1. PRODUCT MARKET EXPANSION GRID NEW CURRENT MARKET PENETRATION PRODUCT DEVELOPMENT MARKET DEVELOPMENT DIVERSIFICATION CURRENT NEW Product market expansion grid was created by the father ofstrategic planning IGOR ANSOFF and it most commonly called as ANSOFF’S MATRIX.
The product market expansion grid has four strategies1. MarketPenetration2. MarketDevelopment3. ProductDevelopment4.
Diversification MarketPenetration:The first strategy companies looks into is focusing onincreasing their sales and profit margins. Marketing efforts of the firm is toaccelerate their existing product line in the current markets is called marketpenetration strategy. The best way to carry out this is to attractcompetitors and customer and looking for potential customer to purchase theexisting products. Example: According to Samsung Company, in terms of market penetration HD and LCD televisions werepresent in only 23%percent of households of Oman in the year 2008, thatnumber has grown to 55% in 2013 and It will grow to 62% by the end of 2017.Samsung company hopes to increase their sales of television by morelocal advertising rather, by means of flyers, brochures etc. MarketDevelopment:Developingan entirely new market for the existing product of the firm is called marketdevelopment strategy. The main purpose of this is to find new market for thenew customers to increase the company’s performance by increasingsales and profits margins. Companies can develop market on geographical anddemographical factors such as age, sex, gender, class, city, regions etc.
Marketingmanager needs to rethink this over and come to a conclusion as whether it isprofitable or should they introduce an entirely new product.Example: Pakistan OilCompany is developing new market by exporting oil to Ahmedabad. ProductDevelopment:This isconcerned with innovating or modifying new products and making an offer ofthese products to the existing market is called product development strategy.It takes relatively much time and money investment for developing a newproduct.
Marketing Manager of the firm must carry out a detailed survey toestablish if it is feasible to introduce new products in the current market ornot.Example: Google Incorporationhas developeda new browser called Google Chrome forthe existing Internet user and platform Diversification:Diversification Strategy is the modificationand innovation of new products in an entirely new market. Diversificationstrategy is chosen by the firm if the current market is saturated due to whichrevenues and profits margins are falling or decreasing. At the corporate level,it is considered to be very risky but a challenging strategy for making anentrance in a promising business outside of the vicinity of the existingbusiness units.Example: WaltDisney Pictures shifted from producing animation movies totheme parks and vacation properties businessThereare three diversification strategies: concentric diversification, horizontaldiversification, and conglomerate diversification. Concentric Diversification is about making an entrance into new markets with a new products that is related to the company’s existing or current product offering.
Horizontal Diversification – the introduction of products that are entirely unrelated to a company’s existing products to existing markets Conglomerate Diversification (or unrelated diversification) is about making an entrance in new markets with a new products that has no relation to a company’s existing offering. KFCrolling out new grilled chicken line to add its traditional fried chicken lineup’. The strategy undertaken by KFC here is Product Development since it ismaking an introduction or addition of Grilled chicken to its already existingline of fried chicken. 2.
BOSTONS CONSULTINGGROUP APPROACH FOR PROTFOLIO ANALYSIS. The Boston Growth-ShareMatrix was developed by the Boston Consulting Group (BCG). It’s a leadingmanagement consulting group and most popular portfolio analysis. The BostonMatrix classifies all the companies’ strategic business units according to thechoice of the market of SBU’s, which is quantified in terms or market growthrate, and the position of that market, measured in terms of relative marketshare of the firms. On the Y axis, market growth rate shows the attractivenessof the SBUs market. On the X axis, relative market share shows the company’sstrength in that market.
(PORTFOLIO ANALYSIS: DESIGNING THE BUSINESS PORTFOLIO – BOSTON MATRIX, n.d.) Stars: These are business units that has the goodand large market market shares and generates cash are considered stars. Monopoliesare commonly referred to as stars. Stars have high growth rate due to which itrequires large and heavy investment and hence it consumes a lot of cash. Due tothis stars can generate both inflows but more of outflow of cash. Starseventually turns into cash cows if they are able to sustain their success in marketby maintaining growth rate. Companies are often advised that it’s betterto invest in stars.
Cash cows: Cash cows are the ultimate leaders in thehigh growth market and generates enough and more cash than they invest forbusinesses. These are business units that have the highest of market shares butlow growth. Companies consider to invest in cash cows to maintain a stable yetlarger level of productivity from market or to “milk” the gains. Dogs: Dogs are units that has the lowest market share anda low growth rate compared to the rest of the matrix. They either reap lowprofits or in some cases generate losses for the business unit.
Dogs usuallyundergoes divesture process as businesses think it is better to investelsewhere. Question marks: They are businesses thathave high growth prospects but relatively low market share. They consume a lotof cash because they are just making their entry into the high growth marketand tends to bring low return. However, business units grows quite rapidly andso they have the potential to turn into stars and ultimately cash cows.Companies invest in question marks only if the product has potential for growthand if not the marketing manager decides whether to continue to stay in highgrowth market because they require huge investments. Firms usually find it hard todispose of question marks since they have invested lot of money into it anddon’t want to waste it. Their main aim is to establish the best possibleutilization for which they are spending.
They wouldn’t want the money investedin businesses to go into complete waste and so before the business is in themiddle stage, company must make the decision whether to continue investing orstop investing in question marks so as to make use of those funds for betterpurposes for which they are best utilized. (Divesture)