3.1.2 Theories of Corporate Strategy
questions and answers
What is Ansoff's Matrix? - correct answer-It's a strategic tool to help businesses achieve
growth and help in decision making.
What are the components of Ansoff's Matrix? - correct answer-Market Penetration (Existing
Products in Existing Markets)
+ Encourages customers to use products more regularly
+ Potential for Increase in sales and revenue
- Uncertainty if markets will like products
- Costs money for R&D
Market Development (Existing Products in New Markets)
+ Gain share from competitors
+ Target market is known
- Effective in short term, because competitors will come up with new substitutes
- Will only work if there's demand for product, customers from other countries might have
different tastes
Product Development (New Products in Existing Markets)
+ Gain a competitive advantage
+ First mover advantage
- Risk of cannibalisation
- Requires significant investment in R&D as well as high risk involved
Diversification (New Products in New Markets)
+ From new connections overseas and may improve relationships with international traders
+ Potential for rewards, increase in capital
- Huge investment in production, trade and R&D
- High risk because diversification takes business outside its area of expertise
What is Porter's Strategic Matrix? - correct answer-Is a tool to help a business identify the
sources of competitive advantage that a business might achieve in the market.
What are the components in Porter's strategic Matrix? - correct answer-Cost Leadership: By
striving to be the lower-cost provider in the market a business will compete in 2 ways
1) Increasing profits, while charging market level prices
2) Increase market share while charging market level prices
* By operating on a larger scale and exploiting economies of scale business is likely to
achieve lower costs
* Businesses can also reduce costs by negotiating with suppliers
Differentiation: Business can defend itself in the market by differentiating itself from the
competition e.g. adding value to their products through e.g. Quality, Design, USP
questions and answers
What is Ansoff's Matrix? - correct answer-It's a strategic tool to help businesses achieve
growth and help in decision making.
What are the components of Ansoff's Matrix? - correct answer-Market Penetration (Existing
Products in Existing Markets)
+ Encourages customers to use products more regularly
+ Potential for Increase in sales and revenue
- Uncertainty if markets will like products
- Costs money for R&D
Market Development (Existing Products in New Markets)
+ Gain share from competitors
+ Target market is known
- Effective in short term, because competitors will come up with new substitutes
- Will only work if there's demand for product, customers from other countries might have
different tastes
Product Development (New Products in Existing Markets)
+ Gain a competitive advantage
+ First mover advantage
- Risk of cannibalisation
- Requires significant investment in R&D as well as high risk involved
Diversification (New Products in New Markets)
+ From new connections overseas and may improve relationships with international traders
+ Potential for rewards, increase in capital
- Huge investment in production, trade and R&D
- High risk because diversification takes business outside its area of expertise
What is Porter's Strategic Matrix? - correct answer-Is a tool to help a business identify the
sources of competitive advantage that a business might achieve in the market.
What are the components in Porter's strategic Matrix? - correct answer-Cost Leadership: By
striving to be the lower-cost provider in the market a business will compete in 2 ways
1) Increasing profits, while charging market level prices
2) Increase market share while charging market level prices
* By operating on a larger scale and exploiting economies of scale business is likely to
achieve lower costs
* Businesses can also reduce costs by negotiating with suppliers
Differentiation: Business can defend itself in the market by differentiating itself from the
competition e.g. adding value to their products through e.g. Quality, Design, USP
