Choosing A New Car

Published Date: 02 Nov 2017

A manager was considering buying a new car. He had driven Jaguars for some time. However, he thought it would be a good idea to review the options systematically. He obtained the brochures for a range of luxury car makes, identified the major factors that were important to him and considered all the performance indicators for each of the cars against these. He even allocated a weighted score to the factors that meant most to him. The analysis told him that a BMW or a Mercedes might be a better choice that a Jaguar.

This surprised him and he didn’t much like the answer. He had always driven a Jaguar, he was used to it, felt it had an especially English character and that it suited his personality. He was also looking forward to having the new model. So his inclination was to buy another Jaguar.

Actually he ended up buying a convertible Mercedes sports. This was because his wife thought he needed to liven up his image and liked the idea of driving it on holidays. With some reluctance he bought the new Mercedes. This proved to be a good decision. They both liked the car and it depreciated in value much slowly than a Jaguar.

So what are the lessons? The planning and analysis was there; and if it didn’t end up informing directly, it did indirectly. His wife justified the purchase of the Mercedes in part on the basis of that analysis. He would have ended up with another Jaguar; a continuity of what he was used to. He actually chose what (to him) was a novel, innovative option that, in the long run, significantly changed his approach to car buying, Of course, if his wife had not intervened, his inclination to the Jaguar based on past experience would probably have prevailed. This depended on him and his circumstances-the context. Some ideas get through, some do not, depending how attractive the ideas were to him. Or it could have been that the power of analysis had been such as to overcome this. All these had to do with the strategy formulation, planning, evaluation and selection, and finally, the implementation. So it is with organizations.

Source: Adapted from Johnson and Scholes (2004) Exploring Corporate Strategy. 6th edition, pg. 25.

Tasks:

Select an organization of your choice and present critical internal and external environmental analysis based on the following tasks:

Give a meaningful definition of the contexts of business strategy and discuss a company’s external environment using Porter’s 5-Force Analysis and PEST analysis.

Discuss the company’s internal environment using value chain analysis and SWOT analysis.

Review the existing strategy or strategies practiced by this company and propose a better strategy for this company based on available options.

Table of Content

TITLE

PAGE

Introduction

4

Task 1

5 - 10

Task 2

11– 15

Task 3

16– 20

Conclusion

21

Bibliography

22

Introduction

Meaning: - The term Business Environment is composed of two words ‘Business’ and ‘Environment’. In simple terms, the state in which a person remains busy is known as Business. The word Business in its economic sense means human activities like production, extraction or purchase or sales of goods that are performed for earning profits.

On the other hand, the word ‘Environment’ refers to the aspects of surroundings. Therefore, Business Environment may be defined as a set of conditions – Social, Legal, Economical, Political or Institutional that are uncontrollable in nature and affects the functioning of organization. Business Environment has two components:

1. Internal Environment

2. External Environment

Internal Environment: It includes 5 Ms i.e. man, material, money, machinery and management, usually within the control of business. Business can make changes in these factors according to the change in the functioning of enterprise.

External Environment: Those factors which are beyond the control of business enterprise are included in external environment. These factors are: Government and Legal factors, Geo-Physical Factors, Political Factors, Socio-Cultural Factors, Demo-Graphical factors etc. It is of two Types:

1. Micro/Operating Environment

2. Macro/General Environment

Task 1: Give a meaningful definition of the contexts of business strategy and discuss a company’s external environment using Porter’s 5-Force Analysis and PEST analysis.

1.0 Definition of Business Strategy

The definition of business strategy is a long term plan of action designed to achieve a particular goal or set of goals or objectives.

Strategy is management's game plan for strengthening the performance of the enterprise.

It states how business should be conduct to achieve the desired goals. Without a strategy management has no roadmap to guide them.

Creating a business strategy is a core management function. It must be said that having a good strategy and executing the strategy well, does not guarantee success. Organizations can face unforeseen circumstances and adverse conditions through no fault of their own.

2.0 Introduction of Toyota Car Company

Being the most powerful car maker in the world, Toyota holds many number one titles: No. 1 sales worldwide, No. 1 sales in Japan, best selling car in the world (Corolla), best selling car in USA (Camry), most factories all over the world, the widest range of vehicles, highest profitability...

