Most small companies have plans to grow their business and increase sales and profits. However, there are certain methods companies must use for implementing a growth strategy. The method a company uses to expand its business is largely contingent upon its financial situation, the competition and even government regulation. Some common growth strategies in business include market penetration, market expansion, product expansion, diversification and acquisition. Show
Market Penetration StrategyOne growth strategy in business is market penetration. A small company uses a market penetration strategy when it decides to market existing products within the same market it has been using. The only way to grow using existing products and markets is to increase market share, according to small business experts. Market share is the percent of unit and dollar sales a company holds within a certain market vs. all other competitors. One way to increase market share is by lowering prices. For example, in markets where there is little differentiation among products, a lower price may help a company increase its share of the market. Market Expansion or DevelopmentA market expansion growth strategy, often called market development, entails selling current products in a new market. There several reasons why a company may consider a market expansion strategy. First, the competition may be such that there is no room for growth within the current market. If a business does not find new markets for its products, it cannot increase sales or profits. A small company may also use a market expansion strategy if it finds new uses for its product. For example, a small soap distributor that sells to retail stores may discover that factory workers also use its product. Product Expansion StrategyA small company may also expand its product line or add new features to increase its sales and profits. When small companies employ a product expansion strategy, also known as product development, they continue selling within the existing market. A product expansion growth strategy often works well when technology starts to change. A small company may also be forced to add new products as older ones become outmoded. Growth Through DiversificationGrowth strategies in business also include diversification, where a small company will sell new products to new markets. This type of strategy can be very risky. A small company will need to plan carefully when using a diversification growth strategy. Marketing research is essential because a company will need to determine if consumers in the new market will potentially like the new products. Acquisition of Other CompaniesGrowth strategies in business can also includes an acquisition. In acquisition, a company purchases another company to expand its operations. A small company may use this type of strategy to expand its product line and enter new markets. An acquisition growth strategy can be risky, but not as risky as a diversification strategy. One reason is that the products and market are already established. A company must know exactly what it wants to achieve when using an acquisition strategy, mainly because of the significant investment required to implement it. What growth strategies does Apple use? An Ansoff Matrix analysisWhat growth strategies does Apple use? Let’s find out by applying the Ansoff Matrix framework. What is the Ansoff Matrix?The Ansoff Matrix is a strategic planning tool that provides a framework to help executives and managers devise strategies for future growth. Also called the Product/Market Expansion Grid, the Ansoff Matrix is a method for measuring the profit potential of alternative product-market strategies. There are 4 growth strategies within the Ansoff Matrix:
What growth strategies does Apple use?In 2018, the 45-year old tech giant became the first US company to hit the $1 trillion milestone. Last year, Apple surpassed it when the company registered a new record: a $2 trillion valuation on the stock market. Let’s see how Apple is growing according to the Ansoff Matrix. Ansoff Matrix for Apple – Market penetrationMarket penetration is about increasing sales. Thanks to the iPhone, Apple’s core product, the company has ranked amongst the Top five smartphone vendors in the world since 2009. Apple’s main strategy for increasing iPhone sales every year is a combination of pricing strategy, product innovation and community leveraging. Apple has been growing a strong community of die hard passionate fans since the early 1980s when Guy Kawasaki became the brand’s chief evangelist. He was the first to understand how valuable an engaged community is for the brand. Through his EvangeList, a mailing list that brought together all Apple fans around the world, he managed to influence and inspire the Apple community with the purpose to support and defend Apple’s products and brand image. When Apple launches a new iPhone model every year, these fans are the first customers to purchase the product. They are the early adopters, fully dedicated to the brand. To the rest of the world, the launch price of a new iPhone might seem very high. iPhone fans see a different