Strategy formulation 167ProductNewNewCurrentCurrentMarket
penetration
(*)Market
development
(**)Product
development
(**)Diversification
(***)(*Denotes level
of risk)Note:
MarketFigure 8.10
Product/market
matrixThe organisation’s potential is determined by the combination of cur-
rent and new products within current and new markets. Additionally, the
element of risk must be considered. As organisations move away from
existing markets and products the potential risk factors increase.
● Market penetration: The aim is to increase sales of existing products in
current markets. An aggressive marketing drive, through factors such
as competitive pricing, sales promotion or advertising can expand the
share of an existing market. Dealing with familiar customers and
products is low risk and provides a starting point to planned growth.
However, the potential for market penetration is often limited and
strategic plans may require additional options to be pursued.
● Market development: Referring to Figure 8.10, market development
aims to find new markets for existing products. This could involve
new geographic market (e.g. exporting), adding distribution channels
or finding new market segments. For example, a manufacturer of
sports clothing may try to position its products as fashion items and
target a different set of retailers.
● Product development: Organisations must update their product portfolio
to remain competitive. Ideally, a balanced product portfolio should exist,
with established products generating funds for product development.
● Diversification: This involves moving beyond existing areas of oper-
ation and actively seeking involvement in unfamiliar activities.
Diversification can be related – having linkages to existing activities,
or unrelated – venturing into totally new activities. While unrelated
diversification may spread risk, it can be difficult to achieve.
The product/market matrix can be expanded to consider the degree
to which new activities are related or unrelated (Figure 8.11) to the core
business. As previously stated, it is more difficult to achieve success in