Business Studies Unit 3 topic 2

Unit 3 Business Studies gce (A2) WBS03 papers Revision Booklet 

Corporate strategy 

Strategy - is a map that shows how business plans to get from where it is to where to wants to be 

Strategical decisions - long term decisions used by the top level of management

Tactical decisions -  short term decisions made by lower level of management 

Tools for Corporate Planning

1. Managing Product Portfolio
2. Management of Growth
3. Assessing Market/Industry Competitiveness
4. Achieving Competitive Advantage

1.) Managing Product Portfolio

Tools : Boston matrix

           Product Life Cycle Diagram

Boston Matrix

1. Problem Child - generates no positive cash; everything is invested it it’s development
2. Stars - at growth stage; generates some money but needs investment to reach full potential 
3. Cash Cow - generates largest amount of revenue
4. Dogs - at decline stage; generates negative revenue 

Boston Matrix & Corporate Strategy 

• Hold: attempt to maintain the current position - this means do nothing
• Build: invest in order to develop market share - this may mean sacrificing short term profits
• Harvest: maximise short term profits - choosing not to invest in products 
• Divest: get rid of some products (dogs) - us capital to invest in new ones

Value of Boston Matrix 

1. Guiding financial strategy - helps to decide which products to invest in, hold to get rid of
2. Shapes marketing strategy - company will know what strategy to apply to different product categories
3. Creating a balanced portfolio management - ensures there are enough cash cows and less dogs

Growth Strategy 

Tools: Ansoff’s Matrix 

1. Market Penetration: focus on selling existing products in existing markets; almost no risk

a.) Maintains or Increase market share:

• Penetration Pricing
• Sales Promotions 
• Buy one get one free
• After sales services etc.

b.) Secure dominance of growth markets

c.) Increased usage of existing products/loyalty 

d.) Driving out rivals: done by aggressive marketing strategies (lowering prices).

2. Market Development: trying to sell existing products to new markets; increase possibility pf risks as company might enter unknown market; needs careful market research

a.) New geographical markets (new countries)

b.) Finding new uses of a product

c.) Finding new distribution channels

d.) Different pricing policies; to attract customers

e.) Changing product ingredients; e.g. flavours 

3. Product Development: aims to introduce new products to existing markets; could be a modification of a previous product; can be risky as developing new products is expensive and there’s no guarantee it will succeed.

4. Diversification: selling new products to new markets; it’s risky and requires a lot of market research, firm had little/no knowledge about market/product.

Assessing Market/Industry Competitiveness - there are several models/theories that help to assess firm’s competitiveness/attractiveness

Porter’s 5 forces model:

• The power of buyers: buyers are more powerful when there are few of them and when products are standardised 
• The threat of new competitors: the threat is greater when the market is profitable and there are few barriers to entry
• The threat of substitutes: the threat is greater when substitution is easy for buyers and the…