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A2 Business Studies
Miss Page
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To describe a range of marketing strategies
Explain the meaning and significance of Ansoff’s
matrix in assessing marketing strategies.
Evaluate the suitability of Ansoff’s competitive
strategies in a given context.
Analyse the risks and benefits involved in entering
international markets.
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So far we have looked at the marketing objectives of a business which
come from the corporate goals and are influenced by internal and external
factors. The necessity of analysing the market before attempting to devise a
marketing strategy has already been discussed.
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We are now moving on to look at the marketing strategy: the plan of how
the marketing objectives are going to be achieved.
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Low Cost- In both niche and mass markets, there is the option to go for the
cheaper end of the market. If this is the strategy adopted by the business,
the aim is to offer products at a lower price than competitors in the market.
To achieve this, the business must be able to reduce its own costs, for
example through, economies of scale, by finding the lowest cost suppliers
or by moving its own operations to a low-cost location.
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Differentiation- This strategy applies in both niche and mass markets. The
purpose is to make one product appear different and somehow superior to
others on the market, and thereby encourage consumers to choose that
particular make or model when making their purchasing decisions. A
differentiation strategy involves all elements of the marketing mix and
includes patenting a new invention, developing a USP or building a strong
brand image. The pricing will reflect the exclusivity and superiority of the
product and the distribution will be strictly controlled if possible to maintain
this image.
easyGroup companies, including easyjet, easycruise and easypizza,
all operate as part of a brand which is known to represent value for
money and is aimed at the many rather than the few.
Tescos and Asda compete by offering customers the “lowest price”
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Igor Ansoff developed a model, known as Ansoff’s Matrix, which
presents the products and market choices available to a business
and divides them into four combinations, each shown by a different
quadrant in the matrix. Choice is the basis for developing a clear
marketing strategy, and the matrix allows managers to discuss the
strategies for achieving corporate objectives through the marketing
function. With every choice, there comes an element of risk, and the
matrix suggests that the level of risk increases as the strategy
moves further away from the present product, present market.
Markets
Products
Present
New
Present
Market Penetration
Product Development
New
Market Development
Diversification
Aims to increase sales of current products to existing customers and to entice
consumers away from competing brands.
This strategy involves using the elements of the marketing mix more
effectively:
 Reducing prices to encourage customers to buy more or entice consumers
from other brands in the market.
 Increasing promotional spending to remind customers about the product
range.
 Launching a loyalty scheme
 Increasing the activity of the sales force
 Making small changes to the products on offer, for example a greater range
of sizes or different levels of service.
 Giving customers a greater range of buying options by increasing the
places from which the product can be purchased.
This is a higher risk strategy which involves selling new products to existing
customers. Note that product development refers to a significantly new
product line, not minor changes to an existing product. This strategy often
looks favourable, because it might allow the company to utilise excess
production capacity, respond to a new product launch from a competitor,
maintain the company’s reputation as a product innovator, exploit new
technology or protect overall market share.
This strategy might include:
 Developing related products or services which market research has
identified as being part of the buying decisions of customers.
 Introducing new models of existing products with significant modifications,
new functions or services.
Can you think of a company that use this strategy?
A market development strategy involves attracting new customer groups to
existing products. The aim is to increase the sales of the current product
portfolio.
Strategies include
 Targeting a different geographical area, including an overseas market
 Developing new sales channels, such as e-commerce, to attract a new
audience
 Targeting a new consumer group with a different profile to existing
customers.
A diversification strategy is the most risky option because it involves the firm moving into new
markets with new products, which may or not be related to existing products and markets.
There is often little opportunity to use existing expertise or achieve significant economies of
scale in the short term. Diversification may be:
 Related, because it is some form of forward, backward or horizontal integration- the firm
becomes involved in the activities of its customers, suppliers and competitors.
 Unrelated- the highest risk strategy- because the business has no experience or detailed
knowledge of the key success factors in the market, although there is evidence that it can
lead to the fastest growth.
Strategies might include:
 A new technology developed by R&D department of the business or bought from an
inventor- if there is evidence of significant potential, the risk is reduced.
 Buying an existing business in a completely different market- if the acquisition is successful,
then the risk is reduced.
 Taregting existing successful markets, if the business already has a very strong brand, the
risk is reduced.
There are increasing opportunities for UK companies to enter
overseas markets. This option will particularly appeal to businesses
where:
 The UK market is saturated
 The UK market is very competitive, driving down prices and
therefore profits.
 There are opportunities to achieve economies of scale
 The firm has excess supply
 The additional costs involved are relatively small.
The benefits and drawbacks of different methods of entering overseas markets.
Exporting
from the UK
Method
Benefits
Drawbacks
Accepting international orders
increasingly on an e-commerce
website
Relatively Cheap
Not very complicated to set up
Can be withdrawn easily if it does
not work
Existing resources, e.g. The sales
force and the website can be used
Full control over marketing is
retained.
Distance may make it difficult to
identify potential business
opportunities.
Making regular visits to the target
country to identify customers, build
relationships and complete sales
negotiations.
Supported by telephone and email
sales
Bureaucracy may be complicated.
Risk of non –payment or delayed
payments of goods, due to export
problems causing cash flow
difficulties
Language barriers may lead to
high recruitment and training
costs.
Opening an
overseas
operation
Opening a new branch staffed by
your own employees
The chance to identify opportunities
in the target market
Setting up as a registered
subsidiary in the new market,
using locally recruited employees,
covered by local company,
employment and tax rules
Control operations and potential
expansion
Forming an alliance with a local
company establishing a new
business which is jointly owned.
Providing good after-sales service
Developing relationships with
clients
A joint venture means that the risk
is shared
The local partner in the alliance
provides important knowledge and
experience.
This is a more expensive option,
including the cost of the
administration and management
Local company, employment and
tax laws might be difficult to
understand and local specialists
may be needed.
The brand name of the product or
company may not be appropriate
in the target markets.