Toyota is a typical example of how Japanese industry succeeded. Although it is often conservative in design and not very creative in bringing new ideas, its special attention to build quality and reliability wins customer confidence gradually. Its emphasis on technology development and production efficiency results in up-to-date products and good value for money. That's why its cars capture a lot of brains if not hearts. Nevertheless, in recent years Toyota starts getting more creative no matter in design and technology. Examples are Prius and iQ. Hopefully it will be even stronger in the future.

Toyota does not have many brands and subsidiaries. Most cars are sold under its own brand, while Daihatsu takes care of mini cars (especially Kei-cars) and Lexus concentrates on premium and luxury cars. Scion is a youthful brand created by its US marketing division and is still rather insignificant. Heavy trucks and commercial vehicles are produced by its subsidiary Hino. Toyota did not invest into foreign marques, as it believes more in its own effort.

3.0 Introduction of Porter’s 5 Forces Analysis

This theory was found by Michael Porter. It is used to analyze competition between industries. It says that a company should not be only competitor oriented but also has a clear market vision, Porter explains that the potential competitors are those infant industries, suppliers, customers and buyers, and substitute product producers. Therefore have to know 5 forces that determine the character of one industry which are the threat of new entrants, rivalry among existing competitors, the threat of substitute products or services, the bargaining power of buyers, the bargaining power of suppliers (UK Essays.com, 2013).

4.0 Porter’s Five Forces Analysis of Tata Motors

(i). Threat of New Entrant

Threat of New Entrants – Low

Entering a car manufacturing market is very costly and risky. The initial capital investment is extremely

high, while the competition between the companies is very intense and dominated by the well established

companies.

Toyota: The well-known brand, unshakable market presence in various segments, and large size

gives Toyota a competitive advantage over new entrants in the auto manufacturing industry.

(ii). Rivalry among Existing Competitors

Rivalry Among the Competitors – High

Considering that the automotive industry represents an oligopoly (especially in United States) the

constant competition for the market share and industry dominance is prevalent. Continuously increasing

competition is fueled by the higher consumer expectations and anticipation for the lower prices.

Toyota: Although Toyota has rather strong cost cutting strategy, the recent natural disaster has put an

additional pressure on Toyota’s costs. Recently, the Detroit Three have been offering higher sales

discounts to counter price competition, which puts Toyota under a heavier burden of efficient

production and cost cutting strategies. Yet, Toyota remains a leader in the low cost manufacturing,

while its production system caused other car-manufacturers to change the way they operate.

(iii). Threats of Substitutes Products / Services

Threat of Substitutes – Medium

As the industry trends indicate, the customers still have a solid reliance on the used car market.

Considering the fact that economy has not fully recovered, a significant part of the car demand is taken by

the used car industry.

Toyota: With the ability to cut costs more efficiently than its competitors, Toyota has narrowed the

price gap between the used cars and its own automobiles. Therefore, compared to its peers, the

substitution with the used cars is less of a danger for Toyota.

(iv). Bargaining Power of Buyers

Buyer Power – Moderate

The recent trends indicate that the consumers are prone to seek out more fuel-efficient cars due to the

rising oil prices. This also results in the increasing demand for the hybrid cars that offer cheaper

alternatives for operating the vehicle coupled with higher expectations of product quality. Moreover,

since the choices in the car market are abundant, the buyer has a quite strong bargaining power and low

switching costs.

Toyota: The cost cutting practices that Toyota implements in its operations lowers the buyer power

and puts its cars into a more advantageous position compared to its competitors

(v). Bargaining Power of Suppliers

Supplier Power – Low

The suppliers in the auto-manufacturing industry are likely to be smaller than manufacturers and thus tend

to sell to multiple automakers. While we see that supplier’s network with automakers is pretty diversified,

they provide crucial elements for car making and most of the auto-manufacturers rely on the supplier’s

timely operations and stellar quality. For this reason, the long-term contracts accompanied by strict

standards or quality on for the suppliers are very common. Usually if a supplier does not comply with the

standards set by the carmakers and charge too much it is fairly easy for the car manufacturer to find

another supplier and even move the supply chain towards the cheaper supply markets in a different

country.

Toyota: One of the competitive advantages of Toyota Co. is its strong relationship with the suppliers.

Its efficient manner of monitoring supply chain places low bargaining power on the suppliers.

