Strategic Management: Ansoff Matrix Quiz
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Questions and Answers

What type of diversification involves expanding within the same industry?

  • Horizontal diversification
  • Conglomerate diversification
  • Related diversification (correct)
  • Unrelated diversification

Market penetration poses the highest risk among the strategies outlined in the Ansoff Matrix.

False (B)

Name one example of unrelated diversification.

Amazon's entry into cloud computing with AWS.

________ diversification refers to new products for current customers.

<p>Horizontal</p> Signup and view all the answers

Match the diversification type with its example:

<p>Related diversification = Tesla's renewable energy solutions Conglomerate diversification = Virgin Group's move into airlines Vertical diversification = Starbucks sourcing its coffee beans Horizontal diversification = Nike adding sportswear</p> Signup and view all the answers

Which of the following strategies typically requires the highest marketing budget?

<p>Market penetration (C)</p> Signup and view all the answers

The Ansoff Matrix accounts for external factors like competition and technology.

<p>False (B)</p> Signup and view all the answers

What is the risk level of diversification?

<p>High Risk</p> Signup and view all the answers

What is the first step in determining market attractiveness and business strength?

<p>Select factors (B)</p> Signup and view all the answers

Prioritizing low-potential units is a good strategy for resource allocation.

<p>False (B)</p> Signup and view all the answers

Name one advantage of using the GE Matrix for strategic planning.

<p>Comprehensive Analysis</p> Signup and view all the answers

The process of assessing whether to enter or exit a market is referred to as ________ decisions.

<p>market entry</p> Signup and view all the answers

Match the strategic applications with their corresponding purposes:

<p>Resource Allocation = Prioritize high-potential units for investment Portfolio Balancing = Ensure a mix of growth-oriented and cash-generating units Market Entry Decisions = Assess whether to enter or exit a market Competitor Benchmarking = Evaluate competitors’ positions and anticipate moves</p> Signup and view all the answers

Which of the following is a limitation of the GE Matrix?

<p>Static view (C)</p> Signup and view all the answers

Weighting factors for the GE Matrix can be completely objective.

<p>False (B)</p> Signup and view all the answers

Provide an example of a company that expanded into a new industry based on market attractiveness.

<p>Netflix entering the gaming industry</p> Signup and view all the answers

What is the primary focus of Blue Ocean Strategy?

<p>Creating new and uncontested market space (B)</p> Signup and view all the answers

Red Ocean Strategy aims to create new demand.

<p>False (B)</p> Signup and view all the answers

Explain the key difference between growth potential in Red Ocean and Blue Ocean strategies.

<p>Red Ocean strategy has limited growth potential, while Blue Ocean strategy has high growth potential.</p> Signup and view all the answers

Blue Ocean Strategy breaks the __________ between value and cost.

<p>trade-off</p> Signup and view all the answers

Match the following strategies with their characteristics:

<p>Red Ocean Strategy = Focuses on existing competitive market Blue Ocean Strategy = Creates new and uncontested markets Market Follower Strategy = Adapts successful models from leaders Counterfeiter = Directly duplicates products, often illegally</p> Signup and view all the answers

Which advantage does the Market Follower Strategy provide?

<p>Cost effectiveness by minimizing R&amp;D (B)</p> Signup and view all the answers

What characterizes the introduction stage of the Product Life Cycle?

<p>Heavy investment in promotion to stimulate primary demand. (B)</p> Signup and view all the answers

A company using a Blue Ocean Strategy competes directly with market leaders.

<p>False (B)</p> Signup and view all the answers

Defensive strategies involve aggressively competing against market leaders.

<p>False (B)</p> Signup and view all the answers

What is a Counterfeiter in the context of Market Follower Strategy?

<p>A behavior that directly duplicates products and sells them, often in illegal markets.</p> Signup and view all the answers

What is a key caution for companies adopting follower strategies?

<p>Over-reliance on leaders and the threat of retaliation or market shifts.</p> Signup and view all the answers

The _____ stage of the Product Life Cycle features rapid sales growth and improved profits.

