\swhat is Ansoff’s Matrix?
Ansoff’s matrix is a tool used by business managers to compare the level or risk of each stratergy which they may use to expand their business and to help to deicde which stratetgy is the best for that specific business. This may be usede in order to increase market share, maintain market share or grow a business
what are some general overall advantages of Ansoff’s Matrix?
- dosen’t just lay out the potential stratergies which can be used for growth it also helps managers to think about hwat some of the potential risks which may be associated with a business moving in a paticular direction.
what are some general disadvantages of manager’s using Ansoff’s matrix in order to decide what direction they want to move their business in?
- fails to show that market development and divertisification stratergies which are used for business development also mean that a business will need to change their day to day working and tactics significantly
- could be said by some that the matrix oversimplifies the tools which can be used for growth too far
- isn’t aa dynsamic tool as doesn’t take into account what a businesses competitiors are doing or the actions which may be taken by the competiton in response to the actions of the busines
- isn’t useful so much for large and multinational businesses as these businesses will normally operate in each of the four areas on the matrix (product development,market development,divertisification & market penetration
- is more useful for small or medium sized businesses
what is divertisification on Ansoff’s matrix and what does it require?
divertificiation is the practice of developing a new product and introducing this new product into a new market, this stratergy is generally seen to be the most risky out of all of Ansoff’s stratergies on his matrix however this stratergy does have the potential for the most growth.
+ high potential for growth
- high financial capabilities needed for research and development costs & product development costs before the product is even launched as there is no revenue or profits coming in and often many products don’t even make it past this stage of development.
what is market development ?
- market development involves launching the same products but to a new market or market segment, eg. this may be a new geographical market such as crisps to china or something like that
what is product development and what does this require when used as a growth stratergy from Ansoff’s matrix?
product development - means to launch a new product into the same market by targetting the same market overall and the same market segments
+ lack of market research as already know the target audience really well, therefore reduces the costs of the product before it is even launched.
can help to build up a sense of brand loyalty as is often used by tech companies such as apple for their i-phones
works well for businesses which already have a strong competitve advantage
- lack of appeal to market and may therefore fail to generate a significant amount more of sales
what is market penetration ?
market penetration involves launching existing products to existing markets in order to maintain market share by encoraging existing customers to buy more of the product.
+ don’t need to carry out new market research as already have an understanding of what the market likes and this helps to reduce the costs involved
- has the least potential for growth on Ansoff’s matrix as is largely used to maintain the market share of a business eg. macdonald’s monopoly or a cereal campaign that encorages customers to replace one of their meals a day with the cereal in order to ‘drop a dress size’
what is a mission statement and what does it do ?
a mission statement helps to lay out the overall purpose of a business and their main corporate aims and helps to make all stakeholder’s of a business aware of business activity and to encourage employees to work towards the businesses aims
lay out the purpose of a business and what the business does
what are some of the benefits and drawbacks of a mission statement?
+
give staff a sense of shared purpose, help to motivate staff and encorage staff to work towards a goal so that they have a direction for their work, encourages staff to be more cooperative which in turn helps the business to achieve it’s aims more easily
- businesses don’t have to prove that their mission statement is accurate however if a mission statement is found to be inaccurate or full of lies then this will damage the businesses overall reputation as a credible business, poor brand image may lead to less sales and in turn profits and revenue being made.
limited purpose as dosen’t go into detail about how a business will achieve it’s aims, dosen’t lay out any corporate stratergies or tactics
what are business objectives?
objectives are set from a businesses mission statement and help to enable the business to achieve their mission. objectives can be broken down into levels
mission statement
corporate objectives
departmental objectives
what are departmental objectives ?
departmental objectives are the objectives of each department
+ more detailed than corporate objecives and can help to motivate staff more on a lower level as the objevives feel that they are more within reach.
managers can make sure that everyone is working towards a goal and this will help to improve coordination within departments.
motivate employees more and can help with decicion making at a departmental level + can help managers to measure and compare the success of the business
- however any objectives which are set within the business need to align with the mission statement of the business otherwise the business risks loosing it’s credibility with their stakeholders which can damage brand image of the business which will likely reduce the overall success of the business
how do you measure the effectiveness of business objecives?
need to set SMART objectives.
