BUSINESS 3.8 - Choosing Strategic direction

What is the Ansoff Matrix?

tool used to analyse and plan growth strategies 

What are the 4 strategies of the Ansoff Matrix? 

product development, market development, market penetration, diversification 

What is market development strategy?

seeking new markets and adding new features to attract new customers 

What is product development strategy? 

developing new products for existing markets 

What is diversification strategy? 

developing new products for new markets 

which Ansoff Matrix strategy is the riskiest? 

diversification strategy 

What are the criticisms of Ansoff? 

no consideration for external environment, only outlines strategies for growth, subjective bias 

What did Porter suggest?

two strategies, differentiation and low cost are effective strategies for firms to gain competitive advantage

What are Porter’s strategies?

Market positioning, product differentiation, mass and niche markets, competitive advantage, corporate objectives

What is a competitive advantage?

advantage over competitors gained by offering consumers greater value

What is low cost strategy

becoming the lowest cost operator and benefit from economies of scale

Why is low cost a competitive advantage?

higher profit margin, can offer lower prices

What are features of a low cost business?

high productivity/efficiency, high capacity utilisation, cheap supplier deals, access to large distribution channel

What are examples of low cost businesses?

aldi, poundland

What is the purpose of differentiation?

making a product seem different from rivals

How can businesses achieve differentiation?

product quality, strong branding, wide distribution, wide promotion

What are the dangers of Porter’s generic strategies

being “stuck in the middle”

What is being “stuck in the middle”?

when businesses have neither the lowest cost or highest branding

What are hybrid strategies?

having both a low cost and differentiation (ikea)

What are the two types of competitive advantage?

comparative advantage, differential advantage

What is comparative advantage?

the ability to produce goods or services at a lower cost

What is a differential advantage?

the ability to offer a product or service that is perceived as unique

What are the benefits of a competitive advantage?

profitability, market share, bargaining power, innovation

What are the challenges of maintaining a competitive advantage?

technology, competition, differentiation