The Product/Market Expansion Grid (Ansoff Matrix)
Tagged: Business & Management
1.0 Introduction
Processes, organizational structure, and the external environment all impact an organization's performance and effectiveness. Porter underlined the significance of the competitive environment in the formulation and execution of company strategy (Haeussler et al., 2015). Choosing a corporate strategy would imply the course of action required for an organization to promote growth. Adopting a plan for an organization's development to increase profits while getting a larger market share is known as a strategy for diversified development. It is typically ideal for massive companies with enormous financial resources, muscular development, and a sizable market share (Yin, 2016). While Kannan and Saravanan (2012) claim that diversification is a form of a market expansion strategy for a firm. It seeks to increase profits based on high sales volumes by selling new items and entering new markets. A diversification strategy differs significantly from other growth methods, such as joint ventures, mergers and acquisitions, and internal start-ups. Corporate initiatives like the Ansoff matrix, among others, encourage diversification. The Ansoff matrix tool is a reliable and traditional framework for corporate planning, providing businesses with four key growth areas. According to Ansoff (1979), firms can use this method to assess their views and ideas and allow them to expand their market while creating a new variety of products in a very accurate and unbiased way. This technique or instrument is frequently used in strategic organizational management. The four main research strategies included in the Ansoff matrix analysis are the new product strategy, the current product strategy, the new market strategy, and the current market strategy. According to the matrix, a company typically starts with market penetration before concentrating on additional market penetration or growing its variety through novel marketing strategies or products. Diversification is the process of increasing the variety of markets or products.
Regarding diversification, the matrix shows that a company tries to increase sales by entering new markets with unique items that may be related to older ones or that bear no resemblance to earlier ones. Compared to the other three strategies mentioned above, this technique is considered riskiest since businesses seek to enter newer markets with newer products but lack expertise and comprehensive knowledge of these newer markets and products. Therefore, to achieve a suitable balance between risk and profit, business organizations and enterprises need to have clear concepts based on targeted studies and research focusing on new markets and goods. It is one of the riskiest, but it can also be lucrative, consistent with the rule that the higher the risk, the higher the projected income (Henry et al., 2022).
2.0 Coca-Cola – Diversification Strategy
Coca-Cola is a multinational corporation with operations practically everywhere in the world. It is also well-established in Germany. They have a wide range of Fast-Moving Consumer Goods (FMCG) products, namely their beverages, that are highly sought after by their clients worldwide. The company wants to broaden its market in Germany because it has domestic FMCG companies selling beverages, such as Fritz Kola and Soda Stream. Coca-Cola can use the Ansoff matrix tool to map out their company strategy for diversification to facilitate its diversification. Unfortunately, there aren't many investing rules more important than diversity. It is the "silver bullet," the tactic that will help investors avoid risk and provide the most reliable returns over the long term. Let's examine Coca-Cola, one of the world's most well-known and influential businesses, to demonstrate this point and see how a wise diversification strategy has helped it thrive for decades. For example, Coca-Cola has recently found itself at odds with the expanding trend towards all things healthy and organic, even though its flagship product continues to dominate the market for carbonated drinks and is a cultural icon with few competitors. It may have signalled the start of a gradual and irreversible loss of market share for a corporation less dedicated to brand variety.
Coca-Cola has had several issues with the branding of its various products. Coca-Cola attempted to introduce a fresh recipe for its original products in the 1980s. The flavour significantly altered the previously beloved taste. However, Coca-Cola did try to maximize the circumstances. With the new flavour, they could draw in new clients but alienated their long-time clients who disliked it. Coca-Cola came up with two specific products as a solution. While the new flavour was referred to as New Coke, the original flavour was known as traditional Coca-Cola. This strategy was successful for a while, but New Coke was finally phased out. Due to their excellence and credentials to meet a predetermined set of requirements, Coca-Cola received the Good Employers Association Founder certification in 2008 (The Coca-Cola Company, 2008). One of Morocco's most dynamic industries is the soft drink one, which has had steady growth over the past 50 years and is still setting new records (Banutu 2012).
The first is to find new opportunities for profitable expansion in the acquired firm by leveraging your company's unique strengths and value-creation process. The second is to improve your company's current business line by strengthening its value proposition or skills. Coca-Cola is doing this and has done it very well for the past fifty years. With a long-standing dedication to discovering novel concepts and expanding its product diversity, Coca-Cola is a prime example of how to diversify an industry. Even when people are so vehemently anti-sugar, the Coca-Cola brand is still universally adored (Afolabi 2016).
3.0 Fritz Kola: New Product Development Strategy
The European Union receives shipments of the soft drink Fritz-kola from many countries in northern Germany. The product is marketed in glass bottles with labels that were originally black and white and featured the faces of the two founders as the company's emblem. It carries a fair amount of caffeine.
Coca-Cola was already well-known in several countries, including Germany. The makers of Fritz Kola, a regional German product, saw a need to provide the local population with a flavour of their own culture. The inventors decided to offer a completely different flavour after realizing that the current Coca-Cola product did not have a distinctive flavour. Although the creators of Fritz Kola were not interested in imitating Coke, they were interested in offering a distinctive flavour with caffeine as the base. Their corporate strategy was to launch a new product to stand out in a market already dominated by a well-known product. It was associated with the Ansoff matrix's product development quadrant.
