Porter came up with strategies that help a business to achieve competitive advantage: – Cost Leadership A business excels by offering products at a lowest price Example: Hyperpanda – Differentiation A business mass markets its product but uses things like branding or packaging to make the product different from its competitors Example: Apple – Focus A business focuses specifically on one market segment Example: Gucci Not required for the new syllabus

 Tool that helps manager to choose a) product and/or b) market growth strategies  Theory: Businesses have a choice of 4 growth strategies to follow

Columns: What Kind of Product? Rows: What Kind of Market? Crest Toothpaste Europe Crest Bubblegum Europe Crest Toothpaste Nigeria Crest Bubblegum Nigeria Well known brand + Europeans know about toothpaste = Low Business Risk Well known brand + Nigerian distribution?, safety?  = May fail, some low/med risk Widens Crest brand into candy  - Know Crest but … bubblegum  ?? = May fail, some risk Bubblegum  ? + Distribution, culture  ? = Two unknowns! High Business Risk

Businesses focus on selling existing products in existing markets. Try to attract new customers, or entice existing customers to buy more often. RISK: Low Businesses focus on selling existing products in existing markets. Try to attract new customers, or entice existing customers to buy more often. RISK: Low Businesses market an existing product to a new market segment. Businesses may sell product in a new location, or may renew the product by updating/changi ng packaging. RISK: Low/Med Businesses market an existing product to a new market segment. Businesses may sell product in a new location, or may renew the product by updating/changi ng packaging. RISK: Low/Med Businesses focus on selling new products in existing markets. This strategy uses product extension and new product development. RISK: Medium Businesses focus on selling new products in existing markets. This strategy uses product extension and new product development. RISK: Medium Businesses market a new product in a new market. Allows a business to spread its risks, so that if one product fails, they can fall back on another. RISK: High Businesses market a new product in a new market. Allows a business to spread its risks, so that if one product fails, they can fall back on another. RISK: High

 Complete Worksheet: Ansoff Matrix  Glue this into your book before you complete the work!

 a) Focus.– Harrods concentrates on catering for the rich and famous (or those willing to pay very highprices for prestigious brands and products).  Cost leadership.– KFC specializes in the fast-food industry, charging relatively low prices to attract a mass market, with operations across the globe.

 b) Global conglomerates, such as Virgin Group, have operations spanning different industries aroundnthe world. Hence, it can be difficult to label a generic strategy to such conglomerates. For example,Virgin Atlantic provides services to a mass market but it is difficult to conclude whether this is based on differentiation, cost leadership (there are cheaper airline carriers) or focus. Since conglomerates have a broad and diversified product portfolio, many would argue that it lacks focus (as a generic strategy). With around 200 companies under the Virgin Group name, it would be hard to justify any ‘focus’. However, within each industry that the conglomerates operate, it is of course possible for the strategic business units to specialize and focus on a specific market segment. Similarly, it may be possible for global conglomerates to differentiate their products or to concentrate on cost leadership to gain a competitive advantage. However, the strength of Porter’s generic strategies theory is that it helps managers to decide on specific strategy that best suits the business in question.– what works well for one area of a conglomerate does not mean it will succeed for other parts of the overall organisation. For instance, Honda manufactures motor bikes, automobiles, jet engines and lawnmowers(!) It would not be practical to apply a single generic strategy across the Honda organisation. Hence, it is only to a limited extent that Porter.’s generic strategies work for a global conglomerate.

 a) Market penetration (Cadbury’s trying to capture a larger share of the market)  b) Product development (new products by Nissan in an existing market for luxury cars)