Theories of corporate strategy, resources, SWOT analysis. pages 5-13 (3.1.2-3.1.4)

What is Ansoff's matrix?
This model helps a business analyse its strategy through the products that it offers and which markets it is competing in.
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What are the four types of strategy?
Market penetration, Product development, Market Development, Diversification.
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What is the market penetration strategy?
This is when a business sells more of its already existing products, in an existing market. Companies achieve this through strong product promotion and pricing initiatives. This can be used to increase market control.
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What is the product development strategy?
This is the development of a new product, which is then introduced to an existing market. Companies work on product development in many ways, such as improvements to packaging or innovation on ingredients.
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What is the market development strategy?
Businesses aim at a new segment, such as introducing their goods to different countries or repackaging to teenagers. Firms achieve this through pricing initiatives, promotion and research, among other methods.
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What is diversification within Ansoff's matrix?
This is the highest risk wherein companies enter a new market with a new product. If successful, the product will help the company spread its risk. i.e if one market/product fails, there is always another one to pick up the slack.
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How can businesses use Ansoff's matrix?
Businesses can better understand their options that are available to them, choosing how it wants to grow. Can help businesses concentrate on the elements of the marketing mix that are most likely to affect them.
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What are the disadvantages of Ansoff's matrix?
The four cells of this model do not always line up with real life businesses. It is the most commonly used model in strategy. Businesses should use other methods to be innovative.
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What is Porter's strategic matrix?
It demonstrates how to gain competitive advantage over rivals, either through a firm, a brand or a product/service.
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`What are the four areas of Porter's strategic matrix?
Cost leadership, Differentiation, Cost focus, Differentiation focus.
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What are on the X and Y axis on Porter's matrix?
Y: Top - mass market Bottom - Niche market. X: Top - Differentiation Bottom - Cost.
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What is meant by cost leadership within the strategic matrix?
This is when a firm leads the market in terms of the lowest possible costs. Businesses running the cost leadership strategy may still sell at the market price but cut their costs a minimum. Use of economies of scale. Fight off rivals.
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Give an example on how a business uses the cost leadership strategy?
Asda, they keep their prices low to keep demand and fend off rivals. They examine internal actions in relation to costs.
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What is meant by differentiation within the strategic matrix?
Businesses work towards differentiation through innovation in order to create a unique product. This strategy requires significant R&D, a highly efficient workforce and/or top marketing skills to succeed.
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Give an example on how a business uses the differentiation strategy?
For example, Dyson. They trialled thousands of the same products in order to create the right one. This technique looks at the business from an outwards view to meet customer needs.
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What is meant by cost focus within the strategic matrix?
Companies concentrate on providing a specialised service to a niche market, which is either cost focused or differentiation focused.
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Give an example on how a business uses the cost focus strategy?
Mondelez international. The business concentrates on a particular area, the processed food and beverages market.
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How do businesses use the strategic matrix?
Helps businesses better understand the options of competitive advantage available to them. Helps them understand the options available for competitive advantage, companies can assess the potential for risk.
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What are the disadvantages of the strategic matrix?
Porter claimed that a business must fit into one single category in order to achieve strategic success. If the market changes, the business's strategy would no longer be relevant.
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What is the boston matrix?
It helps businesses decide which products they should keep/discard and which new products they should add in order to strengthen their portfolio. Businesses decide this by focusing on market share and growth. Both are important elements to success.
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What are the four aspects of the Boston matrix?
Cash cows, Stars, Problem child, Dogs.
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What are stars?
The leaders in business, stars achieve high share in a market that is experience strong growth. They represent increasing sales rev. for a company. However, high-growth markets are very attractive to competitors so the company will invest heavily.
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Give an example of a star business.
YouTube. The service continues to grow, with people using it all around the world. It brings in a lot of money for its owner company, Google but requires large investments to remain the best.
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What are cash cows?
These have a large share of a low growth market. Cash cows are normally found in established, mature markets. The low growth of these markets makes them less attractive to competitors and so little advertising is required. They earn lots of cash.
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Give an example of a cash cow business.
Coca Cola. The company's product range represents a large share of the beverage market, though the market itself changes very little.
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What are problem children?
Products that compete in a competitive and growing market. The potential for the product to generate sales increases but the actual market share of the product stays the same.
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What are dogs?
They are in a low growth market, with very little share. These products are most unlikely to turn a profit. However, products such as chocolate bars that have little share of a low growth market still manage to generate millions in revenue.
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What are the benefits of the Boston matrix?
Simple to understand. Businesses can see where to place their cash reserves in order to grow. As it is simple to understand, it is also easy to test potential strategic ideas.
