Strategies can be developed in different direction depending up on market conditions and product types. In the 1960s Igor Ansoff developed a model describing alternative directions of development. The model looked at combinations of existing and new products and markets. He identified four alternatives –market penetration, market development, product development, and diversification.
This is where a company focuses on selling existing products into existing markets. The aim is to maintain or increase market share of existing products through aggressive sales promotion, more competitive pricing etc. This is very much about carrying on as usual as the company focuses on products and markets it already operates in. It is therefore unlikely to require much investment in new market research.
This is where a company looks to sell its existing products into new markets. This can be new geographical markets, new distribution channels, or new uses for the products. This strategy aims expansion of market segment by selling existing product in new market through searching additional geographic market and attracting other market segments.
It consists of strategy for marketing of present products, often with only cosmetic modifications, to customers in related market areas by adding channels of distribution or by changing the content of advertising or promotion.
⦁ Product development
This is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy deals with the substantial modification of existing products or the creation of new but related products that can be marketed to current customers through established channels. Following activities take place in product development
⦁ Expand sales through developing new products.
⦁ Create different quality versions of the product.
⦁ Develop additional models and sizes of the product to suit the varied preference of the customers.
This strategy is likely to require the development of new competencies and also significant expenditure on research and development.
Diversification differs from the other three strategies in that it requires a company to acquire
⦁ New skills,
⦁ New technologies and
⦁ New facilities.
This is an inherently more risky strategy because the company is moving into markets in which it has little or no experience. For a company 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.
Diversification can be related or unrelated, related means there is an existing connection with value chain. However, there are plenty of good reasons for diversification, for example, by extending their range of goods or services a company can either sell more products to their existing customers or reach out to new markets. This can increase their growth prospects.
Methods of strategy development
Methods of strategy development includes
⦁ Internal Development
⦁ Acquisition and Merger
⦁ Joint development
⦁ Strategic alliance
All these methods have been explained previously .