2nd Jan 2012 Lecture 1 Dr.

Jyotinder Kaur Chaddah

 Background
Ansoff Matrix

-Eg: Food retail in India BCG Matrix SWOT PESTLE

 The Ansoff Growth matrix is a tool that helps

businesses decide their product and market growth strategy. Ansoffs product/market growth matrix suggests that a business attempts to grow depend on whether it markets new or existing products in new or existing markets. The output from the Ansoff product/market matrix is a series of suggested growth strategies that set the direction for the business strategy.

Market penetration

Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets. Market penetration seeks to achieve four main objectives:

- Maintain or increase the market share of current products this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling

- Secure dominance of growth markets

-Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors - Increase usage by existing customers for example by introducing loyalty schemes A market penetration marketing strategy is very much about business as usual. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.

Market development
Market development is the name given to a growth strategy

where the business seeks to sell its existing products into new markets. There are many possible ways of approaching this strategy, including: - New geographical markets; for example exporting the product to a new country - New product dimensions or packaging: for example -New distribution channels - Different pricing policies to attract different customers or create new market segments

Ansoff Matrix

Product Development
Product development is the name given to a growth

strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets.

Diversification
Diversification is the name given to the growth

strategy where a business markets new products in new markets. This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience. For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks.

R et ai l F o r m at

Market Penetration
Inc. number of customers. Inc. qty purchased by Customers Inc. purchase frequency.

Market Development
Reach new segments with existing formats. Expand markets.

Ex ist in g

Offer new retail formats to existing customers Retail Format Devlp. Existing

Develop new retail Formats targetted at new customers Diversification New

Ne w

Market Segment

 Market Penetration (same segment and format)

Increase penetration, basket size, trip frequency cross-selling, loyalty programs, more stores, broader assortment.

Market Development (new segment/same format)

Increase penetration by going after new segments with same format Medicine Shoppe Haiko, McDonalds Ice creams

Retail Format Development (same segment, new

format)

Increase penetration and trip frequency by going after existing customer base with new formats. Crossword & crossword corners New customer base with new format Pantaloons Big Bazaar

Diversification (new segment and new format)

BCG Matrix

BCG Matrix
BCG STARS (high growth, high market share)
- Stars are defined by having high market share in a

growing market. - Stars are the leaders in the business but still need a lot of support for promoting their products. - If market share is kept, Stars are likely to grow into cash cows

BCG QUESTION MARKS (high growth, low market share)

- These products are in growing markets but have low

market share. - Question marks are essentially new products where buyers have yet to discover them. - The marketing strategy is to get markets to adopt these products. - Question marks have high demands and low returns due to low market share. - These products need to increase their market share quickly or they become dogs. - The best way to handle Question marks is to either invest heavily in them to gain market share or to sell them.

BCG CASH COWS (low growth, high market share)

- Cash cows are in a position of high market share in a

mature market. - If competitive advantage has been achieved, cash cows have high profit margins and generate a lot of cash flow. - Because of the low growth, promotion and placement investments are low. - Investments into supporting infrastructure can improve efficiency and increase cash flow more. - Cash cows are the products that businesses strive for.

BCG DOGS (low growth, low market share)

- Dogs are in low growth markets and have low market

share. - Dogs should be avoided and minimized. - Expensive turn-around plans usually do not help.

Limitations of BCG Matrix

The first problem can be how we define market and how we get

data about market share A high market share does not necessarily lead to profitability at all times The model employs only two dimensions market share and product or service growth rate Low share or niche businesses can be profitable too (some Dogs can be more profitable than cash Cows) The model does not reflect growth rates of the overall market The model neglects the effects of synergy between business units Market growth is not the only indicator for attractiveness of a market