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Strategy + Planning (Ansoff's Product-Market Growth Matrix (Important…

- - - - Means they have a bigger cushion than competitors if attacked by a competitor using lower prices
      - Works well when price competition between rivals is especially vigorous
      - Works well w/ standardised products that buyers use in much the same way
      - Works well with low switching costs
      - By reinvesting the profit, for example in improving product quality, long-run superiority is more likely to be achieved
    - - Potential pitfalls if the price cut is too large: unsustainable. Also an issue if price cutting is the only tool used
      - The product can't be sophisticated bc there isn't enough money there to make it
  - - - Works well in a dynamic environment where buyer needs are diverse
      - Works well when few competitors are following a similar approach
      - There are many ways to differentiate a product/service
      - Customers are sometimes prepared to pay a higher price, for products that deliver superior value EXAMPLE: Starbucks is strongly differentiated bc customers will pay to experience the Starbucks experience
      - Differentiation can lead to greater levels of brand loyalty - EXAMPLE: Compared to ASDA, Waitrose provides a strongly differentiated supermarket experience
    - - Differentiation doesn't benefit the buyer
      - Over-differentiation
      - Potential pitfall: trying to charge too high a price for differences
  - - - Works best when target market offers growth potential; there are few rivals; an industry has many segments; competitors don't have specialised needs for the market
    - - Risks: low entry barriers; niche market may not last long; segment is v attractive