Question Tag: Market Development

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  • 30 Marks

CSME – May 2022 – L2 – SA – Q1 – Corporate Strategy Formulation

Analyze Abiodun Farms' growth strategy using SOAR and PESTEL, and suggest strategic directions for growth.

Abiodun Farms Limited is a company established to engage in poultry farming. Currently, it owns and runs a poultry farm located at Ota, Ogun State. With five years of experience in egg production, the company produces 700 crates of eggs per day, all of which are sold in Ota. The current demand for eggs in Ota is estimated at 2,000 crates per day. The company’s vision is to become the country’s biggest egg producer within the next ten years.

As a growth strategy, Abiodun Farms Limited plans to expand production to 10,000 crates of eggs per day through the installation of more cages and pens on its premises at Ota, acquisition of more chickens, and other required inputs. The focus is to serve the market for eggs in selected towns in Southwestern Nigeria, all of which have an estimated daily demand of 50,000 crates of eggs. The production capacity of all competitors of Abiodun Farms Limited in the market for eggs in the Southwest was estimated at 32,000 crates per day. The company hopes to take advantage of this demand gap through the establishment of distribution outlets across major cities in the region for effective marketing. Aggressive advertisement campaigns to stimulate demand for its products will also be embarked upon.

The establishment of a new poultry or expansion of the production capacity of an existing one has no legal requirements except for making adequate arrangements for waste management. Capital requirements are high. However, the Central Bank of Nigeria (CBN) recently approved the release of soft loans to all interested poultry farmers as part of the government’s agri-loan scheme aimed at promoting farming. Abiodun Farms Limited intends to fund 60% of its growth plan through the agri-loans scheme which the CBN has approved and is currently awaiting disbursement.

For the success of the proposed growth strategy, it hopes to leverage the following:

  • Knowledge and experience of poultry business acquired in the company’s 5 years of operation
  • Size of land owned by the company, where current production takes place, is adequate for the proposed expansion
  • Strong business relationships with the biggest and most reliable suppliers of poultry inputs, such as point-of-lay chickens, cages, feeds, medicines, egg crates, etc.
  • Growth rate of demand for eggs is currently in line with that of the population of the country, which is estimated at 3%
  • The company has access to current technology in egg production, which has not changed in decades. It hopes to install automatic solid chicken waste flushers, egg pickers, and sorters. There are also plans to employ two in-house veterinarians
  • The problem of kidnapping has become worrisome in the area where the company operates. Recently, it had to pay a huge ransom to kidnappers for the release of one of its kidnapped marketers. To mitigate this risk, the company plans to engage five local hunters to provide security for its employees in addition to those securing the farm premises currently
  • There is currently no public water supply to the farm location. Hence, the company provides its own water, using a huge borehole it drilled three years ago, which has the capacity to generate adequate water to meet current and future needs. In the same vein, the company relies mostly on its generating sets for its electricity needs, due to the unreliable and epileptic public electricity supply
  • With the increase in egg production comes an increase in solid waste generation and air pollution. Therefore, it is envisaged that the increased air pollution could attract some negative reactions from people in the Ota community. However, the company has an existing waste disposal system which it hopes to expand to properly dispose of all poultry waste
  • Required human resources are available within the Ota community

Required:

a. Use the SOAR model to analyze the strategic position of Abiodun Farms Limited. (12 Marks)

b. Using the PESTEL analysis, assess the business environment of Abiodun Farms Limited, explaining how each component will impact the company’s growth strategy. (12 Marks)

c. Suggest strategies for Abiodun Farms Limited to achieve its goal of becoming the biggest poultry products producer and seller in Nigeria under the following strategic directions:

  • i. Market development (2 Marks)
  • ii. Market penetration (2 Marks)
  • iii. Diversification (2 Marks)

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  • 6 Marks

MGE – May 2018 – L2 – Q1b – Market and Product Development Strategies

Distinguishing market and product development strategies using Agaba Limited as a case study.

