According to Hill, Sam, & Glenn (1999), Igor Ansoff created a market diagram in 1957 as a method by which to classify options for business expansion. This well known marketing tool was first published in the Harvard Business Review (1957) in an article named ‘Strategies for Diversification’. It was later published in the ‘Ansoff’s book on Corporate Strategy’ in the year 1965.
Ansoff (1957), states that the simplicity of this model is that the four strategic options defined can be generically applied to any industry. It is said that he presented this matrix with a view that focused on the firm’s present and potential products and markets in order to portray alternative corporate growth strategies. He talked of four different possible products – market combinations in what he called the Ansoff’s matrix. This matrix is used by marketers who have objectives for growth. And it offers strategic choices to achieve growth objectives for a company.
The Highland Coke company is a company that deals with the production and sale of a beverage known as coke. This company has many franchises all over the United States and thus is a company whose products line is well established. However, for the past few months, this company has been experiencing a decline in growth, sales and profits. The top management fears that their product may be headed to the decline phase and thus holds an urgent meeting. After a series of research on secondary data, they discover that the decline has been caused by the new government policies on internal trade. They therefore realize that in order to maintain profitability, they must find the correct strategies to implement so as to revamp their company.
The following are the strategies that could have been applied in the above case, how they work, their risks and how they can be implemented by the Highland Coke company. It is important to note that the Ansoff matrix, along with other analytical tools and techniques that can be employed to develop alternative strategies, were to be applied to help develop strategic options for the Highland Coke Company as shown in this paper.
According to Etzel, Michael J. et al (1996), this matrix provides four different growth strategies:
|Existing Products||New Products|
|Existing Markets||Market Penetration||Product development|
|New Markets||Market Development||Diversification|
The Coke Highland Company will seek to achieve growth with the existing products in their current market segments and with an aim to increase its market share.
The Coke Highland Company will seek to achieve growth by targeting its existing products to new market segments.
The Coke Highland Company will develop new products targeted to its existing market segment.
The Coke Highland Company will diversify into new businesses and by develop new products for new markets.
Product-market Growth As Applied Highland Coke Company
Market Development Strategy
Riggs & Thomas (1998) define the market development as the name given to a growth strategy where the business seeks to sell its existing products into new markets. However, Hill, Sam, and Glenn (1999), also states that this is the pursuit of additional market segments or geographical regions for the purposes of expanding the market area of a given product. Hill, Sam & Glenn add that if the core competencies are related to the product and not the specific market segment then this would be a good strategy. This is a more risky strategy than market penetration since the firm is expanding into a new market, and for this reason, it is normally carried out with a lot of care and expertise.
According to Beckwith and Harry (1997), there are many possible ways in which the Highland Coke company will approaching this strategy. These ways include:
New geographical markets
The coke company will have to use this strategy in the development of new and unreached markets. The company will have to invest its finances in the identifying other countries abroad and introducing its product on these new countries. Also, the company will have to identify unpenetrated market segments and develop means for product introduction in those segments.
New product dimensions
The company would have to look for means of changing its brand names, diversifying its branding style or simply introducing new packaging styles. This will give the consumers the psychological impression of new products and thus revamp its product market.
New distribution channels
The Highland Coke company will have to reconsider its distribution channels. It might decide to do away with some middlemen in the distribution channel as a means of cutting costs and thus reducing the prices effectively without making loses.
Different pricing policies
Price discrimination might at point be inevitable due to the different social classes in existence in the product market. In some areas, prices would have to be extremely high to fit the needs of the particular social class while in others places, it would have to be averagely low so as to meet the low income class. In this way, the coke brand would have in a sense attracted different customers and created new market segments.
Ries, Al, and Jack Trout (1994), states that the product development strategy deals with the new products that the company will have to market to its consumers and terms it as an existing market with new products. Beckwith and Harry (1997), also add that this strategy is seeking to ensure the invention and innovation created in terms of product reaches the desired consumers. This strategy needs a firm that’s more customer oriented rather than product oriented. In this situation, the firm can easily obtain a competitive advantage and increase its market strength by developing a new product targeted to its existing customers. This however carries more risk than the strategy for increasing the market share.
