Away from assessing current businesses, designing the business portfolio absorbs finding businesses and products the company should consider in the future. Companies need expansion if they are to compete more effectively, satisfy their stakeholders, and magnetize top talent. Growth is like pure oxygen and it creates a vital, enthusiastic corporation where people see genuine opportunity. At the same time, a firm must be careful not to make growth itself an objective. The company's objective must be profitable growth. Marketing has the main responsibility for achieving profitable growth for the company. Marketing must identify, evaluate, and select market opportunities and lay down strategies for capturing them. One useful device for identifying growth opportunities is the product-market expansion grid. It’s a portfolio-planning tool for identifying company growth opportunities through market penetration, market development, product development, or diversification.
Identifying Companies new intensive growth opportunities product-market expansion grid can be a very useful framework. There are four strategies, one for each of the quadrants:
Market Penetration Strategy
When the product is in the current market, it can still grow. There are three major approaches to increasing current product's market share: 1. Encourage current customers to buy more.
2. Attract competitor's customers.
3. Convince non-users to use the product.
When the current product is launched in a new market, there are three approaches to develop the market: 1. Expand distribution channels.
2. Sell in new locations.
3. Identify the potential users.
When a new product is launched in the current market, the intensive growth strategies could be to: 1. Develop new features.
2. Develop different quality levels.
3. Improve the technology.
When a new product is launched in a new market, diversification makes good sense as better opportunities are found outside the present business. The diversification strategies are of three types: 1. Concentric Diversification Strategy: Develop new products with the earlier technology for new segments 2. Conglomerate Diversification Strategy: Develop new products for new markets. 3. Horizontal Diversification Strategy: Develop new products with new technology for old customers. Evaluation of Business Portfolio Using Product-Market Expansion Grid
For a whole variety of reasons, there are times when as an individual or in business want or need to expand or change field or market. In business, manager might need to achieve economies of scale, make more money for investors, or gain national or even global recognition of their brand. Having decided that manager wants to grow business, he’ll have hundreds of ideas about things he could do; this means new products, new markets, new channels, or new marketing campaigns. Using a strategic approach, such as the Product-Market Expansion Grid, helps manager evaluate available options and choose the one that suits the situation best, and gives the best return on the potentially considerable investment that business’ need to make.
To understand the process of evaluation of business portfolio better here I am going to depict an example of Toyota Motor Corporation.
Toyota Motor Corporation commonly known simply as Toyota and abbreviated as TMC is a multinational automaker headquartered in Toyota, Aichi, Japan. In 2010, Toyota Motor Corporation employed 317,734 people worldwide. TMC is the world's largest automobile manufacturer by sales and production. The company was founded by Kiichiro Toyoda in 1937 as a spinoff from his father's company Toyota Industries to create automobiles. Three years earlier, in 1934, while still a department of Toyota Industries, it created its first product, the Type A engine, and, in 1936, its first passenger car, the Toyota AA....