Ansoff argued that when a firm is planning its growth strategies, there should be a link between its current products and markets and its future products and markets. The management of Agaba Limited, an Aba-based company, has anchored its strategies for product-market development on Ansoff’s growth vector matrix.

Required:
Distinguish between market development strategy and product development strategy adopted by Agaba Limited. (6 Marks)

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  • 10 Marks

SCS – Nov 2020 – L3 – Q3 – Competitive advantage

Apply Ansoff's Product/Market Growth Matrix to assess GGOH’s potential market development opportunities.

With the increasing competition in the hospitality industry, GGOH must adopt market development strategies to stay in or ahead of the competition. Apply Ansoff’s Product/Market Growth matrix to assess the extent of the potential market development opportunities available to GGOH. (10 marks)

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  • 40 Marks

CSEG – Nov 2015 – L2 – Q1 – Analyzing the external environment

This question involves analyzing the external environment affecting Grace Telecom Ltd., assessing market development opportunities using Ansoff’s Matrix, understanding economic data relevance, evaluating expansion plans, and outlining methods for obtaining a stock exchange quotation.

CASE STUDY: GRACE TELECOM LIMITED

Introduction: Grace Telecom Ltd. is a well-established company providing telecommunications services both nationally and internationally. It offers telephone services, telephone lines and equipment, and private telecommunication networks. Recently, it has expanded into mobile phone services, an expanding global market.

The company has a diverse customer base, including residential users, multinational companies, government agencies, and public sector organizations. Grace Telecom Ltd. handles approximately 100,000 million calls each working day and employs nearly 140 personnel.

Strategic Development: The Chairman of Grace Telecom Ltd., in the latest Annual Report, identified three main growth areas reflecting the evolving telecommunications market. The company aims to:

  • Expand its telecommunications business nationally and overseas, acting independently or through partnerships.
  • Diversify into television and multi-media services, including telephone shopping and broadcasting.
  • Extend joint ventures and strategic alliances already established in West Africa.

The Chairman emphasized the company’s intent to become a world leader in communications by focusing on long-term development, improving customer services, developing high-quality products, and maintaining innovation, flexibility, and market-driven approaches to deliver world-class services at competitive costs.

Financial Information: The following comparative statistics show extracts from the company’s financial performance in the national telecommunications market over the last two years:

Last year Previous year
Revenue/Turnover (GHS’000) 16,613
Profit before interest and tax (GHS’000) 3,323
Capital employed (GHS’000) 22,150

The company estimates its cost of capital to be approximately 18%.

Business Opportunities: The Chief Executive of Grace Telecom Ltd. identified major opportunities in:

  • Encouraging greater telephone usage.
  • Providing advanced services, including research and development into new technologies.
  • Benefiting from the increasing deregulation of global telecommunication services.

An extensive advertising campaign was used to penetrate the residential market further, offering various charging incentives to residential customers.

To increase long-term shareholder value, the company is considering investing GHS200 million annually for three years in new technology and quality improvements in its national market. This investment, due to its specialized technical nature, is not expected to have residual value at the end of the three-year period.

Following the investment, the directors believe the company’s rate of profit before interest and tax to turnover in the national telecommunications market will remain constant, at the same level as last year, for the three years of the investment.

Markets and Competition: Grace Telecom Ltd. is experiencing market share erosion and faces strong competition in the mobile phone market. Despite leading its national market with an 85% share, the company has seen reduced demand for residential lines over the past five years due to increased competition.

The market for telecommunications equipment is perceived as static. The planned investment of GHS200 million annually is estimated to increase Grace Telecom Ltd.’s market share to 95%. This improvement is expected to be fully realized in the first year and maintained for the full three-year period. Without further investment, the market share is expected to revert to current levels due to competitive pressures.

Industry Regulation: A government regulatory organization has been established to promote competition and deter anti-competitive behavior. Due to regulatory activities and aggressive pricing strategies, charges to customers are anticipated to remain constant for the full three-year period of new investment.