5.0 Introduction of CPESTLE Analysis

Political Factors

In the background of the financial crisis, each country’s government carried out the relating remedy policy to protect or stimulate each important industry, including the annotative industry. For example, in end of 2008, U.S. government gave 17.4 billion short-term loans to General Motors and Chrysler to help them. In March, 2009, Toyota has asked for $2 billion loan from the Japanese Government. These loan policies may help the vehicles corporation survive in the difficult position caused by the financial crisis.

In addition, the U.S. Federal Reserve Board took the quantitative easing policy, which leads the global asset price inflation to protect U.S. trade. Therefore, these policies would help each country to spur its own automotives industry and protect others country automotives corporation to occupy the market share.

Economic Factors

The automotive industry shows the recovery evidence. The General Motors paid back $8.1 billion in emergency government loans and Chrysler demonstrated that it started to produce an operating profit. In the United States, the passenger vehicle sales rose 12.3 million in 2010 compared with 11.3 million in 2009. It is the first time that the sales exceed 10.0 million since the financial crisis, September 2008. In Canada, the revenue of passenger vehicle was 1.61 million compared with 1.56 million last year, due to the new growing point light trucks. The Asian automotive market was the bright point in the past several years. For example, the Chinese new automotive reached 9.32 million in 2010, while the Indian automotive reached to 1.82 million, which is shown in the Figure 1. These positive data will increase the confidence of investors, and the rising of Asia market will attract more automotive corporations.

Social Factors

Due to the increasing price of the oil, more and more people choose the small displacement engines due to its high efficiency. For example, 140,000 Chevrolet Cruze with small displacement engines were purchased in the first six months of 2010. This tendency will lead the manufacturer to produce the small displacement engines. For instance, GM and SAIC develop small displacement engines, and Toyota plans to launch more such types of cars in China. In addition, with the rising power of the middle class in China, they became the main purchasing power of automotive, which help China to become the largest growing car market in the world. It is demonstrated that China’s middle class occupies 23% of its total population.And the luxury cars also are preferred in China. For example, Beijing includes 8,800 billionaires and 143,000 millionaires. Most of wealthy own between a minimum of two to five luxury cars millionaires. This may lead the changing of the production direction about the vehicles types.

Technology Factors

Regarding to the precious energy resource, the demand for vehicle drove by other types of energy caused the interest of vehicle interest, so such types of vehicles were invented by the vehicles manufactures. For example, Hybrid electric vehicle is such type vehicle which comprises of a conventional engine propulsion system with an electric propulsion system. The features of these cars are to achieve both the better fuel economy and a better performance. Toyota leading brand Prius, was sold in 80 countries for 2 million in 2010. General Motor was developing innovative battery technologies and hybrid systems that will help hybrid and electric vehicles travel farther, which may be used in the brand Cleveland. This tendency may cause the basic transformation in the automotive industry, and attract more automobile manufactures concentrate on the hybrid engine system.

Environmental Factors

The waste gas emitted by the vehicles became the hot point in the recent years. The stringent emission standards for the passenger and light vehicles were adopted by the European Union (EU) Commission and the EU Parliament since 2005. In the standards, the automotive corporation must be responsible for the emission performance of these vehicles. And another severe emission standard was adopted by EU in 2009. And the EU Commission plans to carry on more severe standards. And different countries have the different emission standard. For example, the national emission standard of Australia is more stringent than several Asian countries. Thus, with the more stringent emission standard, the additional costs should be spent by the automotive manufacturers to meet it in the factors of product development, testing and manufacturing operations.

Legal Factors

Each country operated the legal policy to protect its own automobile corporation benefit. The Asian countries changed their import duty for the automobiles. For example, it is demonstrated by China government, the preferential taxes will be ended on the small displacement cars, in order to reduce the pollution in the large cities. India also reduced the import duty and excise duty on hybrid cars, and reduced the tax on the auto component aimed at helping the Indian auto component manufacturers. In 2009, U.S. government would restrict imports of Chinese commercial low cost tires, and increased the additional tariffs. This caused that the U.S. automotive corporation cannot chose the expensive European tires instead of Chinese tires, which increased the cost of the manufacturers. Thus, the manufactures should adjust their strategy according the various ration legal policies.

Task 2: Discuss the company’s internal environment using value chain analysis and SWOT analysis.

Value Chain Analysis

Porter_Value_Chain.png

Introduction

Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business. Influential work by Michael Porter suggested that the activities of a business could be grouped under two headings:

(1) Primary Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly); and

(2) Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities.

Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others ("out sourced").

