CHAPTER 5
Existing Market
New Market
Existing Market
Products Penetration
Market
Development
New
Product
Products Development
Diversification
Market Penetration: when company focuses on increasing market share or growth;
emphasizing on increasing revenue generation from each customer. Focus is to attract
customers from rivals as well as new customers who are not already using company’s product.
In order to achieve this, company will focus on new marketing mix, strategies, and increasing
sales force. It is vital for company to understand the following to ensure penetration:
 There must be growth in the overall market
 Company is able to retain the customers in any circumstances even if overall market is
declining
 Competitors are leaving the market
 Company has the opportunity to offer distinctive competencies to its customers which
will help in customer retention
 It requires less investment
 It can provide us efficiency gains
Product Development: it is also an effective strategy to keep the company relevant in the
market; in fact, it will help retain existing market share. New product development will provide
the opportunity where substitutes or new entrants can be halted. In addition, product
development will also introduce the company as innovative. New product development is not
possible without new or unique ideas which are not are not available in extraordinary amounts.
As long as company focuses innovation, it will narrow its target market. Continuous innovation
is an expensive practice; therefore it is not possible for every company. Innovation always faces
risk of imitation and failure.
Market Development: when company seeks new markets either locally or globally.
Undoubtedly, further market development will increase the market share, but it will require
significant investment in marketing, advertisement, and branding. Market development is
possible when:
 Potential opportunities are available
 Enough resources are available to produce a product in large quantity
 Distinctive competencies is another important variable which will help to develop new
market with existing product
Diversification: where a company is launching new product in a new market to diversify its risk.
There are different types of diversifications:
 Conglomerate Diversification: investment in new technology and product to build up a
portfolio of investment or risk diversification to avoid adversities which can affect the
business
 Horizontal Diversification: investment in same industry to increase market power
 Vertical Integration: where the company becomes its own supplier, or retailer, or both
Strategy Evaluation
Whenever a company wants to make its investment decision (locally or globally), company
should follow SAF:
 Suitability: either it’s suitable for business’ environment or core competencies
 Acceptability: where company evaluates acceptability purely on financial grounds
 Feasibility: before making investment in new project, company will evaluate either
project is financially and physically feasible; in addition to human resource feasibility