Year 2 Progress Exam - Ansoff and Porter’s Strategic Matrix

What are the 2 Matrix’s that businesses use to develop corporate strategy?

1. Porter’s Strategic Matrix

2. The Ansoff Matrix

How does Porter’s Strategic Matrix help develop corporate strategy?

Through focussing on Differentiation and Low Cost Operations, a firm can gain competitive advantage

Why would Low Costs be a good strategy in Porter’s Strategic Matrix?

• Can exploit EoC

• Little Product Differentiation = cheaper: less production lines

  • High Productivity/Efficiency

    • High Capacity Utilisation

  • Mass Market Advantages

E.g. Ryanair, Aldi

Why would Differentiation be a good strategy in Porter’s Strategic Matrix?

• Allows high prices

• Enables firm to have superior quality

• Strong Brand image benefits

• Enables continuous promotion - adverts, sponsors etc.

E.g. Apple, Costa etc.

What is a problem that can occur if a firm uses Porter’s Strategic Matrix?

A firm can get “Stuck in the Middle” between the 2 strategies

Why can firms get “Stuck in the Middle” when using Porter’s Strategic Matrix?

• Lack of clarity in how to compete

• Both strategies are conflicting = possible confusion = waste of resources

• Competitive Disadvantage: low cost/high differentiated rivals

Firms are susceptible to failure due to this

How can we avoid being “Stuck in the Middle” when using Porter’s Strategic Matrix?

• Choose one Strategy to focus on

  • Allows for direct resource allocation and clear direction

  • Have multiple Strategies? Create separate business units, with own policies/culture, to prevent confusion

E.g. McDonald’s, Sony etc.

What is the Ansoff Matrix?

A marketing planning mode that helps firms determine its product and market strategy

What is Market Penetration in the Ansoff Matrix?

When a business sells existing products in existing markets

Why may a firm use Market Penetration in the Ansoff Matrix?

• Aim: to increase Market share

• Selling established product that works (no new MR needed)

  • But must need differentiation to entice more sales

    • Can be more costly

• Can be cost efficient to make - mass market pros

What is Product Development in the Ansoff Matrix?

A growth strategy where a firm sells new products in existing markets

Why may a firm use Product Development in the Ansoff Matrix?

• Exploit the existing market

• Sell at higher price than usual

  • But must have innovation/differentiation before entering market

    • Established firms most able to do this

What is Market Development in the Ansoff Matrix?

A growth strategy where firms sells existing products into new markets

Why may a firm use Market Development in the Ansoff Matrix?

• Lower cost for international expansion (w/exports)

  • Don’t need to build production lines there

    • Less investment and risk

• Market may be saturated, so firm moves to new market

  • Firm must make sure product suits new market

    • Adapting for it can be costly (new promotion, needs etc.)

What is Diversificaiton in the Ansoff Matrix?

A growth strategy where a firm sells new products in new markets

Why may a firm use Diversification in the Ansoff Matrix?

• High risk = high reward

• Opportunity to become market leader

A firm does this by:

• Innovation/Differentiation

• Acquire existing firm in market

• Brand Stretching/extension