Linking Value Chain Analysis to Competitive Advantage

What activities a business undertakes is directly linked to achieving competitive advantage. For example, a business which wishes to outperform its competitors through differentiating itself through higher quality will have to perform its value chain activities better than the opposition. By contrast, a strategy based on seeking cost leadership will require a reduction in the costs associated with the value chain activities, or a reduction in the total amount of resources used.

2.0 Value Chain Analysis of Toyota Motors.

2.0.1 Primary Activities

(i). Inbound Activities

Here goods are received from a company's suppliers. They are stored until they are needed on the production/assembly line. Goods are moved around the organization. Toyota motors purchase their raw material from all around the world. In order to maximize their availability of raw material Toyota motors maintain good relationship with their suppliers. Toyota use JIT (Just In Time) approach for handling of raw material.

(ii). Operations

This is where goods are manufactured or assembled. Individual operations could include organizing the parts to make new cars & the final tune for a new car's engine. Toyota motors are known for their reliability which comes from efficient operations.

(iii). Outbound Logistics

The goods are now finished, and they need to be sent along the supply chain to whole salers, retailers or the final consumer. Toyota motors manage their own Showrooms in different countries. Toyota motors make their product easily assessable.

(iv). Marketing & Sales

In true customer orientated fashion, at this stage the Toyota motors prepares the offering to meet the needs of targeted customers. This area focuses strongly upon marketing communications and the promotions mix.

(v). Services

This includes all areas of service such as final checking, after-sales service, complaints handling, training and so on. Toyota value their customers.

2.0.2 Support Activities

(i). Procurement

This function is responsible for all purchasing of goods, services and materials. The aim is to secure the lowest possible price for purchases of the highest possible quality. Toyota motors will be responsible for outsourcing (components or operations that would normally be done in-house are done by other organizations), and e-Purchasing (using IT and web-based technologies to achieve procurement aims).

(ii). Human Resource Management

Employees are an expensive and vital resource. Toyota motors manage recruitment and selection, training and development, and rewards and remuneration. Toyota motors consider their employees as HUMAN CAPITAL. The mission and objectives of the Toyota motor is the driving force behind the HRM strategy .Toyota motors uses following techniques to retain their employees:

•Recruitment

•Selection

•Training and development

•Compensation

•Maintenance

(iii). Technology Development

Technology is an important source of competitive advantage. Companies need to innovate to reduce costs and to protect and sustain competitive advantage. Toyota motors implemented production technology, Internet marketing activities, lean manufacturing, Customer Relationship Management (CRM), and many other technological developments.

(iv). Infrastructure

This activity includes and is driven by corporate or strategic planning. Toyota motors implemented Management Information System (MIS), and other mechanisms for planning and control in different departments.

3.0 Introduction of SWOT Analysis

Internal environment factors can be classified as Strength (S), Weaknesses (W), Opportunities (O) and Threats (T). SWOT analysis is useful tool to auditing company and its environment. It is a business or strategic planning technique used to summarize the key components of the strategic environments. Strengths and weaknesses are company’s internal environment factors and opportunities and threats are company’s external environment factors. SWOT analysis is useful to collect information about company’s resources and capabilities, so we can easily make strategy formation and selection.

4.0 SWOT Analysis of Company

Strengths

 Size and Brand Name: Toyota is the world’s largest vehicle manufacturer by production and

sales and its brand name is widely known as best quality for minimal cost cars.

ï‚· Pioneer in Innovations: Toyota stays high on the competitive edge in terms of technological

development and follows industry trends and consumer tendencies; it has initiated first mass

produced gasoline-electric hybrid automobile that had over 2million sales worldwide in 2010.

ï‚· Lean Manufacturing: Toyota maximizes profit through efficient manufacturing approaches like

Just-In-Time (JIT) production method, Total Quality Management (TQM), 6 Sigma, etc.

ï‚· Integrated Supply Chain: Toyota maintains close relationships with its suppliers and has created

an effective communication system (Kanban)

ï‚· Organizational Culture: Toyota prides itself with a remarkable loyalty from the employees.

Since the company bears Japanese cultural values, the respect for the hierarchy authority is rather

high. The management empowers every employee and gives every worker opportunity to

participate in the process of the Kaizen, or continuous improvement.

Weaknesses

ï‚· Size: Due to its large size, heavy market share, and high rate of Japanese production, Toyota is the

auto-manufacturing company most affected by the natural disaster and its devastating impact on

Japanese manufacturing.