The Highland Coke company will have to develop the new products as per their researches and findings based on consumer wants and preferences. They will then introduce the new product at first to a small market segment and observe consumer behavior in regard to the said product. If the product is acceptable, the Highland Coke company will market such products using the outlined marketing strategies.
Market Penetration Strategy
According to Ansoff (1957), market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets. Hill, Sam, & Glenn (1999), states that the market penetration strategy is the least risky. This is because it leverages many of the firm’s existing resources and capabilities. Ries, Al, and Jack Trout (1994), adds that in a growing market, maintaining market share will lead in growth. Also, the existence of opportunities to increase market share if competitors reach capacity limits is highly available. It is good to note that as Riggs and Thomas (1998) states that the market penetration strategy may at times have its own limits. This may be visible when the market approaches saturation whereby another strategy must be pursued if the firm is to continue to growth.
Through this strategy, the Highland Coke company will concentrate on and ensure that they achieve four main objectives which come with its implementation:
Increase Product’s Market Share
They will have either maintained or increased the market share of current products. The company would have achieved this goal through a combination marketing strategies namely:
Competitive pricing strategies
The Company would have reduced their prices below the market price while at the same time ensuring that they don’t sell below the cost line. This would have reduced profitability for sometime though as the consumer’s become aware of their lower prices, consumption would have increased over time with the company reaping profits in the long run.
Aggressive advertising empowers the consumer with the knowledge he requires to make decisions. The company would have launched a series of advertisements to enlighten its consumer base why the coke drink is better than all the other drinks existing in the market. In this way, they will have created high consumer awareness and in so doing, pushed their sales upwards.
According to Toffler, Betsy-Ann, and Jane in their dictionary of marketing terms, they state that this refers to an element of the marketing process that can close the sale of goods or services to a potential customer by providing the incentive to make a positive purchase decision. Therefore the major techniques that the Highland Coke Company will need are product planning and management, mass advertising, sales promotion and also salesmanship. In the case of this company, salesmanship will take the form of a face-to-face encounter between the consumers and the company’s salesmen in order to convince the said consumers that the product on sale is essential to their satisfaction. This will be an important tool of the marketing strategy because aggressive sales promotion more often than not expands the loyal customer’s base and changes the consumer’s psychology on his view to their product line. As part of its sales promotion, the Highland coke company would have to invest on running sales campaigns with awards and prizes to the winners. It is also important to note that the Highland Coke company will have to implement a personal feedback system between them and their consumers. When well implemented, the sales promotion technique will increase sales by motivating the salespersons to improve their performance and act as an inducement for the consumers to purchase goods and services.
The Company would have to tailor its beverages to meet the specific requirements of a market segment. They would also have to hire sales representatives that would campaign of the products on individual levels. In this way, the consumers will feel part of the company and develop more loyalty towards the company.
Secure dominance of growth markets
The company will have to work very hard through market development to ensure that they are the dominating force in the market. In this way, many consumers would more likely want to associate with them and this will in turn increase their consumer loyalty base and their profits thus enhancing the company’s growth.
Restructure Mature Markets
The Highland Coke company would also be required to develop means of restructuring its mature markets by driving out competitors; this would require a very aggressive promotional campaign on their part. These campaigns would thus be supported by a pricing strategy designed to make the market unattractive for competitors.
Increase usage by existing customers
If the Highland Coke company introduces loyalty schemes, it would increase the usage of their products by the already existing consumers. The company will also be reacquired to carry out research on their market segments based on the SWOT strategy and find means by which they can strengthen the weaker segments. Research will also ensure that the company has good information on competitors and on consumer needs and how those needs can be satisfied.
It is important to note that the advantage that the Highland Coke company will have for carrying out the market penetration strategy is that it is very unlikely, that the strategy will require much investment in new market research since the company will be concentrating on the already existing markets.
