3.8 Choosing strategic direction Flashcards
(10 cards)
What are the factors influencing which markets to compete in and which products to offer?
- market size and growth potential
- level of competition
- customer wants and needs
- economic and political stability
- access to infrastructure and resources
- cultural and legal environment
- customer preferences and trends
- product life cycle
- tech and innovation
- profitability and costs
- brand and strategic fit
Refer to Ansoff’s Matrix.
What are the reasons for choosing different options for strategic direction?
- growth ambitions, businesses wanting to grow quickly may choose market development and product development.
- responding to market conditions, e.g. due to changing consumer behaviour
- level of risk tolerance
- resources and capabilities
- corporate objectives and mission
- stakeholder influence, shareholders want rapid growth= diversification.
What is the value of different options for strategic direction?
- Market Penetration, helps improve brand loyalty, increase sales volume, and use existing resources, good for markets with growth potential or untapped customers. Limitation: Limited growth if market is saturated or highly competitive
- Product Development, allows innovation and differentiation, can deepen customer loyalty and increase average spend, useful when existing customers want new features or upgrades. Limitation: High R&D and marketing costs; risk of product failure
-Market Development, taps into new revenue streams by reaching new demographics or locations, ideal if the product has universal appeal or strong brand recognition, can help spread risk across multiple markets.
Limitation: Risk of poor cultural fit, legal barriers, or high entry costs
-Diversification, highest growth potential, spreads risk — if one market fails, others may succeed, can give a first-mover advantage in emerging markets or sectors. Limitation: High risk – unfamiliar product and market, may overstretch the firm.
How to compete in terms of benefits and price?
Refer to generic strategies.
Porter’s strategies.
What are the influences on choice of a positioning strategy?
Strategic positioning, is choosing how to compete with other businesses in market.
- competitor positioning
- brand strength and resources, well-known brands with strong reputations can charge more and pursue premium positioning.
- businesses objectives and strategy
- product features and quality, nature of the product affects how it can be positioned: high-tech or design-focused = premium/differentiation, basic, mass-produced goods = low-cost/value.
- market conditions and economic climate, recession, consumers may be more price-sensitive, so businesses may shift towards value-based positioning, in boom periods, firms may push luxury or ethical values.
What is the value of different strategic positioning strategies?
Refer to porter’s generic strategies.
What are the benefits of having competitive advantage?
- unique selling pint over competitors
- premium pricing charge as cannot be substituted
- increased market share, due to brand loyalty from consumers
- higher profit margins
- brand loyalty and repeat purchases
- strong brand reputation
- barriers to entry for competitors
What are the difficulties of maintaining a competitive advantage?
- changing customer preferences, USP may no longer be valued.
- technological change, rapid innovation can erode advantages quickly, competitors may adopt better tech
- competitor imitation, rivals often copy successful strategies or products.
- globalisation, global markets expose firms to low-cost international rivals.
- rising costs, if advantage is cost based, any rises in costs can erode your advantage
-lack of innovation, firms that don’t reinvest in innovation or quality can fall behind. - regulation and ethical expectations, legal changes or ethical pressures (e.g. environmental rules, labour standards) may force strategy changes.
