Strategy

ACCA P3 考試：Strategy

1. Do nothing

2. Withdrawal

3. Market penetration

4. Product development

5. Market development

6. Diversification

Do nothing This involves following the current strategy while events around change and can often prove to be a successful short-term strategy. Basically, if an organisation is exposed to some form of competitive threat, its short-term objective is to not react and, hence, get involved in what could be an expensive decision.

Sell out/withdraw from the market This may be followed so as to maximise the return on a business that may be at the top of its cycle and, hence, will be in line with the goal of maximisation of cash flows. Withdrawal from a business sector may be chosen to give the business more focus – for example, Richard Branson’s decision to sell his original business Virgin Records to concentrate on the airlines business.

Market penetration This involves increasing the market share in the current market with the current product. Market share can be enhanced by such techniques as improved quality, productivity or increased marketing activity.

Product development This involves introducing a new product into the current market. The product change is often the result of changes and modifications to an existing successful product – for example, Mars ice cream. This is an alternative to the present product and builds on present knowledge and skills.

Market development In this case the organisation keeps its tried and tested products but aims to apply them to different market segments. This strategy maintains the security of the present product while enabling extra revenue to be generated from new segments – for example, McDonald’s and its geographic market development.

Diversification This is the most risky of the product market strategies as it involves the introduction of a totally new product in a new market. Diversification can either be related or unrelated.

Related diversification This involves development of the product and market but still remaining within the broad confines of the industry. There are three main types.

1. Backward. A development into the business that inputs into the present business – for example, move up the supply chain into raw material inputs.

2. Forward. A development into activities concerned with a company’s outputs also called downstream integration – for example, move down the supply chain into distribution activities.

3. Horizontal. Movement into activities that are competitive with existing activities – for example, to benefit access to market or technology.

Unrelated diversification This involves movement into industries that bear little relationship to the present one and is often the result of a profit motive.