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Unit 8: Choosing Strategic Decision - Coggle Diagram
Unit 8: Choosing Strategic Decision
Porter's generic strategies
Focus on the strategic position- establishing and maintaining a competitive advantage
Cost leadership- mass market, lowest cost producer, gain eos, hard to achieve permanently and easy to imitate
Sustainable and difficult to imitate
Focus- niche market, dominant in a market segment, don't want to get caught in focused cost leadership
Differentiation- mass market, unique product (mass customisation- premium pricing?) harder to imitate but more expensive
Bowman's strategy clock
Still a focus on strategic positioning- an extension of Porter's strategies
Two dimensions used to determine the options are price and perceived value
Position 1- Low price/low value- want to avoid, selling goods at low value and low prices- external influence of interest rates increasing sales would decrease
Position 2- Low price- low cost but valued goods, profit earned through sales volume, high sales meaning a sustainable market position
Position 3Hybrid- moderate price and moderate differentiation, customers attracted to low prices but are still assured on quality- customer loyalty
Position 4Focused differentiation-niche markets, products of high value and high price, achieved from having a good reputation of high quality
Position 5-Increased price/standard product- only short term, businesses tend to exaggerate the perceived value, successful differentiation but gets held back as they refrain from introducing new products so fall behind
Option that is usually taken from luxury brands
Position 6-Increases price/ low value- unlikely success- only works if there is no competition from others having barriers to entry
Unlikely to be successful because competitors can offer products at a higher value and a lower price
Position 7-Low value/ standard price- loss of market share, cheap to produce so lower costs allowed, lose sales from businesses who sell low value products at low prices
Seen as uncompetitive
Competitive advantage
Retaining more customers and making higher levels or revenue and profit
investing in new equipment, staff skills, education and training, r and d- more knowledge of customers makes products more suited to them, quality- gains customer attention that businesses can't copy
All can turn into a disadvantage because its expensive, and if the business fails then it leads to an opportunity cost
Ansoff's matrix
Determines the strategic direction- how a business gets where it wants to be in the long term
Market penetration- existing products in existing markets, wanting to boost sales of an existing product but can only help businesses grow so much
Product development- new product existing market, requires extensive r and d, used when quality of a product wants to be improved, when existing products become out of date
Market development- existing product and new market, creates new uses for the product, new segments, good for when there is spare capacity, reputation is needed
Diversification- new product, new market, the riskiest strategy, used when existing products are declining and markets are saturating