3.1.2 Theories of Corporate Strategy - Coggle Diagram
3.1.2 Theories of Corporate Strategy
- when a business sells an existing product in an existing market. The main aim here is to maintain or increase market share of current products e.g. through advertising.
- when a business sells an existing product in a new market. Has a moderate level of risk and market research is needed before entering the market especially if it's a foreign market.
- when a business sells a new product to an existing market. Less risky than market development as the business knows the market that its operating in. Likely to be carried out through innovation.
- when a business sells a new product to a new market. This is a high risk strategy as the business doesnt know the product or market and so significant market research is needed. However, a benefit of this is that the risk is spread across multiple markets.
Porter's Strategic Matrix
a business tool used in order to find a sustainable competitive advantage.
- when a business becomes the lowest cost producer in the market. This enables the business to either charge a lower price, increasing sales, or increase their profit margins. Usually gained through economies of scale, which requires high productivity levels.
- when businesses targeting large markets aim to achieve a competitive advantage by differentiating their goods and services from competitors. Through higher quality, branding or promotion.
- when the business tries to achieve a cost advantage in a relatively small market.
- when a business tries to differentiate their product from competitors in a small market. As this is in a niche market it means that businesses are more able to differentiate their product for consumers with different needs.
Effect of Decisions on Resources
- the long term plan to achieve the businesses overall goals.
- the short term plan that helps keep the business on track to achieve its strategy.
- The strategy may be to make a profit. However, if there is a recession then the tactic may be to make redundancies as staff are no longer needed due to the lower demand.
- The strategy have a good reputation. However, in order to do this the business may invest in machinery in order to match an increase in demand.
- A businesses strategy may be to grow by 20%. However, if interest rates are high then the business may decide to borrow money from selling shares rather than loans.
Achieving competitive advantage through distinctive capabilities
- relationships between the business, employees, suppliers and customers. Strong and effective relationships adds value by being more efficient regarding the transfer of information, allowing the business to respond quickly to market changes.
- the customers own experience and word of mouth created by the business having good customer service and quality products. Creating loyal customers and giving the business an edge over competitors.
a form of competitive advantage that can't be easily reproduced.
- differentiates a business from its competitors, however this is likely to only last for a short period and a lot of investment in R&D is needed.
a method of categorising all of the products and services of a firm and decides where each fits in within the strategic plans.
Aim's of Portfolio analysis
gives a full detailed overview of all the products in the current business portfolio
looks at the performance of each of these products by examining: current and projected sales, costs and activity of competitors and risks that can effect performance
Stars: High growth products in High growth market
Cash Cows: Low growth products with high market share. They generate more cash than they consume
Question Marks: Products with low market share in high- growth markets. Consume more cash but give little in return. Potential for growth into stars
Dogs: Products with low market share in low growth markets. They may break even, little prospect of future growth.