Ansoff's Matrix Flashcards
What is meant by strategic choices?
Strategic choices involve deciding the direction in which a business should move and the methods by which it should pursue this plan
What is meant by strategic direction?
The strategic direction sets out which markets a business will compete in and what products it will offer
What does the Ansoff matrix show?
The Ansoff matrix considers a firm’s strategy in terms of the products it offers and the markets in which it operates
Existing Markets
New Markets
Existing Products
New Products
What is market penetration on Ansoff’s matrix?
Strategies to boost sales of existing products in existing markets, aiming to boost market share.
Not worth it if there is little growth potential
What is market development on Ansoff’s matrix?
Involves offering existing products but targeting new market segments.
- geographical area
- demographical features
What is new product development on Ansoff’s matrix?
Developing new products for existing markets.
- R&D
What is diversification on Ansoff’s matrix?
Offering new products to a new market
- high risk
- unfamiliarity
- uncertainty
What factors must a business consider when deciding on a strategy?
- Expected costs
- Expected returns
- Opportunity costs
- Risk
- The fit with the resources and strengths of the business
- Impact on other stakeholders
- Ethical issues involved
What is strategic positioning?
The strategic positioning of a business refers to how it is perceived relative to other businesses in the industry
What did Porter identify as two possible positioning approaches for a business?
- Cost-leadership strategy
- Differentiation strategy
What is a cost leadership strategy?
A cost leadership strategy involves achieving lower costs than rivals in the same industry
What is a differentiation strategy?
A differentiation strategy involves offering more benefits than rivals in the same industry
How can a cost-leadership strategy be achieved?
Lower input costs
- owning suppliers
- located nearer supplies
Economies of scale
Experience
- source cheaper materials
- more efficient decisions
Product/process design
- design can make product more cost efficient
- budget airlines use local regional airports
What is meant by cost leadership with parity?
Cost leadership with parity involves charging the same price as rivals but because costs are lower, the profit margin is higher
What is meant by cost leadership with proximity?
Cost leadership with proximity involves having a lower price than rivals but because costs are lower it is possible to still make the same or higher profit margins than them