All cash flows are assumed to occur at the end of the year to which they relate. The cash flows and discount rate are in real terms.

Future Outlook: The business remains under family control, but the board is considering an expansion program, which would require raising GH¢200 million in equity or debt finance. However, there are risks associated with the expansion, such as the declining market for fixed telephone lines. New income is expected from expanding into mobile money transfer services. The company’s key to profit growth lies in generating sales growth, though it faces stiff competition from larger telecom companies.

Grace Telecom Ltd. must carefully consider external factors, including government economic policy. Recent key economic data include:

  • Bank base rate reduced from 22% to 20%, with a forecast of a further 0.5% reduction within six months.
  • Annual inflation rate reduced to 12% from 14% in the previous quarter and 16% twelve months ago, with no further declines expected in the medium term.
  • Personal and corporate tax rates expected to remain unchanged for at least twelve months.

Required:

a) Explain the nature of the political, economic, social, and technological forces which will influence Grace Telecom Ltd. in developing its business and increasing its market share. (8 marks)

b) Apply Ansoff’s Product/Market Growth matrix to assess the extent of the potential market development opportunities available to Grace Telecom Ltd. (12 marks)

c) Explain the relevance of each of the items of economic data listed in the case to Grace Telecom Ltd. (6 marks)

d) Explain whether Grace Telecom Ltd. should continue with its expansion plans. Clearly justify your argument for or against the expansion. (10 marks)

e) Outline FOUR (4) methods whereby Grace Telecom Ltd. can obtain a quotation for its shares on the Ghana Stock Exchange. (4 marks)

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  • 10 Marks

BMIS – Nov 2021 – L1 – Q5a – Introduction to business strategy

Explain the components of the Ansoff Growth Matrix in strategic planning.

Organisations that intend to remain focused on the achievement of their objectives develop and apply different business models to guide them in their operations. One of such models is the Ansoff Growth Matrix.

Required:
Explain the Ansoff Growth matrix with emphasis on its components. (10 marks)

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  • 30 Marks

CSME – May 2022 – L2 – SA – Q1 – Corporate Strategy Formulation

Analyze Abiodun Farms' growth strategy using SOAR and PESTEL, and suggest strategic directions for growth.

Abiodun Farms Limited is a company established to engage in poultry farming. Currently, it owns and runs a poultry farm located at Ota, Ogun State. With five years of experience in egg production, the company produces 700 crates of eggs per day, all of which are sold in Ota. The current demand for eggs in Ota is estimated at 2,000 crates per day. The company’s vision is to become the country’s biggest egg producer within the next ten years.

As a growth strategy, Abiodun Farms Limited plans to expand production to 10,000 crates of eggs per day through the installation of more cages and pens on its premises at Ota, acquisition of more chickens, and other required inputs. The focus is to serve the market for eggs in selected towns in Southwestern Nigeria, all of which have an estimated daily demand of 50,000 crates of eggs. The production capacity of all competitors of Abiodun Farms Limited in the market for eggs in the Southwest was estimated at 32,000 crates per day. The company hopes to take advantage of this demand gap through the establishment of distribution outlets across major cities in the region for effective marketing. Aggressive advertisement campaigns to stimulate demand for its products will also be embarked upon.

The establishment of a new poultry or expansion of the production capacity of an existing one has no legal requirements except for making adequate arrangements for waste management. Capital requirements are high. However, the Central Bank of Nigeria (CBN) recently approved the release of soft loans to all interested poultry farmers as part of the government’s agri-loan scheme aimed at promoting farming. Abiodun Farms Limited intends to fund 60% of its growth plan through the agri-loans scheme which the CBN has approved and is currently awaiting disbursement.

