3.1.2 Theories of corporate strategy

• strategy - long term plan of action ; can be a sequence of business decisions
• tactics - short term plans set as part of the strategy
• strategic direction - a business choices determine the product it sells and what market it operates in.

  • a business may change its strategic direction due to competition or new markets E.g. opportunities in new countries
• Ansoff's Matric : Growth Model

  A) market penetration

  B) market development

  C) product development

  D) diversification

  E) risk

  
• Market Penetration : increasing market share in an existing market

  • classed as a low risk strategy - doing more of what you already know/are good at
  • creates a barrier for competition to enter
  • only works if the market has potential
  • possible tactics : sale promotion, pricing strategies, advertising, takeovers, marketing campaign, strategic alliances, etc
• Product Development : selling new products in your existing market

  • can help to : improve loyalty, increase market share, gain competitive advantage
  • needs significant investment, research & testing - innovation
  • can expose you to more competition, regulation & uncertainty
• Market Development : selling existing products to new markets

  • will only work if the brand is strong & market is not too different from current market
  • must understand the new market
  • possible tactics : new geographical locations, international expansion, new customer segments, complimentary locations
• Diversification : selling new products to a new market

  • considered a high risk strategy
  • venturing into unknown territory
  • reduces dependency on limited product range
  • high profit could be achieved