story, one of emotional engagement, excitement and the feeling of participating in a historical event. Owning an iPhone also makes a statement about you as an individual. When a new iPhone is launched, the previous model decreases in price thus driving a continuous flow of new and old smartphones sales. Ansoff Matrix for Apple – Market developmentMarket development is about selling existing products in new markets. Latest figures from market research showed that the iPhone 11 was the most popular model of all smartphone brands sold on the Chinese market in 2020 (source). China is Apple’s second largest market following the US. How did Apple expand its business to China? Apple entered the Chinese smartphone market in 2010. Within five years, Apple’s sales in the region grew more than 20-fold (source). What was behind Apple’s amazing success in China? Great timing! Apple began tapping into the Chinese market around the time the country’s economy was seeing a resurgence due to the rising world demand for consumer electronics. The Chinese urban middle class was beginning to form. And they had money to spend. The iPhone was one of the consumer goods they could now afford to buy as a symbol of wealth and status. In recent years, with the rise of strong competition from Huawei and Samsung, sales in China have been stalling. It’s time for Apple to expand into a new country and India has shown increased demand for Apple products through the company’s third-party partners. CEO Tim Cook announced last year that the tech giant would be opening its first flagship store in India by the end of 2021. Ansoff Matrix for Apple – Product developmentProduct development is about developing new products in the same market. How much does Apple invest in research and development? Apple Inc. spent a record $18.75 billion on research and development in its 2020 fiscal year, increasing by about $2.5 billion from its 2019 total (Statista). It’s more than Samsung ($18.6 billion) but less than Huawei ($20 billion), Apple’s main competitors. Looking outside the smartphone industry, to the tech companies that make up the Big Five list, Apple is yet again not the biggest spender on R&D: in 2020, Amazon spent $42 billion and Google, $27 billion. Apple has been launching new products in every one of its product lines every year since the company’s foundation four decades ago. Apple I, the first personal computer created by Steve Jobs and Steve Wozniak in 1977 was not the first personal computer ever to be commercialized on the market. Four years earlier, Xerox had launched Xerox Alto. The Alto had innovative features like a graphical user interface (GUI), a mouse, large internal and external memory storage and specific software. Yet the launch of Apple’s computer marks the beginning of the personal computer industry. MacBook Air, Apple’s latest laptop launched in Fall 2020 currently ranks at #1 in the top 3 best laptops in the world. Apple has set out to make only great products by constantly focusing on innovating. Ansoff Matrix for Apple – DiversificationDiversification is about developing new products in a new market. Apple began diversification early on. Throughout its history, the company has produced a wide range of products like drives, printers, modems, displays and gaming consoles which were later discontinued. Starting with 2001, Apple has developed innovative product lines like the iPod (2001), the iPhone (2007), the iPad (2010), the AppleWatch (2015) and the smart speaker HomePod (2018). What makes Apple so prolific and innovative? Its strategic approach to R & D. Apple doesn’t innovate to be the first; it innovates to be the best. The iPhone was not the first smartphone on the market when it launched in 2007. There were smartphones manufactured by brands like Nokia, Samsung, Sony Ericsson and Motorola. Yet, the iPhone set a new standard in the industry and quickly became a trendsetter. It all comes back to not being the first, but being the best. Here’s what Apple CEO Tim Cook said in an interview in 2015 regarding how the company decides what new products to develop next:
What is Apple going to make next? As different as the current product lines are, they belong to the same market: consumer electronics. They are, as the experts say, related diversification. Over the past year, rumors have been circulating about Apple going outside its main market, in an unrelated diversification effort and building a car, more specifically, a self-driving electric vehicle. In a market dominated by Tesla, what would the Apple Car look like? What innovation will the car bring into the market? What significant contribution to society will the Apple Car make? We don’t know yet. But if we are to believe Mr. Cook’s statement, it should be big enough to blow the competition out of the water. Join the Conversation We’d love to hear what you have to say. Get in touch with us on our LinkedIn Page, Facebook Page, Twitter or TikTok. Ansoff Matrix allows you to plan your company’s growthLooking to plan your company’s growth and don’t know which way to go? Use the Ansoff Matrix to opt for the right growth strategy for your business!