Specific,Measurable,Achievable,Realistic and timely objectives within a business.
what is a strategy?
a strategy / strategic decision is a long term plan of action which is developed to achieve a businesses objectives & a corporate strategy is based off a businesses corporate objectives.
normally a strategy is just a sequence of decisions which are made over time with the aim of reaching a defined/ paticular goal and this doesn’t nessescarily need to be written down especially not so much in a smaller business.
what are business tactics?
business tactics are short term plans which are tequniques that a business uses to achieve it’s overall strategy & can sometimes be used to react to an opportunity or a threat which is being faced by the business.
what is the difference between strategy and tactics?
tactics are more short term plans of how a business will react to a stimulus whereas strategies are more long term and calculated decisions which are planned and sometimes even written down, the use of tactics and strategies may require a business to use human resources such as staff, physical resources such as production lines or technologies which a business may need or they may need financial decisions to be made by the business
what are porter’s three main strategies used to gain advantage? and what do they involve?
cost leadership - this strategy requires a business to use the lowest cost of production possible in order to achieve a given level of quality. this stratergy is often used by large firms which have large machines and can therefore benefit from economies of scale as they can reduce their costs of production and add value to the product in order to gain a larger profit. this strategy will mean that the business can maintain competitive during times of price wars as they will have the lowest prices.
differentiation - product differentiation helps a business to gain a competitive advantage as they can charge higher prices for a unique product which customers will likely percieve as better than compettiots products. Innovative businesses and businesses which have strong branding and high quality products can benefit from this strategy.
focus - concentrates on niche markets by minimising costs or showing differentiation of the products in comparison to compeititors products. businesses which can benefit from this are usually ones with limited resources and few loyal customers
what is a SWOT analysis?
a SWOT analysis is a four factor model that details the strengths the weaknesses, opportunities and the threats which are facing a business.
strengths and weaknesses are internal factors that affect a business
the opportunities and threats are external factors that affect a business
what are the strengths and the weaknesses of using a SWOT analysis to analyse a business?
strengths -
- can help managers to make decisions in a way which considers a businesses’ individual circumstances in a factual and objective way
- helps to convert opportunities into strengths of the business and also helps to manage threats before they become out of control and threaten to destroy a business
- can easily be redone in a way which considers changing conditions and therefore allows a business to adapt their strategy accordingly
- also shows if the business has a competitive advantage over rivals
weaknesses
- oversimplifies the amount of data which is needed for decisions
- doesn’t provide solutions to the problems at stake
- time consuming to carry out - may be better off using another method/ tool that provides solutions to the problems at stake
- paralysis by analysis (collecting too much data)
- lack of prioritisation
what is a PESTLE analysis and what does it do?
a PESTLE analysis looks at the external factors that present opportunities or threats to a business and help managers to take strategic and tactical decisions
PESTLE - political, economic,social,technological,legal and environmental factors
what does porter’s five forces model show?
porter’s 5 forces shows the 5 forces which impact the nature of the competitive environment which a business is operating in, these 5 forces are:
- buyer/ customer bargaining power
- supplier bargaining power
- intensive rivalry/ competition within a market
- the threat of substitutes
- barriers to entry
what is the definition of business growth?
Business growth is where a business needs to expand and has to explore ways to grow in order to generate profits
what are the 4x objectives of business growth?
- achieve internal and external economies of scale
- increased market power over customers and suppliers
- increased market share and brand recognition
- increased levels of profitability
what are economies of scale in the context of business expansion?
- economies of scale relates to how average costs of a business have fallen and the profit margins of a business have grown, or a business reduces their selling prices in order to gain market share.
- occurs when the average unit costs of a business fall as a result of the increase in the level of output of the business
+
more funds to buy stock and can get better deals as can buy in bulk
more funds to pay for specalist staff
better access to sources of finance as likely to have a better reputation
how to calculate economies of scale ?
total costs of production = VC X output + FC
average cost per unit = total costs / output
