the choices of which markets to compete in, what products to offer and which direction the business should grow in

Question 3

What five factors influence the choice of market?

Answer 3

Type of product
Level of competition
External factors
Internal resources
Attitude to risk

Question 4

What are five factors that influence products?

Answer 4

Research and development
Competitors
Technology
Finances available
External factors

Question 5

What is Ansoff’s matrix used for?

Answer 5

Ansoff’s matrix is a tool for comparing the level of risk involved with the different growth strategies and it helps managers to decide on a direction for strategic growth

Question 6

What are the two axes labelled as on the Ansoff matrix?

Answer 6

Products (existing and new) and markets (existing and new)

Question 7

What are the four quadrants of the Ansoff matrix?

Answer 7

Market penetration
Product development
Market development
Diversification

Question 8

What is market penetration? (Ansoff matrix)

Answer 8

Market penetration means trying to increase your market share in your existing market

Question 9

What is product development? (Ansoff matrix)

Answer 9

Product development is selling new products in your existing markets

Question 10

What is market development? (Ansoff matrix)

Answer 10

Market development is selling existing products to new markets

Question 11

What is diversification?  (Ansoff matrix)

Answer 11

Diversification means selling new products to new markets. This is the most risky strategy

Question 12

What is strategic positioning?

Answer 12

Strategic positioning means choosing how to compete with the other businesses in the market. A business says positioning strategy is part of the marketing strategy – the choice influences the general direction the business develops in and affects all areas of the business

Question 13

What are the two types of competitive advantage that Porter identified?

Answer 13

Cost advantage and differentiation advantage

Question 14

What is cost advantage?

Answer 14

A business can get a competitive advantage by selling a similar product at a lower cost than its rivals

Question 15

What is differentiation advantage?

Answer 15

Selling better products at the same or a slightly higher price compared to competitors creates a competitive advantage. Offering a product that consumers see as different from competitors products can make consumers think it’s better

Question 16

What are the three generic strategies that Porter suggested to gain advantage?

Answer 16

Cost leadership
Differentiation
Focus

Question 17

What does Porter’s strategic matrix help decide on?

Answer 17

Porter strategic matrix helps decide on a competitive strategy

Question 18

What does Bowmans strategic clock show?

Answer 18

Pricing and differentiation strategies

Question 19

What does position 1 in the Bowmans strategic clock correspond to?

Answer 19

Position 1 corresponds to a strategy of low-priced products with low added value – this will only be successful if the product sell in a high volume

Question 20

What does position 2 on Bowman’s strategic clock correspond to?

Answer 20

Position 2 corresponds to the cost leadership section of Porter’s strategic matrix

Question 21

What does position 3 on Bowman’s strategic clock represent?

Answer 21

Position three is the hybrid area – modest prices with a relatively high perceived added value

Question 22

What do positions 4 and 5 on Bowman’s strategic clock correspond to?

Answer 22

Position 4 corresponds to the differentiation section of porters strategic matrix and position five corresponds to the differentiation and focus section

Question 23

What do positions 6 to 8 (the grey area) represent on Bowman’s strategic clock?

Answer 23

Positions 6 to 8 combine a high price with fairly low perceived added value. Unless a company has a monopoly, if it adopts these positioning strategies it will ultimately fail