3.1.2 Theories of Corporate strategy.

What is the Ansoff Matrix?

Its is a matrix considering 4 factors Market (new/existing) Product (new/existing) to help business identify corporate strategy to use and the risks involved.

What is an Market penetration (Ansoff)

Selling more of an existing product in a current market by branding / innovation / sales promotions of the product. Eg. Apple they sell more of the same product in the same market by innovating and branding. (Aim is to drive up market share)

What are the benefits of market penetration?

The product is already known in the market that it is in. This means that people are more likely to buy as the brand is known - this is the least risky. This helps business gain new and repeat customers which increase market share. Costs are also lower back you don’t need to do as much research and development or market research.

What are the drawbacks of market penetration?

Limited potential in a saturated market - especially if the product may be in the maturity phase (could be a risk of price war) this means that it is harder to gain a higher market share.

What is product development (Ansoff)

Product development is creating a new product in an existing market, eg. Dyson bringing straighter in market after their hairdryer.

What are the advantages of product development.

The business eg. Dyson are already established in the market - more likely to make sales and grow from the new product.

What are the disadvantages of product development?

If product isn’t effective (could ruin business’ brand image) can lead to opposite of growth.

What is market Development (Ansoff)

Where you Put an existing product in a new market in order to grow market share. eg. Coca Cola take their products to another country.

What are the benefits of market development?

There is a larger amount of potential customers - this means more people are aware and able to buy the product.

What are the disadvantages of market development?

It is risky - there may be established competitors already in the market - customers may already be loyal to those business. You may also have to adapt your product to that market increasing costs.

What Is diversification?

Diversification in creating a new product in a new market.

What are the benefits of diversification?

This can help business raise through the ceiling - if other market is mature and product growth isn’t High - new ideas in a new market could potentially help business grow.

What are the drawbacks of diversification?

The business has a lack of product / market knowledge and experience this could lead to potential faults / lack of customers.could ruin brand image.

Which Ansoff strategies are short term?

Market penetration is the shortest term - this is because the market and the product is staying the same - you’re just innovating and advertising but not entering a new market / new product.

Which Ansoff matrix are longer term?

Market development, product development and diversification. this is because more research and development / advertising / production / market research needs to take place and in market development / diversification you start with no market share.

What are the Ansoff links to an LTD?

They could do diversification because they invite shareholders that share there values - this means that they would accept years for returns on their investment and going into a new market with a new product would likely have some losses however it would be hard because with them not being a plc less likely to gain enough capital.

Could also do market penetration - cheaper with their lack of capital from invesrtments.

What are the Ansoff links to plc?

Basically of them link to PLC as they can use the capital gained by shareholders to invest into the business. however the development and diversification sides can be resisted by shareholders in a PLC because many investors want quick returns.