<p>growth</p> Signup and view all the answers

Which pricing strategy aims to recover costs quickly?

<p>Skimming pricing (A)</p> Signup and view all the answers

Match the following stages of the Product Life Cycle with their characteristics:

<p>Introduction = Sales are low, high costs due to R&amp;D Growth = Rapid sales increase, rising profits Maturity = Sales peak, market saturation Decline = Sales decrease, shift in consumer preferences</p> Signup and view all the answers

Follower strategies are suitable for companies with resource constraints.

<p>True (A)</p> Signup and view all the answers

Name one real-world example of a product in the introduction stage.

<p>Tesla's Electric Cars.</p> Signup and view all the answers

What characterizes the shakeout phase in a competitive market?

<p>Weak competitors may exit the market. (C)</p> Signup and view all the answers

During the maturity phase, sales are at their peak and competition is mild.

<p>False (B)</p> Signup and view all the answers

Name a real-world example of a company that faced a shakeout phase in its competitive market.

<p>Uber or Lyft</p> Signup and view all the answers

In the decline phase, companies may choose to _______ to preserve profitability.

<p>cut back on costs</p> Signup and view all the answers

What is a common strategy for companies in the maturity phase of the product life cycle?

<p>Revamp products with minor upgrades. (C)</p> Signup and view all the answers

Match the phase of the product life cycle with its characteristic:

<p>Growth = Sales begin to decline steadily. Maturity = Sales peak and competition is fierce. Decline = Weak competitors may exit the market. Shakeout = Intense competition leads to price wars.</p> Signup and view all the answers

Continuous innovation can extend a product's life cycle.

<p>True (A)</p> Signup and view all the answers

In the maturity phase of the product life cycle, companies often invest in customer _______ programs.

<p>loyalty</p> Signup and view all the answers

What does the Growth-Share Matrix (BCG Matrix) primarily categorize?

<p>Products based on market growth and market share (D)</p> Signup and view all the answers

The TOWS Matrix helps in identifying strategies that exploit strengths and opportunities.

<p>True (A)</p> Signup and view all the answers

What competitive strategy involves directly challenging a competitor's strengths?

<p>Frontal Attack</p> Signup and view all the answers

Walmart's TOWS Matrix shows that its strong supply chain can be leveraged to drive down prices, which is an example of an opportunity in the context of ______.

<p>strength</p> Signup and view all the answers

Match the following companies with their corresponding competitive strategies:

<p>Pepsi = Frontal Attack Ford = Flank Attack Apple = Market Leader Response Tesla = Disruption</p> Signup and view all the answers

Which example represents a product classified as a 'dog' in the BCG Matrix?

<p>iPod (D)</p> Signup and view all the answers

Competitive analysis is a one-time process that only needs to be conducted occasionally.

<p>False (B)</p> Signup and view all the answers

What is a potential threat identified in Walmart's TOWS Matrix analysis?

<p>Reliance on low-margin goods</p> Signup and view all the answers

Flashcards

Related diversification

Expanding into the same industry, using existing knowledge and resources.

Unrelated diversification

Venturing into completely new industries, unrelated to the current business.

Horizontal diversification

Offering new products to existing customers, leveraging existing relationships.

Vertical diversification

Expanding into different parts of the supply chain, like becoming a supplier or distributor.

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Conglomerate diversification

Investing in completely unrelated ventures, often through acquisitions.

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Ansoff Matrix

A strategic tool that helps businesses choose their growth path by analyzing risk and opportunity.

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Risk levels in Ansoff Matrix

The risk associated with a growth strategy depends on the familiarity with product and market.

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Limitations of Ansoff Matrix

The Ansoff Matrix provides a framework for growth strategies, but must be adapted to specific business conditions.

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GE Matrix

A strategic tool used to analyze and prioritize business units based on their market attractiveness and competitive strength.

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Market Attractiveness

Factors that influence the appeal of a particular market, like market growth, profitability, and competition.

