Theme 3 Summary

What is Ansoff’s Matrix used for?

Developing a marketing strategy

What are the elements of Ansoff’s Matrix?

• Market penetration

• Market development

• Product development

• Diversification

What is market penetration?

Existing product existing market

What is market development?

Existing product new market

What is product development?

New product existing market

What is diversification?

New product new market

Which element of Ansoff’s Matrix is the least risky?

Market penetration

Which element of Ansoff’s Matrix is the most risky?

Diversification

What does market penetration entail?

Sales promotion, extension strategies, aggressive pricing

What is an advantage of market penetration?

Cheap

What is a disadvantage of market penetration?

Doesn’t expand business

What is an advantage of market development?

Reputation helps boost sales in new market

What is a disadvantage of market development?

Requires extensive research

What is an advantage of product development?

Brand loyalty

What is a disadvantage of product development?

Could damage reputation in current market

What is an advantage of diversification?

Expansion

What is a disadvantage of diversification?

Research, development, and market research

What are the elements of Porter’s Generic Strategies?

• Low cost

• Highly differentiated

What happens if you don’t focus on either of the elements in Porter’s Generic Strategies?

Stuck in the middle - failure

What are the elements of Kay’s Model of Distinctive Capabilities?

• Architecture

• Innovation

• Reputation

What is is architecture according to Kay?

Relationship with key stakeholders for efficiency

What is innovation according to Kay?

Nailing competitors with new ideas

What is reputation according to Kay?

Good customer service

What does SWOT stand for?

• Strengths

• Weaknesses

• Opportunities

• Threats

What parts of SWOT analysis are internal?

• Strengths

• Weaknesses

What parts of SWOT analysis are external?

• Opportunities

• Threats

What do strengths and weaknesses in SWOT refer to?

• Finance

• Operations

• Marketing

• Personnel

• Culture

• Ethics

What do opportunities and threats in SWOT refer to?

PESTLE

What does PESTLE stand for?

• Political

• Economic

• Social

• Technological

• Legislation

• Ethics

What is one thing that political refers to in PESTLE?

Corruption

What is one thing that economic refers to in PESTLE?

Recession

What is one thing social refers to in PESTLE?

Population

What is one thing that technology refers to in PESTLE?

Research and development activity

What is one thing environmental refers to in PESTLE?

Corporate Social Responsibility

What is one reason why businesses might want to grow?

Increased market power over customers and suppliers

What is a problem that can arise from growth?

Overtrading

What is overtrading?

Expanding too quickly and not having enough resources to fulfill orders

What is diseconomies of scale?

When costs of production increase as output increases

What is a merger?

When 2 or more companies join

What is a takeover?

When one company buys another

What is horizontal integration?

2 businesses of the same sector join

What is forwards vertical integration?

Business joins one further in supply chain

What is backwards vertical integration?

Business joins one the stage behind in the supply chain

What is organic growth?

Expanding internally

What is an example of organic growth?

Buying new machinery

What is an advantage of organic growth?

Can maintain current management style

What is a disadvantage of organic growth?

Time consuming

What is inorganic growth?

Expanding through mergers or takeovers

What is an advantage of inorganic growth?

Can remove a competitor

What is a disadvantage of inorganic growth?

High risk

What is one reason for a business staying small?

Offer a more personalised service

What are investment decisions?

Use of resources to invest in non-current assets in hope of making a profit

What is discounting?

Accounting for inflation

What are decision trees?

Visual way of presenting the alternative courses of action available when making a choice

What is the critical path?

Set of activities that will lengthen the project if delayed

What is total float time?

Spare time between the time an activity takes and the time it must be completed without delaying the whole project

What is free float time?

Amount of time a task can be delayed without it affecting the next task

What is payback?

Time it takes before the money invested is received

What is net present value also known as?

Discounting

What is average rate of return?

Assessing profitability of an investment

What is the formula to work out payback?

Cash to be recovered/cash generated in the next year x 12

What is an advantage of payback?

Helps cash flow management

What is a disadvantage of payback?

Good investments may be dismissed

What is the formula to work out average rate of return?

Average annual return/initial investment x 100

What is an advantage of average rate of return?

Considers inconsistent net cash flows

What is a disadvantage of average rate of return?

Fails to take timing into account

What are the steps to work out net present value?

• Multiply net cash flows by discount factor

• Add all up

• Subtract initial investment

What are the steps to work out average rate of return?

• Add up net cash flows

• Deduct initial investment

• Divide by number of years

• Divide by initial investment and multiply by 100

What is an advantage of net present value?

Can choose different discount factors

What is a disadvantage of net present value?

Only considers financial

What can change the results of any investment appraisal technique?

External shocks

What is an advantage of critical path analysis?

Enhanced project management

What is a disadvantage of critical path analysis?

Disregarding non-critical elements

What is an advantage of decision trees?

Easy to interpret

What is a disadvantage of decision trees?

Unstable - can change easily

What is short-termism?

Focus on short term results at the expense of long term interests

What is long-termism?

Delayed gratification

What is evidence based decision making?

Facts based approach

What is subjective decision making?

Personal opinions, emotions, intuition

What is an advantage of short-termism?

Investor satisfaction

What is a disadvantage of short-termism?

Cutting corners

What is an advantage of long-termism?

Reputation

What is an example of short-termism?

Hard HR - quick gains

What is an example of long-termism?

Soft HR - building workforce

What is corporate culture?

Personality of a workplace

What are Handy’s corporate cultures?

• Power

• Role

• Task

• Person

What is power culture?

Decisions coming from one centralised figure

What is an advantage of power culture?

Quick reactions

What is a disadvantage of power culture?

Might lead to poor decisions made on instinct

What is role culture?

Formal hierarchy - tall

What is an advantage of role culture?

Clear job descriptions

What is a disadvantage of role culture?

No flexibility

What is task culture?

Teams are formed - matrix

What is an advantage of task culture?

Teamwork

What is a disadvantage of task culture?

Lacks depth - people change projects a lot and can’t become specialist

What is person culture?

People believe they are superior to the business - all have similar background

What is an advantage of person culture?

Person with most relevant skills will be making the decisions

What is a disadvantage of person culture?

Self-centred

How is corporate culture formed?

Internal factors

What is Corporate Social Responsibility?

Commitment to behave ethically