Corporate Strategy

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Choosing Which Markets to Compete In

Businesses can use Ansoff’s Matrix to analyse their strategic direction.

Ansoff's matrix

Market penetration

Market penetration involves increasing sales of existing products to existing markets.
For example, McDonald's promoting its Happy Meal product range involves targeting an existing market with an existing product and is, therefore, market penetration.

Market development

Market development involves targeting existing products at new markets to increase sales.
For example, Raleigh selling its cycling products in a new country involves existing products but a new market and so is an example of market development.

Product development

Product development involves targeting new products in existing markets to increase sales.
For example, KFC introducing a range of pizzas involves targeting a new product at an existing market and it an example of product development.

Diversification

Diversification involves targeting new products at new markets to increase sales.
Advantages:
- Diversification can provide large rewards as a business can benefit from both selling a new product and accessing a new market.
- Diversification can spread risk as it gives businesses an alternative if demand for one product declines.
Disadvantages:
- Diversification involves new products and new markets and a business will, therefore, have limited expertise in each which increases risk.

Influences on strategic direction

The level of risk accepted by a business can influence the overall choice of direction.
Opportunity costs can influence the overall choice of direction as a business may need to decide whether it is willing to forfeit the benefits of an alternative direction.
Business culture can influence the overall choice of direction as culture and leadership must support the strategic direction chosen.

Choosing How to Compete

When choosing how to compete with other businesses, a business may decide to compete on either price or customer benefits:

Price competition

A business may decide to compete against other businesses on the basis of price; for example, discount retailers often try to price-match or undercut one another to remain competitive.

Customer benefits

A business may also decide to compete against other businesses on the basis of the benefits it can offer customers.
- For example, Google’s Google Docs and Microsoft’s Office 365, compete in terms of the benefits they can offer customers: both products offer customer email access, digital storage, and document editing capabilities.

Porter's strategies

Cost leadership

The cost leadership approach is taken by businesses which compete on price, and which seek to be the cheapest retailer or producer within the market.
- For example, Aldi seeks a cost leadership approach as it aims to compete on price.
Businesses can increase their competitiveness by reducing their costs, for example negotiating better deals with suppliers and producing their own products if this can be done at a cost lower than the cost of buying such products from suppliers.

Differentiation approach

The differentiation approach is taken by businesses which compete in terms of the benefits offered to customers from the purchase of its products or services.
- For example, Apple competes within the market based on its iOS product and the benefits this can offer to consumers when compared to other operating systems.
Businesses can increase their competitiveness by investing in research, development, and innovation so that the products and services it offers continue to increase in terms of the benefit offered to customers.

Stuck in the middle

If a business fails to target customers based on cost or differentiation, Porter’s strategy classifies the business as a concern, known as ‘stuck in the middle’.

1Exploring Business

2Marketing Campaigns

2.1Marketing

2.1.1Setting Marketing Objectives

2.1.2Customer Needs

2.1.3The Market

2.1.4Competition & The Market

2.1.5Consumer Behaviour

2.1.6Market Research

2.1.7Forms of Market Research

2.1.8Market Segmentation

2.1.9Cultural & Social Factors in Marketing

2.1.10Promotional Decisions 3

2.1.11Pricing Strategies

2.2Marketing Mix

2.2.1Marketing Mix

2.2.2Product Life Cycle

2.2.3Pricing Decisions & Price Skimming

2.2.4Pricing Decisions & Price Penetration

2.2.5Promotional Decisions

2.2.6Promotional Decisions 2

2.2.7Promotional Decisions 3

2.2.8Market Mapping

3Business Finance

3.1Sources of Finance

3.1.1Internal Finance

3.1.2External Finance

3.1.3External Finance 2

3.1.4Sources of Business Finance

3.2Financial Planning

3.2.1Revenue

3.2.2Costs

3.2.3Cash & Cash Flow

3.2.4Cash & Cash Flow 2

3.2.5Break-Even Analysis

3.2.6Profits

3.3Financial Statements

3.3.1Balance Sheets

3.3.2Income Statements

3.3.3Liquidity

4International Business

4.1Globalisation

4.1.1Growing Economies

4.1.2Specialisation & Trade

4.2International Business

4.2.1Internationalisation

4.2.2International Trade

4.2.3MNCS

4.2.4Conditions that Prompt Trade

4.2.5Assessment of a Country

4.3International Economic Environment

4.3.1Globalisation

4.3.2Factors Contributing to Globalisation

4.3.3Protectionism

4.3.4The EU & the WTO

4.3.5Trading Blocs

4.4Factors Affecting International Business

4.4.1Global Competitiveness

4.4.2Ethics of Global Business

4.4.3Controlling MNCs

4.4.4Cultural & Social Factors in Marketing

5Principles of Management

5.1Management & Leadership

5.1.1Managers

5.1.2Management Theories

5.1.3Managing Organisational Culture

5.1.4Management Style

5.2Theories of Motivation

5.2.1Motivating & Engaging Employees

5.2.2Taylor's Theory

5.2.3Mayo's Theory

5.2.4Maslow's Theory

5.2.5Herzberg's Theory

5.3Managing Change

5.3.1Change

5.3.2Key Factors in Change

5.3.3Scenario Planning

5.3.4Managing Change

5.3.5Managing Strategic Implementation

6Business Decision Making

6.1Business Principles & Practices

6.1.1Influences in External Environments

6.1.2Product Decisions

6.1.3Competitive Environment

6.1.4Corporate Strategy

6.1.5Quantitative Sales Forecasting

6.1.6Legislation

6.2Quality Management

6.2.1Importance of Quality

6.2.2Measuring Quality

6.2.3Total Quality Management

6.2.4Evaluating TQM

6.3Human Resources

6.3.1Contracts

6.3.2Recruitment

6.3.3Training a Workforce

6.4Documents & Business Decisions

6.4.1Sales Forecasts

6.4.2Managing Strategic Implementation

6.4.3Problems with Strategy

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