3.1.2 Theories of CS

• What does a successful strategy provide?

  competitive advantage
• Effective corporate strategy development requires careful consideration of internal external faactors.
• What are internal factors?

  Internal factors include the human and capital resources available.
• What are external factors?

  • External factors include the economic and political environments.
• What is Ansoff's matrix?

  • Tool for businesses with growth objective.
  • used to identify appropriate corporate strategy & identify level of risk associated with chosen strategy.
• 4 axis of Ansoff's matrix

  The market - existing and new markets

  The product - existing and new products

  A) Product

  B) Market

  C) Penetration

  D) Development

  E) Product

  
• Market Penetration

  • Selling more products to existing customers.
  • least risk.
  • More regular/increased use of product.
  • Brand loyalty of customers.
• Market Development

  • Existing products into new markets.
  • Abroad.
  • Repositioning the product by selling to different customer profiles.
  • Seeking complementary locations.
• Product Development

  • New products to existing customers
  • Upgrading/developing new version of existing, successful products.
  • Redesigning packaging & aesthetics.
  • Relaunching heritage products at commercially convenient intervals.
• Diversification

  • Targeting new customers with new products.
  • Most risky.
• What is Porter's Generic Matrix

  identifies a range of strategies a business might adopt considering

  Its source of competitive advantage (cost or differentiation)

  The scope of the market in which it operates (mass or niche)
• • Porter - failing to adopt one strategy risks a business being ‘stuck in the middle and unable to compete successfully
• Porter's Generic Matrix

  A) leadership

  B) differnetiation

  C) focus

  
• Businesses operating in mass market- adopt either cost or differentiation strategy, depending on what makes them stand out from their competitors.
• Businesses that have a significant cost advantage over competitors should exploit this as much as possible to achieve success. This is called cost leadership
• Businesses that are unable to operate as the most competitive on cost should adopt a strategy of differentiation
• A business that operates in a niche market should adopt a focus strategy that closely meets the needs of its specific group of customers
• What is Portfolio Analysis?

  • involves a business carrying out a detailed evaluation of its full range of products in order that appropriate strategies may be identified and pursued
• What is a Boston Matrix?

  • he Boston Matrix is a portfolio analysis tool that considers the relative market share of a firm's products and the rate of growth within the market in which each product is sold
• Boston Matrix

  A) Stars

  B) low

  C) cash

  D) cows

  E) dogs

  F) high

  
• What are stars?

  • sold in high-growth markets and have a high level of market share.
  • require some ongoing investment to maintain their market position.
  • if managed well, likely to become cash cows in future.
  • Market penetration strategy- increase sales revenue & maximise market share
• Cash Cows

  • Sold in lower-growth markets and have a high market share
  • Generate more cash than needed to maintain market position & can be used to fund development of other products in portfolio.
  • May seek new markets for products if relatively risk-free.
• Question marks

  • Sold in high-growth markets and have a relatively low market share.
  • Require significant investment to improve level of market share and become Stars.
  • Risk that it will become Dogs when market growth rates slow
• Dogs

  • Sold in low-growth markets & have a relatively low market share.
  • Have little potential for future growth & should be divested so finance and effort may be invested in other products
• The nature of that distinctive capability will determine the aims and objectives of the business and the strategies it will pursue to achieve them
• Operational skills and expertise within the business(dISTINCTIVE cAPABILITY)

  • An outstanding and committed design team.
  • product development is a suitable strategy
• Relationships and networks established within and around the business (Distinctive Capability)

  • Developed close trading relationships with key suppliers
  • Low cost strategy is possible
• Reputation & Image (Distinctive Capability)

  • Excellent reputation for quality.
  • Differentiation strategy is likely to be appropriate
• Innovation & Ability to change (Distinctive Capability)

  • Particularly effective at responding to external change
  • Market development strategy is likely to be suitable
• Strategic decision-making involves medium- to long-term planning to achieve corporate and functional objectives

  Establishes actions that business intends to take to achieve goals
• Strategic decision-making will have an impact on a business's human, financial and production resources
• Tactical decisions are made to support the overall strategy and are usually short-term
• Tactical decision-making will also have an impact on a business's human, financial and production resources
• Difference between strategical & tactical decision

  • Strategy is more long term and relates to achieving an overall goal;
  • tactics are shorter-term actions that help to achieve the strategy.
• Enter a new overseas market - impact on HR

  • Staff may be required to relocate.
  • Additional staff with language skills may be required.
  • More staff may be needed to achieve increased output.
• Enter anew market overseas - impact on finance

  • Marketing budgets - need to be increased.
  • Investment in overseas distribution and retail outlets may be required.
• Enter a new market overseas - impact on Production resource

  • Products may require adaptations to meet the needs of overseas customers.
  • Increased output may require more capital investment in machinery.
• Withdraw an obsolete product from sale - impact on HR

  • Fewer workers may be required as output is likely to be lower and so redundancies may be needed.
  • The remaining staff may need to be retrained or redeployed to produce alternative goods.
• Withdraw an obsolete product from sale - Impact on finance

  • Finance spent on the withdrawn product can be used elsewhere.
  • Redundancy payments or retraining of staff may incur significant short-term costs.
• Withdraw obsolete product from sale - impact on Production Resource

  • Capacity utilisation is likely to be lower, increasing unit costs of production.
  • The remaining stocks of the withdrawn product will require disposal.