ï‚· Decreasing Market Share: In the first quarter of 2011, GM outsold Toyota globally by a wide

margin—2.2 million units versus 1.8 million vehicles. Volkswagen also beat Toyota, with sales of

2.0 million vehicles.

ï‚· Recalls: In the first quarter of 2010, Toyota recalled more than 8 million trucks globally due to the

quality issues.

Opportunities

ï‚· Emerging Markets: The rapid development of emerging markets, especially China, offers Toyota

an opportunity to boost sales in the faster growing markets and produce at lower manufacturing

costs.

ï‚· Consumer Preferences: Since the consumers are shifting towards smaller, fuel-efficient, and

cost-effective cars, Toyota can benefit from being a leader innovator in those areas.

Threats

ï‚· The Japanese Yen has been strengthening against the Dollar and Euro, which projects potential

increase in the production costs for Toyota, leading to narrower margins.

ï‚· Repetition of the natural disaster might jeopardize future sales growth of the company.

ï‚· Rising fuel prices, increasing raw material costs, and changing customer preferences might be

challenging threats.

Task 3: Review the existing strategy or strategies practiced by this company and propose a better strategy for this company based on available options.

1.0 Introduction of Ansoff’s Product-Market Matrix

Ansoff’s Market-Product Matrix

Ansoff_Matrix.jpg

Sources: www.tutor2u.net

Ansoff Product-Market Matrix was founded by H. Igor Ansoff in 1957. This marketing tool is used to help company to find the best strategy that should they choose to reach the objectives (UK Essays.com). Output from this Ansoff Matrix is a growing strategy which is appropriate for every part of business. Igor Ansoff stated that there are 4 strategies in Ansoff Matrix, which are Market Penetration, Product Development, Market Development, and Diversification.

2.0 Ansoff’s Product0Market Matrix of Toyota Motors

(i). Market Penetration

Market Penetration

Suitability

The market penetration strategy is most suitable for growing and emerging markets. But in this case, the car market is already well-established and penetration would be made much easier if the target market is growing. Considering that Toyota is such an established name within the automotive industry, the risk of opting to penetrate the market is not that significant barrier.

Acceptability

Management may worry that targeting the customers of rival car manufacturers may result in retaliation and it is likely a retention strategy to be considered as a possible and preferable option. Since a fair amount of costs are involved with implementing this specific strategy, it is expected that Toyota would need to improve both product quality and levels of service, backed by promotional spend. However, if the risk of undertaking such a strategy does not pay off, both shareholders and staff may be cautious. That, on the other hand, would lead to shareholders losing value in their shares and also the employees possibly losing their jobs as a result of the failed venture and lost revenues.

Feasibility

The fact that Toyota's range is one of the largest in the automobile world and already exists in each segment of the car market is determining factor for potential penetration on the market. This suggests that Toyota is in a position to go ahead and penetrate any of these existing markets, where the most likely target market for this strategy would be the small car market which is predominantly aimed at young people.

(ii). Product Development

ï‚· Suitability

Given the fierce high competition in the automotive market, it is necessary for car manufacturers to keep up to speed with the latest developments. Toyota, like many other car manufacturers is known for spending huge amounts of money on research and development[8]. It spent the most on research and development of any company in the world in 2008. The company spent $8,994million on R&D, which is 4.4% of sales. (Behura, 2009) Toyota was running an estimated Formula One budget of £190m per season and last year the budget was estimated of $445 million. (GPUpdate.net, 2009) The company is likely to continue to build on the technology found with the Prius and other 'new-fuel' alternatives. Toyota's Global 21 project, better known as Toyota Prius gives the company first mover advantage.

Considering the rapidly vanishing natural resources and more specifically oil, future plans of Toyota include development of Camry Hybrid fueled by compressed natural gas (CNG) which shows that there may be possibilities of using a whole new fuel in the future. Also, TMC is planning to launch 10 new hybrid models by the early 2010s, in various global markets. Another key factor, affecting the market position is the launch of the 'urban commuter' battery-electric vehicle (BEV) by 2012. And finally, Toyota has a wide range of small cars already at their disposal that inevitably will continue to enlarge the niche that Toyota occupies.