Business Diversification Strategy
According to Ries, Al, and Jack Trout (1994), the business diversification strategy is the marketing of entirely new products to completely new customers in a market segment. Levitt and Theodore (1986), also states that diversification strategy is the riskiest of the four growth strategies because of its requirement of both the product development strategies and the market development strategies. Despite its implementation risks, the potentially high rate of return counters the high risk involved making it a reasonable choice. Its other advantages of may include though not limited to: The potential to gain a stronghold in a highly profitable industry and the reduction of the overall chances of the other business risk. According to Hill, Sam, and Glenn (1999), there are two types of diversification that the highland coke company is likely to use when dealing with business diversification strategy. These are the related and unrelated diversification where related diversification means that the highland company will remain in a market with which we are familiar and unrelated means that they will market in markets that they are not unfamiliar with. Ries, Al, and Jack Trout (1994), also says that the Business diversification strategy can also be divided into horizontal, vertical and lateral diversification and thus the Highland Coke company will decide to either use the two methods or one.
The horizontal diversification
In case the highlands company chooses on the horizontal diversification strategy, it will mean that they will have to extend their production programs into the new marketing segment to reduce such costs as transport costs by ensuring that the products are next to their consumption base.
The vertical diversification
If the Highland company chooses this method, it will have to ensure that the sales stage is stored by products pre-order.
The lateral diversification
The highland coke company will have to carry out the sales of its new products new products within the range of existing technologies and other marketing strategies if it decides to perform a lateral diversification.
It is important to note that when carrying out the Business Diversification, Highland Coke Company must place into consideration that it is an inherently higher risk strategy. This is because the business is moving into markets in which it has little or no experience. Thus a business needs to understand what it stands to gain and a clear and concise risk assessment for it to adopt the diversification strategy. It is only then that this strategy will lead to the company’s success.
Analytical Tools And Techniques
Market share Growth
According to KnowThis.Com (2009), Market Share Growth seeks to increase the marketer’s overall percentage or share of market. The Highland Coke Company will have to take sales away from competitors through aggressive marketing tactics in order to accomplish this strategy should they decide upon it.
It is also stated in KnowThis.com (2009) that Niche Markets seek to obtain an upper hand within a certain segment of the overall market. The niche market is under normal circumstances much smaller in terms of total customers and sales volume than the overall market. The Highland Coke company will try to form a niche market by trying to present its brand in the chosen market segment as different from the other Coke brands in the larger market.
Market Expansion Strategy
According to the Marketing Survival Kit, this strategy looks to grow overall sales with existing products or with new products. If the Highland Coke Company was to use this strategy, they would seek to actively increase the overall sales of the Coke product through either getting the existing customers to buy more or getting potential customers who have never bought their products. They can also achieve this by selling current products in new markets. The means in which the Highland Coke company will ensure that it grows sales with New Products will be through the introduction of new products. The company will be required to either introduce updated versions of Coke or introduce new product brands not previously marketed.
Market Exit Strategy
According to KnowThis.com (2009), market Exit explores the means and ways of product removal from the market. If Highland Coke Company decides that it should remove its brand Coke from its product mix. It can achieve this through either selling the product to another organization, or completely eliminating the product.
In the essence, the use of how the Highland coke company as already stated is not limited. There are many other ways in which the company can implement the Ansoff matrix to maximize profitability and expansion for example, they can use it in carrying out the necessary analysis and planning to ensure that consumer need are met and satisfied. The best way to implement the suggested strategies would be through the following steps:
- What strategy is the highland coke company implementing at the present for it’s products/services?
- What is the product quadrant placement of the company’s products?
- Is the current strategy achieving the goals in terms of meeting customer needs and expectations?
- Are the methods used in the implementation of this strategy by the company effective?
It is thus important that analysis be done before any strategy in the Ansoff matrix is implemented to avoid failures and miscalculations that can be very costly to the company. If analysis is properly done, then there is no reason as to why the Highland Coke company should not become successful. However, it is also important to note that While Ansoff’s matrix is a useful model for analysis and planning. Situations are rarely this clear cut in reality. In actual situations markets and products will straddle across the matrix. Thus there is a need for a useful framework within which to check a hypothesis though this is not compulsory.
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Marketing Survival Kit, 101 Marketing Strategies, Tips, Insights and Marketing Tools, Web.
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