Selecting a Strategy (AQA A Level Business): Flashcards
Exam code: 7132
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- FrontAnsoff's Matrix
Define strategic direction.
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Cards in this collection (30)
Define strategic direction.
Strategic direction is the long-term path a business chooses to follow to achieve its objectives and fulfil its vision.
How does a clear strategic direction help to focus resources?
It ensures money, people and time are used on activities that move the business forward, not on distractions.
The senior team's experience, vision and attitude to __ influence whether a business aims for rapid growth, cautious expansion or innovation leadership.
The senior team's experience, vision and attitude to risk influence whether a business aims for rapid growth, cautious expansion or innovation leadership.
How do financial resources influence a business's strategic direction?
The cash a business has and its access to credit determine how big or fast it can invest in new facilities, technology or staff.
What two factors does Ansoff's matrix consider?
Ansoff's matrix considers whether the market and the product are existing or new.
Define market penetration.
Market penetration is the growth strategy of selling more products to existing customers, for example by encouraging more regular use or brand loyalty.
True or False?
Market penetration is the least risky of Ansoff's growth strategies.
True.
The business already understands its existing product and market, so market penetration carries the lowest risk.
What limits the growth that market penetration can achieve?
Growth is limited by the size of the existing market. Once most potential customers are already loyal, there is a ceiling on further growth.
Define market development.
Market development involves finding and exploiting new market opportunities for existing products.
By relaunching a mature product into growth in a new market, market development can extend the product's ________.
By relaunching a mature product into growth in a new market, market development can extend the product's life cycle.
Define product development.
Product development involves selling new or improved products to existing customers.
What is the risk of cannibalising existing sales?
A new or upgraded version may simply replace sales of the existing version rather than generating genuinely new sales, limiting overall growth.
Define diversification.
Diversification is the growth strategy of targeting new customers with entirely new or redeveloped products.
Why is diversification the most risky of Ansoff's strategies?
The business has no existing experience of either the new product or the new market, so both variables are unfamiliar at once.
Define strategic positioning.
Strategic positioning is how a business sets itself apart from competitors by choosing the unique mix of price, quality, service and features it offers.
How do a business's costs and resources influence its strategic position?
Its own costs, equipment and staff skills determine whether it can afford to compete on low price or on premium features.
What two factors does Porter's generic matrix consider?
It considers the business's main source of competitive advantage (cost or differentiation) and the scope of its market (mass or niche).
Porter argued that a business failing to adopt one generic strategy risks being stuck in the ____, unable to compete successfully with rivals.
Porter argued that a business failing to adopt one generic strategy risks being stuck in the middle, unable to compete successfully with rivals.
True or False?
Porter's model gives businesses detailed guidance on specific tactics and implementation.
False.
Porter's model does not offer guidance on specific tactics or implementation. It also overlooks external factors, such as technological change and economic conditions.
Define cost leadership with parity.
Cost leadership with parity is where a business has lower costs than rivals but charges the same price.
True or False?
Budget airlines such as Ryanair, which charge lower prices than rivals, use cost leadership with parity.
False.
Budget airlines use cost leadership with proximity, where a business has lower costs and charges a lower price than rivals.
A low cost strategy is risky because, if more than one business in a market pursues it, it may result in a _______.
A low cost strategy is risky because, if more than one business in a market pursues it, it may result in a price war.
What does successful differentiation allow a business to do?
Successful differentiation allows a business to charge a premium price and achieve a high profit margin.
What are the five ways a business can achieve differentiation?
A business can differentiate through marketing and branding, packaging, functions and features, customisation and customer service.
True or False?
A differentiation strategy needs ongoing research to stay effective.
True.
Fashions, trends and customer preferences change over time, so research must be ongoing. This adds to the high costs of differentiation.
Define cost focus.
A cost focus strategy involves being the lowest cost competitor within a market niche.
Define differentiation focus.
A differentiation focus strategy involves offering specialised products within a niche market.
Define repositioning.
Repositioning means deliberately changing a business's chosen combination of price, quality, service and features, altering how it is perceived relative to competitors.
How might a recession lead a business to change its strategic position?
A recession may push a business to reposition towards value.
True or False?
Moving upmarket carries no risk to a business's existing customer base.
False.
Moving upmarket may make prices too high for core customers, causing them to switch to a rival that better matches their needs.
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