ï‚· Acceptability

With rising fuel prices, more drivers are likely to be looking for ways to cut the costs of motoring and to drive environmentally friendly vehicles. Moreover, shareholders and managers will be interested in maintaining the superior company image by being environmentally responsible. That is why Toyota continues to spend more on research, in order to fulfill its plan to release more hybrid cars in the future. It is likely that its good reputation that has stemmed from the Prius model will meet the consumers' needs. Furthermore, the Government will be satisfied about Toyota's decision to continue with the research and manufacture of new and innovative fuel alternatives.

ï‚· Feasibility

Toyota is clearly serious about developing this new technology further and perceives it as being the future in this industry. They have successfully released the Prius model and therefore it is likely that if they unearth more ground-breaking technology they will be more than capable to launch it in the correct way. Given that Toyota is already making rapid progress on developing new products for the existing car market it is certainly feasible to continue develop in this market.

Considering the two examined strategic options, most likely the best option for Toyota is Product Development for existing market. The company has proved itself and exists in each segment of the car market. Its best option is to continue to develop the brand and the products that are demanded most. Though consumers are becoming more environmentally conscious which enforced the excellent ability of the company to research and develop new fuel efficient technologies. Second, the corporation plans to release 10 new hybrid models in the near future. Toyota has the first mover advantage with hybrid synergy drive and sufficient expertise when developing small, fuel-efficient vehicles and there is an increasing demand for these cars.

(iii). Market Development

 A company considers whether it can find or develop new markets for its current products.  For example, U.K.’s Cobra Beer entering the Indian market.  There are three approaches to identifying a new 

market for an existing product:

•identifying potential user groups in the current sales areas whose interest in the product the company might stimulate

• seeking additional distribution channels in the company’s present locations

• selling in new location in home country or abroad

(iv). Diversification

a company considers developing new products for new markets. For example, The Virgin Group’s Virgin Galactic.  Diversification growth is best used when good opportunities can be found outside the present businesses.  However, diversification strategy is the most riskiest of all the four strategies.  

3.0 Purposed Strategy – Ansoff’s Product-Market Matrix (Product Development)

Toyota has announced it is going to introduce a new framework for vehicle development that will be encompassing all brands within the Toyota group. The overhaul in product development strategy is being carried out in an effort to reduce costs, reduce launch times and also make the Toyota vehicles more appealing in terms of styling and handling. The Japanese car maker intends to maintain its market share in the highly competitive car market and this step of having a common global architecture is similar to what Volkswagen is doing with the MQB platform.

One key element in the company’s strategy will be the development of new global vehicle architectures which would be shared by many Toyota models across the world. A Toyota official commented on the same lines that cooperation between the planning and design divisions would result in a revised vehicle body structure with which new platforms would be featuring a lower center of gravity and bolder styling. This effort would help Toyota realise the development of cars with never-before-seen emotional designs and superb handling.

The Japanese car maker announced that it will be starting the development of three front wheel drive platforms under Toyota’s new "Toyota New Global Architecture" that will account for as much as half the company’s global production volumes. In addition to this, Toyota also announced a major change in terms of the role of its chief engineers. Under the new R&D structure, it will reduce the number of executives who attend internal design review meetings while giving chief engineers greater authority. You can check the image below for more clarity.

Conclusion

Ansoff’s matrix is one of the most well known frameworks for deciding upon growth strategies of an organisation. Strategic options relating to which products or services an organisation may offer in which markets are critical to the success of companies. The Ansoff’s matrix is a useful, though not an exhaustive, framework for an organisation's objective setting process and marketing audits.

The differences in strategic choices of organisations can often be attributed to the type of market in which the company operates. Changes in business environment play a crucial role in the strategic options that an organisation may pursue over its life stages. There are risks associated with all of the four strategic options entailed in the Ansoff’s matrix. Market penetration is generally considered as a low risk strategy while diversification, on the other hand, is deemed as a high risk growth strategy as it involves moving simultaneously into new products and new markets. Diversification remains a popular strategic option for firms in today's competitive business arena, and if the diversification strategy is consistent and well though-out, like the case of IBM, significant improvements in profitability can be experienced.

Sources of finding information for Ansoff’s analysis include company websites, marketing communications activities, company's annual reports, journal articles, trade publications and well reputed business magazines. Lastly, Ansoff’s matrix as a strategic model has certain limitations. The use of SWOT and PESTEL analysis is recommended, along with Ansoff’s analysis, to be able to capture a holistic view of the strategic scenario of an organisation.