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What are the disadvantages of the Boston matrix?
Getting data on the market can be difficult. It is two dimensional. High market share does not mean never ending profits.
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In Kay's model of distinctive capabilities, what are the three possibilities for competitive advantage?
Architecture. Reputation. Innovation.
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What does architecture involve?
Positive management of relationships. Encouraging individuals to meet the aims of the company. Creating and maintaining a culture of cooperation.
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What does Kay mention about reputation?
Kay views this as vital in gaining a competitive advantage. It involves conveying to the customers that products are good quality. And the selling price is fair for consumers.
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What does Kay mention about innovation?
This is difficult for businesses. The difficulty comes from the costs and uncertainty associated with the innovation process. Management is required to inspire innovation. Allocation of rewards.
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What are the distinctive capabilities in business?
Most businesses exist in order to make a profit and so the success of a firm is decided by how much value it adds to its inputs. All three of Kay's values add value to the business by making them more competitive.
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What are strategic decisions?
Long term decisions that a business makes in order to build its strategy and achieve its ultimate goals.
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What are tactical decisions?
These are shorter term decisions that a business makes in order to support its strategy.
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In what way can each of these decisions affect a business (resources!)?
Human, psychical and financial resources. Strategic decision of cutting costs by 10%, for instance can increase the amount of finance a business has but at the same time, decrease the motivation of employees.
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What is a SWOT analysis?
Strengths, Weaknesses, Opportunities, Threats.
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What is meant by strengths and weaknesses?
These are internal factors affecting a business within its control.
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Give some examples on strengths within a business regarding SWOT.
+Innovation, Quality, Efficiency, R&D, Investment in fixed assets, Training, Profitability, Communications.
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Give some examples on weaknesses within a business regarding SWOT.
Limited opportunities for employee training. High staff turnover. Products nearing end of life cycle. Poor communications. Bad reputation as an employer. Negative cash flow. Limited experience in market. Poor location.
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What are opportunities and threats in terms of SWOT?
External factors affecting the business that it cannot change. Firms often can only react to changes in their external environment.
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Name some examples of opportunities in terms of SWOT to a business?
New markets opening abroad. Low wages and high unemployment. Fall in exchange rate. Social trends shifting to green products. Main rival is in financial trouble. Government policy encourages spending.
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Name some examples of threats in terms of SWOT to a business?
Ageing population leads to fewer sales, Taxes increasing for particular firms, Maturation of product life cycle is imminent, Competition levels are high, Pressure groups threaten business, Technology makes products obsolete.
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What does PESTLE stand for?
Political. Economic. Social. Technology. Legal. Environmental.
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What are political influences?
Taxation, whether direct or indirect tax. Such as corporation tax or VAT can affect a business. When taxes are increased, businesses must compensate for this somehow. Raising prices may scare away customers whereas lowering them wont generate any rev
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What are economic factors within PESTLE?
E.g, consumer demand increases as an economy moves through the business cycle. With a rise in demand, companies are able to generate more sales and maximise profit. Increasing cash flow, and therefore opening more opportunities for investments.
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What are social factors within PESTLE?
Factors such as trends. Companies may need to change how they act to keep up with society and what they provide to keep up with trends.
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What are technology factors within PESTLE?
New, improved processes and rival products are two of the many factors here that can influence a business. New technology may help businesses improve efficiency, or reduce their demand as customers don't need them.
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What are legal factors within PESTLE?
With all employment legislation, such as Equal Pay Act and Disability Discrimination act, there are costs involved. Businesses must comply with legislation and so may need to purchase new equipment or facilities.
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What are environmental factors within PESTLE?
Factors such as wars, diseases can affect businesses through trade and import/exporting.
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What are Porter's five forces?
Bargaining power of market suppliers. Threat of new entrants to the market. Bargaining power of market buyers. Threat of substitute products/services. These all lead to the rivalry of the market.
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What is meant by new entrants?
Firms that already exist within the market need their goods to be at the right quality and price. This is so they can compete should a new competitor enter the market. Likewise, businesses work on improving the promotion and USP.
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What are substitutes?
These are the alternative products that a customer might want to buy instead of what the business offers. Substitutes will depend on many elements, including price, perception, availability and convenience.
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What is buyer power?
If a market has many producers but only a few consumers, the buyers have a lot of power. Conversely, if there are many consumers and few producers, buyer power is much less significant.
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What is supplier power?
When there are many suppliers to a market, the power that each one has over the market is minimal. If, however, the source of goods/servies is focused to a select few suppliers, those suppliers have direct power over the market.
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