Expansion Flashcards
expansion model
- ansoff matrix
ansoff matrix
- growth power and motivated by revenues
- summarized growth opportunities
- each quadrant increases risk
market penetration - description
- Sell more of existing product to existing target market = greater market share and/or greater purchase frequency
- Target market does not change → trying to get greater market share by capturing more customers in target market or getting customers to buy more
- Ex. arm and hammer selling baking soda as not only baking but cleaning product (still same target market and same product)
market penetration riskiness
low
market penetration
- why
- build on what you have and know -no change
- economies of scale in production and selling (not as much investment/cost needed)
market penetration
- challenges
- competitor reaction (taking market share from them)
- winning customers
market penetration
- tactics
Cut prices
Increases demand
Lower prices so they are cheaper than competitors
Increase advertising, loyalty schemes
Creates more awareness
Increase distribution channels
Increases purchase frequency
Volume incentives
Encourage customers to buy more of what you are making
Discounted prices if you buy a lot
Buy a competitor
Increase market share by buying out com
market penetration
- questions to ask
Return: If I decrease price will volume compensate for lower price? Will lower price affect brand image?
Lower price might make consumers think the product is less quality
market penetration
- diamond-e
- Capabilities: Can I persuade customers to consume more of my product?
If you already hold a large share of the market, the ability to persuade consumers to buy more might be difficult
Resources: Do I have to use new distribution channels? Should I? Can I?
Resources: Do I have the production capacity to meet the increased demand?
market penetration
- porters 5 forces
Buyers: Propensity to switch? Lock in/switching costs? Brand loyalty?
Rivalry: Fragmented vs concentrated, growing vs declining, aggressive vs passive competitor
Concentrated market → majority of market share is held by a small number of companies, trying to steal customers from a concentrated market → they have a big footprint in the industry (harder to compete)
Fragmented market → everybody has a small share, easier to steal from many small companies
How much share do I already have? Can it grow?
market development
- description
- Selling what you already produce to new target markets (market segments) or new geographic markets
Develop customer understanding (satisfying needs, understanding wants)
New target markets → ranges based on country
Some adjustments must be made, main components stay the same
Ex. selling protein powder to professional athletes, market development can be either selling to seniors (supplements) or selling to professional athletes overseas (both are market development)
market development
- risk
A little riskier then market penetration but still not the most risk
market development
- why
- Capitalize on production capabilities (not changing much)
- economies of scale (doesn’t cost much) Because they didn’t change their product that much
pursue less contested or larger market
diversification of customer base
market development
- challenges
customer access and awareness
market development
- tactics
Create awareness in new market – pitch benefits to new customers
(e.g. arm and hammer baking soda being marketed as sneaker balls for athletes)
Expand geographically (use international expansion knowledge!) Always have to have really strong marketing scheme (e.g. when Coke expanded to teens in Japan had to change message, had to appear as respectful to older people)
market development
- diamond-e
Resources: Will this affect brand image? Should I use a different brand name?
Diversification can negatively impact brand image → brand targeting teenagers, old people wearing it, turns teenagers off
Old Navy, Gap, Banana Republic → same company, different brands, different target markets
Capabilities: Will the product need any adjustments? Can I make them?
Do I have the resources ($, brand equity, distribution network, knowledge of new customer) and capabilities (marketing, product redesign, international operations) to go international?
market development
- porters
Can I access the distribution channels to reach this new market?
Where are the buyers, how do we get to them?
Are the customers accessible? Will they switch?
Accessible in the psychological sense → can they be persuaded to switch
Rivalry: fragmentation, aggression, growth? Differentiation – are there market segments that are under-served?
Barriers to entry?
New market segment → new components that will get in the way
product development
- description
- risk
Develop related or unrelated products your customers value; product line extension
Capture more share of wallet by offering more products
Ex. Apple: airpods were a product development strategy → same customers, new product
Tide pods
product development
- why do it
build on customer knowledge & brand equity;
possible distribution synergies (take advantage that they already have stores and distributors) & product complementarity/bundling
product development
- challenge
Cannibalization
- New product might steal market share from yourself → doesn’t grow the number of customers
- Not increasing sales, customers are just switching to different products
Ex. tide pods
give up production efficiencies
- Create new production capabilities in mass production
- must know what and how to develop new product
product development
- tactics
Extend product
Repackage existing products
Tide pod → detergent, softener, stain remover all in one pod
Create bundles of complementary products that add value to each other
product development
- diamond-e
can I leverage existing brand and/or distribution?
Ex. associated apple brand for high quality
Can my facilities manage or do I have to build new ones?
Can I produce & sell at a profitable scale?
How much new product expertise will I need?
product development
- porters
Will customers be willing to switch to my new product?
Rivalry: aggression?
Barriers to entry
Increases risk → new capabilities, invest new resources, loss of efficiencies and cannibalization
diversification
- description
Selling new products, unfamiliar work, etc.
New customers, new products, new businesses, new distribution channels
Needs new resources, activities, research
The more new things, the higher the chance of making a mistake
new products and new markets