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Business Strength

Factors that measure a business unit's strength, like market share, cost structure, and competitive advantages.

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Weighting Factors

Assigning weights to different factors to reflect their relative importance in overall assessment.

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Rating and Scoring

Rating each factor on a scale (like 1-10) and calculating a weighted score for each business unit.

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Plot on the Grid

Plotting business units on a grid based on their overall market attractiveness and business strength scores.

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Analyze and Strategize

Formulating strategies tailored to the unique position of each business unit on the GE Matrix.

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Limitations of the GE Matrix

The GE Matrix has limitations like subjectivity, complexity, static view, and interdependency.

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Red Ocean Strategy

A strategy where companies focus on existing markets and compete directly with rivals.

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Blue Ocean Strategy

A strategy where companies create entirely new markets and products, avoiding competition.

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Existing Market Space

Refers to the existing, crowded marketplace where businesses fiercely compete for market share.

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Uncontested Market Space

Companies in these markets create new products and services that don't exist, effectively removing competition.

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Captures Existing Demand

Businesses aim to capture existing customer demand and increase their share in the market.

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Creates New Demand

Companies create completely new products and services that attract new customer segments.

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Market Follower Strategy

Where companies adapt and replicate successful strategies of market leaders, avoiding high-risk competition.

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Counterfeiter Strategy

Imitating a company's products or services without authorization, often illegally.

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Offensive Strategy

A strategy where a company focuses on improving its product, aiming to become a leader in the market.

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Defensive Strategy

A strategy where a company avoids competing directly with market leaders by focusing on specific niches.

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Product Life Cycle (PLC)

A framework that explains how a product's popularity and sales evolve over time, from its launch to its decline.

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Introduction Stage (PLC)

The initial phase of a product's life, characterized by low sales and high costs due to market introduction.

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Growth Stage (PLC)

The stage where a product experiences rapid sales growth, increasing profits, and increased competition.

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Skimming Pricing

A pricing strategy used during the introduction stage, setting a high price to quickly recover development costs.

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Penetration Pricing

A pricing strategy used during the introduction stage, setting a low price to capture market share quickly.

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Introduction Phase of PLC

The stage where products are introduced to the market, characterized by low sales and high marketing expenses to create awareness and build demand.

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Growth Phase of PLC

The stage of rapid sales growth, increasing profits, and intense competition as more players enter the market.

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Maturity Phase of PLC

The stage where sales growth slows down, competition becomes fierce, and companies focus on differentiation and customer loyalty.

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Decline Phase of PLC

The final stage where sales decline, competition reduces, and companies may choose to harvest profits, explore niche markets, or discontinue the product.

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Harvesting Strategy

A strategy to maintain profitability during the Decline Phase by minimizing marketing expenses and focusing on loyal customers.

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Prolonging the Product Life Cycle

Involves extending the product's life cycle by entering new markets, modifying products, or finding new uses.

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Innovation as a Driver

Investing in research and development to continuously improve existing products or introduce new versions, aiming to sustain growth and stay ahead of competition.

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Marketing Evolution

The evolution of marketing strategies across different stages of the product life cycle.

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BCG Matrix (Boston Consulting Group Matrix)

A tool used to analyze a company's product portfolio based on market share and growth rate. Products are categorized into four quadrants: stars, cash cows, question marks, and dogs.

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TOWS Matrix

This matrix analyzes an organization's internal strengths and weaknesses against external opportunities and threats, leading to strategic decisions.

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Frontal Attack

A strategy where a company directly challenges a competitor's strengths by offering matching products or services. It is a head-on approach.

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Flank Attack

A strategy targeting a competitor's weaknesses, exploiting their vulnerabilities.

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Competitive Dynamics and Response

The process of analyzing competitor responses after a strategic move, like a price change or new product launch, to gain a competitive advantage.

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Competitive Analysis

The ongoing process of analyzing competitors to understand their strategies, strengths, weaknesses, and market position.