For the success of the proposed growth strategy, it hopes to leverage the following:

  • Knowledge and experience of poultry business acquired in the company’s 5 years of operation
  • Size of land owned by the company, where current production takes place, is adequate for the proposed expansion
  • Strong business relationships with the biggest and most reliable suppliers of poultry inputs, such as point-of-lay chickens, cages, feeds, medicines, egg crates, etc.
  • Growth rate of demand for eggs is currently in line with that of the population of the country, which is estimated at 3%
  • The company has access to current technology in egg production, which has not changed in decades. It hopes to install automatic solid chicken waste flushers, egg pickers, and sorters. There are also plans to employ two in-house veterinarians
  • The problem of kidnapping has become worrisome in the area where the company operates. Recently, it had to pay a huge ransom to kidnappers for the release of one of its kidnapped marketers. To mitigate this risk, the company plans to engage five local hunters to provide security for its employees in addition to those securing the farm premises currently
  • There is currently no public water supply to the farm location. Hence, the company provides its own water, using a huge borehole it drilled three years ago, which has the capacity to generate adequate water to meet current and future needs. In the same vein, the company relies mostly on its generating sets for its electricity needs, due to the unreliable and epileptic public electricity supply
  • With the increase in egg production comes an increase in solid waste generation and air pollution. Therefore, it is envisaged that the increased air pollution could attract some negative reactions from people in the Ota community. However, the company has an existing waste disposal system which it hopes to expand to properly dispose of all poultry waste
  • Required human resources are available within the Ota community

Required:

a. Use the SOAR model to analyze the strategic position of Abiodun Farms Limited. (12 Marks)

b. Using the PESTEL analysis, assess the business environment of Abiodun Farms Limited, explaining how each component will impact the company’s growth strategy. (12 Marks)

c. Suggest strategies for Abiodun Farms Limited to achieve its goal of becoming the biggest poultry products producer and seller in Nigeria under the following strategic directions:

  • i. Market development (2 Marks)
  • ii. Market penetration (2 Marks)
  • iii. Diversification (2 Marks)

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  • 6 Marks

MGE – May 2018 – L2 – Q1b – Market and Product Development Strategies

Distinguishing market and product development strategies using Agaba Limited as a case study.

Ansoff argued that when a firm is planning its growth strategies, there should be a link between its current products and markets and its future products and markets. The management of Agaba Limited, an Aba-based company, has anchored its strategies for product-market development on Ansoff’s growth vector matrix.

Required:
Distinguish between market development strategy and product development strategy adopted by Agaba Limited. (6 Marks)

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  • 10 Marks

SCS – Nov 2020 – L3 – Q3 – Competitive advantage

Apply Ansoff's Product/Market Growth Matrix to assess GGOH’s potential market development opportunities.

With the increasing competition in the hospitality industry, GGOH must adopt market development strategies to stay in or ahead of the competition. Apply Ansoff’s Product/Market Growth matrix to assess the extent of the potential market development opportunities available to GGOH. (10 marks)

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  • 40 Marks

CSEG – Nov 2015 – L2 – Q1 – Analyzing the external environment

This question involves analyzing the external environment affecting Grace Telecom Ltd., assessing market development opportunities using Ansoff’s Matrix, understanding economic data relevance, evaluating expansion plans, and outlining methods for obtaining a stock exchange quotation.

CASE STUDY: GRACE TELECOM LIMITED

Introduction: Grace Telecom Ltd. is a well-established company providing telecommunications services both nationally and internationally. It offers telephone services, telephone lines and equipment, and private telecommunication networks. Recently, it has expanded into mobile phone services, an expanding global market.

The company has a diverse customer base, including residential users, multinational companies, government agencies, and public sector organizations. Grace Telecom Ltd. handles approximately 100,000 million calls each working day and employs nearly 140 personnel.

Strategic Development: The Chairman of Grace Telecom Ltd., in the latest Annual Report, identified three main growth areas reflecting the evolving telecommunications market. The company aims to:

  • Expand its telecommunications business nationally and overseas, acting independently or through partnerships.
  • Diversify into television and multi-media services, including telephone shopping and broadcasting.
  • Extend joint ventures and strategic alliances already established in West Africa.

