Theories of Corporate Strategy

3.1.2 Theories of corporate strategy: 

Planning to achieve corporate objectives is called strategy.

Strategy involves developing medium to long term plans (generally 1 - 3 years).

Developing strategy is time consuming - but there are planning tools that a business can use.

Ansoff's Matrix:

The Ansoff Matrix is a strategic planning tool that provides a framework to help directors and senior managers to devise strategies for future growth.

Market penetration
In a market penetration strategy, the organisation tries to grow using its existing products and services in existing markets.

How:

Advertise, to encourage more people within the existing market to choose the product, or to use it more often.

Using promotional techniques.

Increase your sales force activities i.e. employ more sales representatives.

Buy a competitor company. 

Would McDonald's be allowed to buy Burger King?

Market development
In market development strategy, a firm tries to expand into new markets using its existing products.

How?

Target different geographical markets at home or abroad.

Expanding to new areas in the UK:

Expanding internationally:

Link to McDonald's Korea here.

Use different sales methods, such as online or shopping channels.

Target different groups of people, perhaps different age groups, genders or demographic profiles from your normal customers.

Once sold to a niche market, now a mass market product:

Would this be an example of market development?

Product development
In product development, a company tries to create new products and services targeted at its existing markets to achieve growth.

How:

Extend the product range by producing different versions, or packaging existing products in new ways.

Example 1:
Click on the headline.

Example 2:

Example 3:

Develop related products or services (for example, a toothpaste producer starts selling mouthwash).

Diversification

In diversification an organisation tries to grow their sales by introducing new products in new markets. 

It is the most risky strategy since both product and market development is required.

There’s often little scope for using existing expertise or achieving economies of scale, because you are trying to sell completely different products or services to different customers.

Would selling a 'full English' breakfast in Costa stores in China be an example of diversification?

The main advantage of diversification is that if the new business fails, the main business is unlikely to be affected.

Ansoff's matrix. Some examples here.

Ansoff and Coca Cola. Details here.