What is the Ansoff Matrix?The Ansoff Matrix is a strategic planning tool that provides a framework to help executives and managers devise strategies for future growth. What are Ansoff Matrix’s 4 growth strategies?The Ansoff Matrix also called the Product/Market Expansion Grid, is a method for measuring the profit potential of alternative product-market strategies. Here are the 4 growth strategies: market penetration, market development, product development, diversification. The Ansoff Matrix – Market penetrationMarket penetration is an effort to increase
company sales without departing from an original The company seeks to improve business performance either by increasing the volume of sales to its present customers or by finding new customers for present products. This growth strategy presents the least risk to a company because it focuses on existing products in existing markets. The Ansoff Matrix – Market developmentMarket development is a strategy in which the company attempts to adapt its present product line (generally with some modification in the product characteristics) to new missions. The market development growth strategy is somewhat less risky since it refers to existing products in new markets. The Ansoff Matrix – Product developmentA product development strategy, on the other hand, retains the present mission and develops This growth strategy is not as risky as diversification because it is easier to develop new products in a market the company already has. The Ansoff Matrix – DiversificationDiversification is the fourth growth strategy and the riskiest. It calls for a simultaneous departure from the present product line and the present market structure. Developing new products in new markets requires extensive research conducted by the company: market research, customer research, buying behaviour analysis, external influences on the market, business environment analysis etc. A healthy company can take any of the above growth strategy paths to survive and thrive. Or it can choose to pursue three of them simultaneously: market penetration, market development and product development. Diversification is the most difficult growth strategy a company can implement. While the other three require the same technical, financial and operational resources used for the original product line, diversification requires a distinct break with past business practices. New skills, new technologies, new resources are needed in order to diversify. Diversification basically means starting a new business which entails organizational changes and other unforeseen challenges that management needs to address. Two types of diversificationThere are two types of diversification: related diversification and unrelated diversification. In related diversification, the company develops a new line of products but remains in the same industry. Toyota Company is a car manufacturer and a humanoid robots developer. The company has the knowledge and the resources in place (automated assembly lines) to develop both lines of products. In unrelated diversification, the company develops products that are outside its original industry. A good example is Tesla, the leading electric car manufacturer, which moved into spirits with the launch of Tesla Tequila, an exclusive, premium beverage. Who created the Ansoff Matrix?The tool was developed by Igor Ansoff known as the father of Strategic management. Igor Ansoff was an applied mathematician and business manager who worked at Lockheed Aircraft Corporation where he became Vice President of Planning and Director of Diversification. Following his tenure at Lockheed, Igor went into academia and was a Professor of Management at Owen Graduate School of Management. In 1983 he joined the U.S. International University (USIU, now Alliant International University) where he created the school’s strategic management program. He has consulted with hundreds of multinational corporations including, Philips, General Electric, and IBM. To honour his body of work, the prestigious Igor Ansoff Award was established in 1981 in the Netherlands. The award is given for research and management in the study of Strategic Planning and Management. Igor first described the matrix in Strategies for diversification, an article published in 1957 in the Harvard Business Review. The strategic planning tool was subsequently published by Igor in his book Corporate Strategy: An Analytic Approach to Business Policy for Growth and Expansion (1965). Why is the Ansoff Matrix useful?The Ansoff Matrix is a highly useful strategic tool that allows executives, business developers and managers to make the right decision for the company growth-wise. Here are the benefits of using the Ansoff Matrix:
Sources: Strategies of Diversification (1957), AnsoffMatrix.com Join the Conversation We’d love to hear what you have to say. Get in touch with us on our LinkedIn Page, Facebook Page, Twitter or TikTok. Which of the following is a marketing strategy?Answer: some examples of marketing tactics: Sending emails to existing customers and targeted consumers. Reaching customers and prospects through social media websites such as Face-book, Twitter, In-stagram, etc. A prospect is a person who I think could well turn into a customer.
Which growth strategy is designed to increase sales of existing products?Market penetration
The aim of this strategy is to increase sales of existing products or services on existing markets, and thus to increase your market share.
Which of the following planning processes focuses on developing detailed plans for day to day activities that carry out an organization's functional plans quizlet?Operational planning refers to a decision process that focuses on developing detailed plans for day-to-day activities that carry out an organization's functional plans.
Which of the following terms refers to a formal statement in an organization's strategic plan that describes the overall purpose of the organization?Mission Statements
The mission statement defines an organization's purpose or reason for being.
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Which of the following strategies are utilized to introduce existing products to new markets?
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