The Chairman emphasized the company’s intent to become a world leader in communications by focusing on long-term development, improving customer services, developing high-quality products, and maintaining innovation, flexibility, and market-driven approaches to deliver world-class services at competitive costs.

Financial Information: The following comparative statistics show extracts from the company’s financial performance in the national telecommunications market over the last two years:

Last year Previous year
Revenue/Turnover (GHS’000) 16,613
Profit before interest and tax (GHS’000) 3,323
Capital employed (GHS’000) 22,150

The company estimates its cost of capital to be approximately 18%.

Business Opportunities: The Chief Executive of Grace Telecom Ltd. identified major opportunities in:

  • Encouraging greater telephone usage.
  • Providing advanced services, including research and development into new technologies.
  • Benefiting from the increasing deregulation of global telecommunication services.

An extensive advertising campaign was used to penetrate the residential market further, offering various charging incentives to residential customers.

To increase long-term shareholder value, the company is considering investing GHS200 million annually for three years in new technology and quality improvements in its national market. This investment, due to its specialized technical nature, is not expected to have residual value at the end of the three-year period.

Following the investment, the directors believe the company’s rate of profit before interest and tax to turnover in the national telecommunications market will remain constant, at the same level as last year, for the three years of the investment.

Markets and Competition: Grace Telecom Ltd. is experiencing market share erosion and faces strong competition in the mobile phone market. Despite leading its national market with an 85% share, the company has seen reduced demand for residential lines over the past five years due to increased competition.

The market for telecommunications equipment is perceived as static. The planned investment of GHS200 million annually is estimated to increase Grace Telecom Ltd.’s market share to 95%. This improvement is expected to be fully realized in the first year and maintained for the full three-year period. Without further investment, the market share is expected to revert to current levels due to competitive pressures.

Industry Regulation: A government regulatory organization has been established to promote competition and deter anti-competitive behavior. Due to regulatory activities and aggressive pricing strategies, charges to customers are anticipated to remain constant for the full three-year period of new investment.

All cash flows are assumed to occur at the end of the year to which they relate. The cash flows and discount rate are in real terms.

Future Outlook: The business remains under family control, but the board is considering an expansion program, which would require raising GH¢200 million in equity or debt finance. However, there are risks associated with the expansion, such as the declining market for fixed telephone lines. New income is expected from expanding into mobile money transfer services. The company’s key to profit growth lies in generating sales growth, though it faces stiff competition from larger telecom companies.

Grace Telecom Ltd. must carefully consider external factors, including government economic policy. Recent key economic data include:

  • Bank base rate reduced from 22% to 20%, with a forecast of a further 0.5% reduction within six months.
  • Annual inflation rate reduced to 12% from 14% in the previous quarter and 16% twelve months ago, with no further declines expected in the medium term.
  • Personal and corporate tax rates expected to remain unchanged for at least twelve months.

Required:

a) Explain the nature of the political, economic, social, and technological forces which will influence Grace Telecom Ltd. in developing its business and increasing its market share. (8 marks)

b) Apply Ansoff’s Product/Market Growth matrix to assess the extent of the potential market development opportunities available to Grace Telecom Ltd. (12 marks)

c) Explain the relevance of each of the items of economic data listed in the case to Grace Telecom Ltd. (6 marks)

d) Explain whether Grace Telecom Ltd. should continue with its expansion plans. Clearly justify your argument for or against the expansion. (10 marks)

e) Outline FOUR (4) methods whereby Grace Telecom Ltd. can obtain a quotation for its shares on the Ghana Stock Exchange. (4 marks)

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  • 10 Marks

BMIS – Nov 2021 – L1 – Q5a – Introduction to business strategy

Explain the components of the Ansoff Growth Matrix in strategic planning.

Organisations that intend to remain focused on the achievement of their objectives develop and apply different business models to guide them in their operations. One of such models is the Ansoff Growth Matrix.

Required:
Explain the Ansoff Growth matrix with emphasis on its components. (10 marks)

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