Strategic Market Manangement - 7th Edition© 2005 John Wiley & Sons
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Part Four
Growth Strategies
Chapter Thirteen
© 2005 John Wiley & Sons
“The risk of a wrong decision is preferable to the terror of indecision.”
- Maimondies
- Benjamin Franklin
Expand the product line
Develop new products for same market
I. Growth in existing
III. Market Development
Related
Unrelated
Increasing Market Share
Increasing Product Usage (less threatening to competitors)
Provide Reminder Communications – e.g., reminder e-mails
Position for Regular or Frequent Use – e.g., 3 glasses of milk per day; of the Month, checking stocks on Yahoo
Make the Use Easier - e.g., microwaveable containers, prepared foods
Provide Incentives – e.g., Frequency Programs, Value Meals
Reduce Undesirable Consequences of Frequent Use – e.g., shampoo, low fat, sugar, calorie, sodium foods
Revitalize the Brand – e.g., Abercrombie & Fitch
New Applications for Existing Product Users – e.g., Arm & Hammer, Jell-O
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Line Extensions – e.g, Yoplait Go-Gurt and Expresse
Developing New-Generation Products – e.g., Yamaha with Disklavier, Apple with iPod
Incumbent’s Curse
Even if new technology is successful – may be making investment just to maintain same level of sales and profits
Need to improve costs, quality, and service for existing offering, which leaves little time to explore new technologies.
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Expand the Product Scope – e.g., John Deere with one-stop landscaping
New Products for the Existing Markets – e.g., Lenox jewelry & giftware; Gerber baby clothes, H & R Block legal services
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Product Line Expansions
Will customers benefit from a systems capability or service convenience made possible by a broad product line?
Do potential manufacturing, marketing, or distribution cost efficiencies exist from an expanded product line?
Can assets or competencies be applied to a product-line expansion?
Does a firm have the needed competencies and resources in R&D, manufacturing, and marketing to add the various products proposed?
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Expanding Geographically
Usage – e.g., nonusers
Age – e.g., J&J Baby Shampoo
Attribute preference – e.g., audiophiles
Evaluating Market Expansion Alternatives
Is the market attractive?
Do the resources and will exist to make the necessary commitment in the face of uncertainties?
Can the business be adapted to the new market?
Can the assets and competencies that are at the heart of the business success be transferred into the new business environment?
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Access to Supply – e.g., raw material, parts
Access to Demand – e.g., large automakers investing in car rental
Control of the Product System – e.g., Samsung
Entry into a Profitable Business Area
Comprehensive services – e.g., IBM, GE, “tail wags the dog”
Distributor/Retailer – e.g., Avon, Dell, Apple, Krispy Kreme
Embedded services – e.g., John Deere’s GreenStart machinery
Integrated solution – e.g., Nokia
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Vertical Integration Strategies
Risks of Managing a Different Business – e.g., Pepsico with KFC, Taco Bell, Pizza Hut
Reduction in Strategic Flexibility – raises exit barriers
Alternatives to Integration – e.g., long-term contracts, exclusive dealing agreements, joint ventures, strategic alliances, etc.
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Significant
Growth
Strategies
Big
Ideas
Incremental
Growth
Strategies
Key Learnings
The most fruitful growth area is often to increase product usage within the existing product market, where assets and competencies are in place and only need to be leveraged. Growth within a product market can involve adding product features, new-generation products, expansion of the product scope, or new products.
Developing new products, a second route to growth, can involve line extensions, expanded product scope, or new generation products.
A third growth route, market development, involves expanding the market either geographically or by targeting new market segments.
A key consideration of any growth strategy is how to achieve synergy by leveraging current assets and competencies.
© 2005 John Wiley & Sons
Key Learnings
Vertical integration, another growth direction, can provide access to supply or demand, control of the quality of the product or service, and entry into an attractive business area. It also, however, introduces the risks of managing a very different business and reducing strategy flexibility.