Expansion Strategies

The product market scope refers to the industries to which the organization confines itself. When an organization follows the expansion strategy, the marketing or the production function underlie some degree of commonality between the different businesses it operates in.

Expansion and thereby, growth results from concentrating the resources within the domain of one or more businesses allied in terms of customer needs, functions, or technology.

For example, lowering the price of a combo meal in fast food restaurant to compete with local offers, market development (Malaysia Tourism’s aggressive “Malaysia Truly Asia” campaign to attract tourists), and product development (skincare products in addition to the eye care products by a pharmaceutical company; non­beef, non-pork products by McDonald’s in parts of Asia).

Expansion Strategies - Ansoff’s 2x2 Matrix

Market penetration, market development, and product development strategies can be followed by an independent business or by a strategic business unit of a multi-business organization.

A strategic business unit is for all purposes an independent identity and capable of conducting business on its own, which is a part of a larger multi-business organization.

The option for a particular strategy will depend upon the returns expected, nature, and scope of the industry, whether the industry is in the growth, maturity or decline phase, and the resource return trade-off.

Market PenetrationMarket DevelopmentProduct Development
The objective is to increase market share in an existing market. Volume­based strategy.Product with some variations is marketed to different geographical/demographic markets.The existing product is in the maturity phase. New/different/ altered products are introduced in the market.
Concentration on the existing market pushes sales aggressively through existing/new segments.New unsaturated markets exist. The organization has the resources to tap new markets.Leveraging knowledge of customers reduces associated marketing costs.
Higher sales volume enables cost reduction leading to a price reduction and higher market share.New markets have low entry barriers. Demand is high, and sales are brisk—use of prior knowledge possible.Market and its dynamics are known; prior knowledge gives a tactical advantage.

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