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Study Notes

Ansoff Matrix

  • The Ansoff Matrix, also known as the Product/Market Expansion Grid, is a framework for businesses to select growth strategies.
  • It analyzes the interaction between products (existing or new) and markets (existing or new).
  • This leads to four distinct strategies:
    • Market Penetration: Selling more of existing products in existing markets.
      • Techniques include aggressive promotions, expanding distribution, and loyalty programs.
      • Example: Coca-Cola using promotional campaigns like "Share a Coke."
    • Product Development: Creating new products for existing markets.
      • Techniques include product improvements, innovative products, and complementary products.
      • Example: Apple releasing the Apple Watch.
    • Market Development: Expanding existing products to new markets.
      • Techniques include geographic expansion, targeting new demographics, and repositioning.
      • Example: Netflix expanding internationally.
    • Diversification: Entering new markets with new products.
      • Types: Related diversification (within the same industry), and unrelated diversification (new industries).
      • Example: Tesla expanding into renewable energy solutions.

BCG Matrix

  • The Boston Consulting Group (BCG) Matrix (also known as the Growth-Share Matrix) is a strategic planning tool for evaluating and managing a company's portfolio of products.
  • It helps allocate resources effectively.
  • It's based on two dimensions:
    • Market Growth Rate (attractiveness of the market).
    • Relative Market Share (strength of a product/business unit compared to the largest competitor).
  • This intersection creates four quadrants:
    • Stars (high market share, high growth): Often leaders in fast-growing markets.
    • Cash Cows (high market share, low growth): Mature products in saturated markets; generate more cash than needed.
    • Question Marks (low market share, high growth): Operate in attractive markets but lack dominance; require heavy investment.
    • Dogs (low market share, low growth): Limited growth potential.

GE Matrix

  • The GE Matrix (also known as the McKinsey/GE Matrix) is a strategic planning tool for evaluating a company's portfolio of products or business units.
  • It's based on two dimensions:
    • Market Attractiveness (evaluating the market: size, growth rate, profitability, competitive intensity, technological innovation, regulatory environment, and socio-cultural trends).
    • Business Strength (assessing the company's competitive position: market share, brand equity, operational efficiency, innovation capabilities, customer loyalty, and financial resources).
  • The matrix is a 3x3 grid with nine cells, categorized by the above factors.

Product Life Cycle (PLC)

  • The Product Life Cycle explains the progression of a product in the market.
  • It has four stages:
    • Introduction (slow sales, high costs): Focus on building awareness and encouraging adoption.
    • Growth (rapid sales increase): Enhance features, expand distribution, and focus on creating brand preference.
    • Maturity (peak sales, stable profits): Revamp products, explore niche markets, and maintain competitiveness.
    • Decline (declining sales/profits): Harvest profits, explore alternative uses for the product, or exit the market.

Market Follower Strategy

  • A strategy that involves consciously avoiding challenges to market leaders.
  • It leverages the groundwork of market pioneers and focuses on operational efficiency, niche targeting, and resource optimization.
  • Four types of followers: counterfitters, cloners, imitators, and adapters.
  • Benefits: lower risk, cost savings, and opportunity for targeted growth for a niche customer.
  • Drawbacks: Limited differentiation, leader dependence, and possible growth ceiling.

Competitive Analysis

  • A key part of strategic management enabling organizations to understand competitors' strengths and weaknesses.
  • Identifying competitors: Differentiating between direct and indirect competitors.
  • Analyzing competitor strategies: Identifying strategic objectives, strengths/weaknesses, and their customer value analysis.
  • It utilizes tools such as Ansoff Matrix, BCG Matrix, and Blue Ocean Strategy.
  • Understanding competitive dynamics and response patterns of competitors provides a competitive edge.

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Description

Test your knowledge on the Ansoff Matrix and related strategic management concepts. This quiz covers various types of diversification, market penetration risks, and provides insights into resource allocation and strategic planning. Expand your understanding of business strategies and their implications.

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