3.1.2 Theories Of Corporate Strategy

Question 1

What’s the link between a strategy and tactics?

Answer 1

A strategy is a long term plan of action to help achieve a business’s objectives. Tactics are short term plans to help a business achieve its overall strategy.

Question 2

What 4 options did Ansoff suggest for strategic growth?

Answer 2

1. Market penetration
2. New product development
3. Market development
4. Diversification

Question 3

What is market penetration?

Answer 3

Where the business focuses on selling existing products into existing markets, to increase their market share. (Low risk)

Question 4

What is product development?

Answer 4

Selling new products in existing markets (moderate risk)

Question 5

What is market development?

Answer 5

Selling existing products to new markets (moderate risk)

Question 6

What is diversification?

Answer 6

Selling new products to new markets (high risk)

Question 7

Advantages of Ansoff’s matrix

Answer 7

- Forces managers to think about the potential risks when moving in a certain direction.
- Shows the potential strategies for growth.

Question 8

Disadvantage of Ansoff’s matrix

Answer 8

- Doesn’t take into account what competitors are doing or how they might react to a strategy.

Question 9

What type of business is Ansoff’s matrix not useful to and why?

Answer 9

Large MNCs because its likely that they are operating in all 4 sections of the matrix.

Question 10

What are Porter’s 5 forces?

Answer 10

1. Competitors
2. Supplier power
3. Buyer power
4. Threat of substitutes
5. Threat of new entrant

Question 11

What 3 strategies did Porter suggest to gain competitive advantage?

Answer 11

1. Cost leadership
2. Differentiation
3. Focus

Question 12

How does cost leadership give businesses an advantage?

Answer 12

Aims for the lowest cost of production to achieve EOS.

In a price war, the firm can stay profitable due to their low costs.

Question 13

How does differentiation provide a competitive advantage?

Answer 13

It allows the business to charge premium prices

Question 14

How does focus provide a competitive advantage?

Answer 14

A focus strategy concentrates on niche markets which increases loyal customers, this makes it harder for other firms to compete.

Question 15

What does Kay’s model suggest?

Answer 15

That a successful business strategy is one that’s built on their distinctive capability.

Question 16

What is a distinctive capability?

Answer 16

Something that a business is good at, which competitors don’t do.

Question 17

What are the 3 distinctive capabilities outlined by Kay?

Answer 17

Architecture
Reputation
Innovation

Question 18

What do the 3 distinctive capabilities helps a business to achieve?

Answer 18

Added value and competitive advantage

Question 19

What is architecture and how does it help achieve competitive advantage?

Answer 19

Describes the relationship a business has with its main stakeholders. This helps gain a CA as sales might increase due to increased communication.

Question 20

How does reputation help achieve competitive advantage?

Answer 20

A good reputation means there’s more satisfied customers who are likely to be loyal to the brand. This makes it hard for other businesses to compete.

Question 21

How does innovation help achieve competitive advantage?

Answer 21

A business that invests resources into R&D will bring new products to the market which have a USP.