1． What are the four product growth strategies according to the Ansoff matrix? Critically evaluate each of them with an appropriate example of each. Answer1:
(1) Product strategies for growth: a useful way of looking at growth opportunities is offered by the Ansoff Matrix as it is a practical framework for thinking about how growth can be achieved through product strategy. It comprises four general approaches to sales growth: market penetration/expansion, product development, market development and diversification. Market penetration and expansion are strategies relating to growing exiting products in existing markets. Market penetration depends on winning competitors’ customers or buying competitors (thereby increasing market share). Defense of increased penetration may be through discouraging competitive entry. Market expansion may be through converting non-users to users or increasing usage rate. Although market share may not increase, sales growth is achieved through increasing market size. Product development is a strategy for developing new products for existing markets. It has three variants: extending existing product lines (brand extensions) to give current customers greater choice; product replacement (updates of old products); and innovation (developing fundamentally different products). Market development is a strategy for taking existing products and marketing them in new markets. This may be through the promotion of new uses of existing products to new customers, or the marketing of existing products to new market segments (e.g. overseas markets). Diversification (entry into new markets) is a strategy for developing new products for new markets. It is the most risky of the four growth strategies but also potentially the most rewarding. (2) For example: market penetration (Cadbury Schweppes did by increasing expenditure by 87 percent over a four-year period); market expansion (Kellogg’s has targeted lapsed breakfast cereal users who rediscover the...
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