Comparing beverage businesses to other food preparation techniques is difficult. Launching targeted initiatives to address new product creativity, design, and marketing is a vast area of new product development. This new product approach by fritz Kola increased the potential for expansion and market share acquisition. As a result, new items can be developed to take the place of current products to establish a presence and grow market share.
4.0 Comparison: Coca-Cola vs Fritz Kola
To differentiate itself from Coca-Cola, fritz Kola exclusively offered bottles with a half-litre capacity for all its bottles. This packaging design was distinctive. 100 grams of each Fritz-Kola contain 25 milligrams of caffeine. The amount in a regular Coca-Cola is 10 milligrammes. The energy drink Red Bull includes 32 milligrams (the average brewed coffee still tops out at 55 to 85 milligrams, however). The motto of Fritz-Kola is "Vielviel Koffein," which translates to "Plenty and lots of caffeine." Compared to the competitors, it tastes thicker and is more vital.
Additionally, Fritz-Kola is exclusively sold in bottles, none of which are larger than half a litre. Wolf claims that Fritz-Kola was exclusively used in bars. "None of this, no one-litre bottles. You should be aware of it once you've had a Fritz-Kola. There is never a lack of patrons in Berlin, a city with 3.5 million inhabitants and 900 bars, one for every 3,900 people (New York City shades ahead with 2,657 bars for its 8.5 million people, or one in 3,200). Furthermore, fritz Kola was extremely clear about its target consumers from the start, unlike Coca-Cola, which did not have a definite target market (Sean Williams, 2015).
Only Austria and the Czech Republic drink more beer than Germany, which still drinks more than practically any other nation on earth. However, consumption is declining as the economy stumbles and health worries escalate. More and more people prefer non-alcoholic beverages because the business went on the attack with a barrage of humorous billboards and commercials aimed at the liberal, global youth of Europe. Most combine the strange with the seductive. One advertisement features bare asses hugged by a downpour of coffee beans. A group of women wearing red spandex are led by Other across a woodland by Fritz-Kola. Last year, when Coca-Cola introduced Coke Life, a beverage sweetened with stevia, Fritz-Kola praised the company for its "ground-breaking innovation." It was mentioned that a Fritz-Kola stevia beverage had been available since 2011, and there are 10 flavours of Fritz-Kola, and wine and rhubarb will be added later this year.
Since Fritz-success, Kola's Afri-Cola, a modest regional brand, has grown in recognition. It debuted in the 1930s, shares Fritz-straightforward Kola's branding, and was even the preferred cola at the 2007 G-8 Summit in Heiligendamm, close to Hamburg. But Fritz-Kola is undoubtedly more well-liked. Wolf and Hampl also started selling in Poland, Denmark, and the UK after experiencing domestic success. Wolf claims that France and Spain will follow. The major players are still far too large, but not in America. Coca-Cola, are you quaking in your boots? Most likely not. Wolf is unlikely to be the next billionaire in Europe. However, he and Hampl provide evidence that you may sometimes defeat the odds using cola. Instead of offering it in the retail sector, fritz Kola concentrated solely on bars. There was no lack of customers in Germany, where the number of people who attended taverns was relatively considerable. In other words, Fritz Kola had expanded its product line beyond what Coca-Cola was providing while simultaneously succeeding in differentiating itself in the market by providing German consumers with a distinct flavour that was not included in Coca-offerings. Cola's Clearly, Fritz Kola used the Ansoff matrix as their company strategy, which appears to have been successful. Thus, Coca-Cola may use the same corporate strategy to diversify and stand out in the market.
5.0 Alternate Model: 4P
Based on the design of their products and services, organizations have been known to come up with marketing plans that aid them in interacting with their clients. The degree to which a consumer is loyal to the goods a business provides will significantly influence the relationship an organization has with its customers. Organizations frequently depend on higher levels of quality and innovation in the goods and services they provide, which can be projected through a marketing plan. It attracts more people to their products and makes money from selling them. The effectiveness of a strong marketing strategy is ultimately undermined by an organization's desire to capture a larger market share (Bee, 2009). Customers who are treated well by firms are more likely to stick around, and they use that loyalty to attract new clients (Ferguson & Brohaugh, 2008). So, the 4Ps, which stands for product, pricing, place, and promotion, could be an alternative method. The product part of the 4P refers to the services or goods an organization provides to its target market. However, from a strategic standpoint, the product on sale should be such that it will satisfy a significant demand and cater to what the buyer wants (Kotler & Armstrong, 2011). The second component, price, describes the value being charged for the product.
Regarding strategy, the price should be reasonable and impact the customer's psychology, which plays a crucial role in whether they decide to buy the goods (Kotler, 2015). The location of the customers' access to the products is the third P in this approach. But now, in addition to geography, a place also refers to dissemination methods. So, the concept of "location" would also be necessary. The word "promotion" stands for the final P and describes how the product is advertised. The promotion's medium must be appropriate for the intended audience. For instance, if the target audience is in rural areas without access to the internet and online promotions are the chosen medium of advertising, the campaign would be unsuccessful. As a result, businesses looking to grow their markets can find the 4Ps approach helpful.
References
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