Unit 3 Business Management

Market Penetration

selling an existing product to an existing market

Market Development

when you sell an existing product to a new market

Product Development

selling a new product to an existing market

Diversification

when you sell a new product to a new market

Risk Profile of Market Development

risky

Risk Profile of Market Penetration

least risky

Risk Profile of Product Development

riskier

Risk Profile of Diversification

riskiest

Related Diversification

selling a product similar to one you’ve already made to a new market

Unrelated Diversification

selling an unfamiliar product to a new market

potential customer

a customer who is willing to buy but isn’t

Advantages of force field analysis

graphically simplifies complex information, easy to understand, helps increase understanding of stakeholders and other factors preventing change, management knows whether to regulate driving or restraining forces

Driving force

a point towards change

Restraining force

a force against change

Limits of force field analysis

uses numbers to measure subjective/qualitative data, may cause conflict between stakeholders cited as restraining forces

Franchising

the process of giving another business rights to use the name, logo, and trading systems of an existing successful business

Benefits of being a franchisor

rapid growth with low risk, larger presence in bigger markets, royalty payments, doesn’t pay for day to day costs, franchisees are motivated towards success

Benefits of being a franchisee

low risk, relatively low start costs, large scale advertising from franchisor reduces costs, works in a market they are familiar with, gets support and advice from franchisor, established brand with customers and recognition

Disadvantages of being a Franchisor

huge issues if franchisees cause issues with your name attached, lack of control, quality and reputation at risk, growth is slower than M and A’s

Disadvantages of being a Franchisee

can’t use their own ideas, highly regulated, very expensive, pays royalties

Porter’s Generic Strategy

a framework for building competitive advantages

Competitive Advantage Definition

what sets a business apart from others

Competitive Advantage List

differentiation, cost advantage

Differentiation

uniqueness and quality

Differentiation Strategy

involves developing a product that offers unique features valued by customers, products often charged at premiums

Internal Strengths needed to use a differentiation strategy

amazing R&D, corporate reputation for innovation and quality, strong sales team to promote uniqueness

Cost Leadership Strategy

selling products at average industry prices to earn a higher profit or selling below industry averages to build market share, used by large businesses offering standard, satisfactory products

Market Share

the portion of a market controlled by a particular company or product.

Internal Strengths needed to use a Cost Leadership Strategy

high investment in advanced production, efficient production, efficient distribution channels

Distribution Channel

the path a product takes from a producer to a consumer

Focus Strategy

concentrates on a narrow market segment, aiming to achieve a cost advantage of differentiation

Differentiation Focus Strategy

aims to differentiate within one or in a small number of target market segments

Advantages of Strategic Alliances

access to new markets and customers, sharing of resources and expertise

Multinational Corporation

a for profit business with operations in more than one country

Subsidiary

a business made by a parent business that is placed elsewhere

Host Country

Where an MNC branches to

Home Country

Where an MNC comes from

Why do MNCs grow

increased customer base, cheaper production cost, economies of scale, companies can avoid protectionist policies, spreads risk by being in multiple markets, tax incentives