Growth Strategies: Ansoff Model

Present Products,Present Markets:Market Penetration

New Products,Present Markets:ProductDevelopment

Present Products,New Markets:Market Developmentor Extension

New Products,New Markets:Diversification

Growth in Existing Product Markets

Increase market share Can do this tactically (price reductions, increase advertising, etc.) or

strategically, which involves finding a sustainable competitive advantage

Attract competitors’ customers Attract non-users

Increase product usage Increase the frequency used Increase the quantity used Find new application for current users

Market Penetration Strategies

provide reminder communications

position for frequent use position for regular use provide incentives reduce undesirable

consequences of frequent use

use in different situations

Jell-O pudding

Dispensers, portable packaging

frequent flier plan gentle shampoo low fat versions of food

cereal as snack versus breakfast

Typology Of New Products

New presentation Packaging Positioning

Product improvement and reformulation Line extensions Category extensions New to the category New to the world

The New Product Development Process

Marketing Premises Each Brand Must Fill a Real Gap in

the Marketplace. Product Must Meet a Consumer

Need, Based on Emerging Trends Must Execute Flawlessly:

– Positioning

– Packaging

– Marketing

Achieving New Product Development Success

•A Defined New Product Process•Form Dedicated Cross-Functional

Teams•Fact-Based Decision-Making•Top Management Commitment•Encourage Entrepreneurial Behavior•Learn From Your Mistakes

Shortening New Product Development Cycle Times

Concurrent Development (of Product, Package, Production Equipment)

Close Partnership With Suppliers, Equipment Manufacturers, Customers

Support From Top Management Adequate Resourcing Use of Cross-Functional Teams

Market Development

New segments Johnson & Johnson Baby Shampoo

New distribution channels Restaurant products to retail OEM to retail

New geographical territories Regional expansion: Tasty Baking International expansion

Diversification

Related vs. UnrelatedTechnology, processes

Markets

Portfolio Analysis Assessment of Business Position Evaluation of Market Attractiveness Generation of Cash versus

Demand for Cash Treat SBU’S, Product Lines, Markets As

Investment Units (Need for Balance) Recommendations for Investment Strategies

Based on Business Position and Market Attractiveness

Portfolio Models

•Useful at Different Levels Useful at Different Levels

of Decision Making: of Decision Making:

› CorporateCorporate

› SBU SBU

› Product LineProduct Line

•Treats Different SBU’S, Product Lines, Treats Different SBU’S, Product Lines,

SKU’s as Investment UnitsSKU’s as Investment Units

Portfolio Models

Used for Guiding Decisions Related to:Used for Guiding Decisions Related to:A. Achieving a Balanced Portfolio Over TimeA. Achieving a Balanced Portfolio Over Time

1). Short vs. Long Term Returns1). Short vs. Long Term Returns

2). Providers and Users of Cash 2). Providers and Users of Cash

and Other Resourcesand Other Resources

B. Investment Strategies for SBU’S, B. Investment Strategies for SBU’S,

Product Lines, SKU’SProduct Lines, SKU’S

e.g., Invest to Grow, Invest to Build, e.g., Invest to Grow, Invest to Build,

Maintain Position, Harvest, DivestMaintain Position, Harvest, Divest

Portfolio Models:Criteria for Evaluation

A. Profitability, Expected ReturnA. Profitability, Expected Return

B. Growth, Related to Stage of PLCB. Growth, Related to Stage of PLC

C. Risk (Variability of Return)C. Risk (Variability of Return)

D. Competitive Position / StrengthD. Competitive Position / Strength

E. Market Position, ShareE. Market Position, Share

F. Demand on, Utilization of ResourcesF. Demand on, Utilization of Resources

Portfolio Models: Analytical Process

A.A. Level of AnalysisLevel of Analysis

B. Define the MarketB. Define the Market

C. Time Dimension: Historical Vs. ProjectedC. Time Dimension: Historical Vs. Projected

D. Identify Dimensions: Single Criterion Vs. CompositeD. Identify Dimensions: Single Criterion Vs. Composite

E. Construct the Matrix and Position Individual EntitiesE. Construct the Matrix and Position Individual Entities

F. Project the Future Position of Each EntityF. Project the Future Position of Each Entity

G. Select the Desired PortfolioG. Select the Desired Portfolio

H. Make Strategic Choices Based on Achieving Desired H. Make Strategic Choices Based on Achieving Desired

PortfolioPortfolio

BGC Model

Dimensions

Market growthPLC Indicator of cash demand

Relative sharePIMS data Indicator of cash generated

BCG Matrix

High Growth,High Share:Stars

High Growth,Low Share:Question Marks orProblem Children

Low Growth,High Share:Cash cows

Low Growth,Low Share:Dogs

GE-McKinsey Model

Use of composite dimensions: Market Attractiveness Business Strengths or Competitive

Position

Provides guidance for investment strategy

Dimensions of the GE Matrix:Industry Attractiveness and Competitive Position

Industry Attractiveness Market Size, Growth Rate Industry Profitability, Margins Market Diversity Competitive Structure Environment

Competitive Position Size of Business Growth Rate Market Share, Relative Market Share Profitability, Margins, Relative Cost Position Technology Position

GE-McKinsey MatrixVertical Axis: Market AttractivenessHorizontal Axis: Competitive Position

Protect Position-Invest at maximumdigestible rate-Concentrate effort onmaintaining strength

Invest to Build-Challenge for Leadership-Build selectively onstrengths-Reinforce vulnerableareas

Build Selectively-Specialize around limitedstrengths-Seek ways to overcomeweaknesses

Build Selectively-Invest heavily in mostattractive segments-Emphasize profitability byraising productivity

Selectivity/Managefor Earnings-Protect existing program-Concentrate investmentsin segments with goodprofits, low risk

Limited Expansion orHarvest-Rationalize operations

Protect and Refocus-Manage for currentearnings-Concentrate on attractivesegments-Defend strengths

Manage for Earnings-Protect position in mostprofitable segments-Upgrade product lineMinimize Investment

Divest-Sell at time that willmaximize cash value-Cut fixed costs and avoidinvestment