Generating Strategic Options Flashcards
(28 cards)
What are Porter’s 3 generic stategies?
Cost leadership, Differentiation, Focus
Mnemonic: CLiF
What is cost leadership?
Becoming the lowest cost producer in the industry to offer low prices & gain market share
Application: Use in price sensitive markets (e.g. Aldi, Ryanair)
What is differentiation strategy?
Offering unique products/services customers value enough to pay more for
Application: Use in markets with brand loyalty (e.g. Apple / Nike)
What is focus strategy?
Targeting a narrow segment with either low costs or differentiated products
Example: Rolls-Royce (luxury focus), Poundland (budget focus)
What’s the risk of being ‘stuck in the middle’?
Trying to mix cost leadership & differentiation often leads to failure
What’s market segmentation?
Dividing a market by customer group (e.g. age, geography) to target more effectively
What is Bowman’s strategy clock?
A model showing 8 strategy options based on price and perceived value
What are the 4 useful Bowman strategies?
Low price / low value
Low price, differentiation, hybrid
Application: Hybrid = Aldi (low cost + decent quality)
What are the 4 risky Bowman positions?
Risky high margins
Monopoly pricing
Loss of value
Low value/ high price
Use only if little competition or high brand loyalty
Why is Bowman more flexible then Porter?
It allows hybrid strategies and shows combination, not just 3 positions
What is Ansoff’s Matrix used for?
To plan growth strategies by considering new/ existing products & markets
What are Ansoff’s 4 growth strategies?
Market Penetration
Market Development
Product Development
Diversification
Which Ansoff strategy is highest risk?
Diversification - both product and market are new
E.g. Amazon launching smart fridges
What’s the difference between related and unrelated diversification?
Related = uses existing capabilities (e.g. Apple into wearables)
Unrelated = new business area (e.g. Virgin into trains)
Which is Lynch’s expansion matrix?
A tool for choosing growth strategies
Home v Abroad
Internal v External
Organic v Inorganic
What is organic growth?
Internal growth using existing resources e.g. opening new stores
App: Slower but lower risk
What is inorganic growth?
External growth via M&A, joint ventures, alliances
App: Faster access to markets / resources but highest integration risk
What are the strategic factors when choosing a growth method?
Resources, speed, risk appetite, level of control needed
What are 2 main reasons for international expansion?
Cost / competence-led (cheaper ops)
Market-led (access to new customers)
What are common methods of international entry?
Exporting, licensing, joint ventures, alliances, subsidaries
What is a joint venture?
A new entity created by 2 firms to share resources & risks
Application: When is licensing preferred?
For fast entry with low investment. e.g. franchising McDonald’s abroad
What is divestment?
Selling or closing part of the business to cut loss or focus on core strategy
What are 4 methods of divestment?
Sales as a going concern, liquidation, demerger, management buyout (MBO)
