3.1.2 Theories of corporate strategy

Question 1

triangle

Answer 1

mission statement
corporate obj
functional obj
strategy

Question 2

corporate strategy

Answer 2

medium to long term actions a business takes to achieve its aims (HOW business achieves aims)

Question 3

market penetration

Answer 3

sells more existing product to existing customer/market
growth strategy

aim: increase market share, sell more existing product to same target customers

Question 4

market development

Answer 4

sells existing product in new market
growth strategy
business seeks to sell existing product in new mkt

Question 5

product development

Answer 5

bus launch new product to existing customers
aims to introduce new products in existing markets
growth strategy

Question 6

diversification

Answer 6

sell new product new market
growth strategy
successful diversification = reduce risk = spread risk across different places
business markets new products in new markets

Question 7

ansoff’s matrix

Answer 7

existing market:& existing product MP
existing market & new product PD
new market & existing product MD
new market & new product D

Question 8

risk levels on Ansoffs matrix

Answer 8

least: 
market penetration (bus already know both customer and product and experience in area) 

product development & marker development (more unknowns lack of knowledge and/or experience of product or market

most:
diversification (no knowledge and/or experience of either products/ or market - mistakes are easy to make = leading to failure

Question 8

risk levels on Ansoffs matrix

Answer 8

least: 
market penetration (bus already know both customer and product and experience in area) 

product development & marker development (more unknowns lack of knowledge and/or experience of product or market

most:
diversification (no knowledge and/or experience of either products/ or market - mistakes are easy to make = leading to failure

Question 9

methods of market penetration

Answer 9

1. advertise/promote product
2. sales promotion techniques (coupons, competitions, BOGOFF)
3. decrease price, use promotional prices
4. expand channels of distribution e.g. direct to customers & through retailers/wholesalers
5. open more stores
6. sign up more retailers to stock product

Question 10

ADV & DIS of market penetration

Answer 10

ADV:
business focus on market and product known = reduce risk
exploit insights on what customers want (& competitors)
unlikely to need significant new market research

DIS:
will strategy allow business to achieve growth objs?
still some risk to strategy

Question 11

methods of product development

Answer 11

1. product extension strategies (modification/ improvements to existing product/ increase sales after saturation)
2. umbrella brands/ brand proliferation (business launches independent sub-brands under overall umbrella brand e.g. Unilever = PG tips and walls ice cream
3. brand extension (new products added under an existing brand e.g. Dove

Question 12

ADV & DIS of product development

Answer 12

ADV:
often plays to strengths of established business = brand loyalty already established = easy to persuade customers to try products
market research techniques = gain insight into existing customer needs

DIS:
expensive (research, develop, launch)
may not be 1st to market = decrease effectiveness of launch
customers dont like new product = affect brand image

Question 13

methods of market development

Answer 13

1. re-branding existing product = appeal new customer e.g. grab and go soup = aim at different mkt segment
2. sell into new country setting up retail outlets e.g. M&S opening in India
3. sell into new country = use local distribution partner or licensing agreement e.g, Coca Cola India or integrating with another business or through joint venture

Question 14

ADV&DIS of market development

Answer 14

ADV:
effective strategy where existing mkts are saturated or in decline (push factors) or where huge potential in emerging mkts (pull factors)
increases global reach & brand awareness when targeting footloose customers

DIS:
more risky than PD = expansion into international = external env/cultures = different
existing product = not suit new market = depend on customer needs e.g. ethnocentric vs geocentric

Question 15

methods of diversification

Answer 15

1. innovation & R&D = develop new solutions e.g. Amazon - cloud computing
2. acquire existing business in new market through conglomerate integration e.g. Virgin group buying Telewest
3. extend existing brand into new market e.g. Tesco Fresh n easy stores in US

Question 16

ADV&DIS of diversification

Answer 16

ADV:
high growth potential
done successfully = reduce risk of 1 product/market failing (risk bearing EOS)

DIS:
inherently risk strategy
no direct experience of product/mkt
have few EOS (initially)

Question 17

food retailing market Boston matrix

Answer 17

cash cow = UK
rising star = China/vietnam
problem child = Libya
dog= democratic republic of Congo

range of countries as = spread risk, alternative revenue stream

Question 18

porter’s generic strategies

Answer 18

find a way of competitive adv (2 strategies = differentiation, low cost) low cost = EOS

1. cost leadership (selling prices = similar low cost = profit, low price = gain MS)
   (successful; profit increase by cost decrease av prices)
2. cost focus (not viable)
3. differentiation leadership
4. differentiation focus (niche mkt)

Question 19

competitive adv

Answer 19

adv over competitors gained by offering consumers greater value (either lower price/greater benefits/service justifying higher price)

Question 20

cost leadership strategy suited for

Answer 20

1. standard product
2. little product differentiation
3. branding unimportant

Question 21

ways to achieve low cost

Answer 21

1. bargaining power = negotiate low price
2. LEAN
3. efficient, high productivity
4. high CU
5. large scale = economies
6. distribution access wide/important

Question 22

ways to achieve differentiation

Answer 22

product distinctively different from competitors (customers value)

1. branding (loyal)
2. wide distribution (major channels)
3. superior product quality (features)
4. sustained promotion (advertise/sponsor)

Question 23

product differentiation

Answer 23

business uses to make product stand out from competing products
marketing
design
quality

point of differentiation cant be copied
lose competitive adv = customer loyalty = fail strategy

Question 24

mass vs niche market.

Answer 24

mass: mkt for goods on large scale for significant no of consumers niche: segment of larger mkt defined by own unique needs/preference/identity = different from larger mkt

Question 25

distinctive capability

Answer 25

form of competitive advantage that is sustainable as it is difficult for other firms to replicate this

Question 26

3 types of distinctive capability

Answer 26

John Kay foundation of corporate success (1995) 1. architecture (strength of relationships within organisation between employees, also with suppliers) 2. reputation (build strong brand image) 3. innovation (develop new products/processes)

Question 27

strategy

Answer 27

long term refers to achieving an overall goal or target of a business e. g. ansoffs, porters, Boston e. g. mergers/takeovers/joint ventures

Question 28

tactic

Answer 28

shorter term actions help achieve strategy e. g. existing distribution channel = reach new mkt e. g. method of promotion e. g. which SOF e. g. whether to drop price e. g. which retailers to sell through

Question 29

functional areas

Answer 29

1. human (recruit, re-skilling, training, redundancy, restructure) 2. physical/operations (purchase new equip/machines, location, outsource) 3. financial (costs, cash flow, new SOF)