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What is a Product Market Expansion Grid? 

The product market expansion grid, also known as the Ansoff matrix, is a two-by-two framework that was developed by Igor Ansoff, a Russian-American mathematician and business manager, in 1957.

The grid helps you analyze the relationship between your products and your markets, and determine the level of risk and reward associated with different growth options.

The grid consists of four quadrants, each representing a specific growth strategy. The horizontal axis shows whether you are dealing with existing products or new products, while the vertical axis shows whether you are targeting existing markets or new markets. The four strategies are:

1. Market Penetration: 

This strategy involves selling more of your existing products to your existing markets. This is the least risky strategy, as you are not changing anything in your product or market mix. You are simply trying to increase your market share and customer loyalty by using tactics such as increasing marketing efforts, lowering prices, improving quality or service, or acquiring competitors.

2. Market Development: 

This strategy involves selling your existing products to new markets. This could mean expanding to new geographic regions, new customer segments, new channels, or new niches. This strategy is more risky than market penetration, as you are entering unfamiliar territories where you may face different customer needs, preferences, behaviors, or competitors. You may need to adapt your product features, pricing, promotion, or distribution to suit the new market conditions.

3. Product Development: 

Product development strategy involves creating new products for your existing markets. This could mean adding new features, benefits, or variations to your current products, or developing completely new products that cater to the same or related customer needs. This strategy is more risky than market development, as you are investing in research and development, innovation, and testing of new products that may or may not be accepted by your customers. You may also need to educate your customers about the value and benefits of your new products.

4. Diversification: 

This strategy involves creating new products for new markets. This is the most risky strategy, as you are venturing into unknown territories where you have no experience or expertise. You are essentially starting a new business from scratch, with no guarantee of success. You may need to conduct extensive market research, develop new capabilities and resources, and face high competition and uncertainty.

The product market expansion grid can help you evaluate the pros and cons of each strategy and choose the one that best fits your goals, capabilities, and resources. It can also help you identify potential opportunities and threats in each quadrant and plan accordingly.

Examples of Product Market Expansion Grid Strategies

To illustrate how the product market expansion grid works in practice, let’s look at some examples of companies that have used each strategy successfully.

1. Market Penetration: Starbucks

Starbucks is one of the world’s leading coffee chains that has achieved remarkable growth by using a market penetration strategy. Starbucks has focused on increasing its sales and profits in its existing markets by opening more stores, offering more products and services, enhancing its brand image and loyalty, and acquiring competitors. For example:

• Starbucks has opened over 30,000 stores in more than 80 countries around the world, making it one of the most ubiquitous coffee brands globally.

• Starbucks has diversified its product portfolio by offering not only coffee but also tea, pastries, sandwiches, salads, snacks, merchandise, and even alcohol in some locations, catering to different customer tastes and occasions.

• Starbucks has enhanced its brand image and loyalty by providing high-quality products and service, creating a cozy and inviting atmosphere in its stores , launching loyalty programs and mobile apps , and engaging in social responsibility initiatives.

• Starbucks has acquired competitors such as Seattle’s Best Coffee , Teavana , Evolution Fresh , La Boulange , and Princi , expanding its market share and product range.

2. Market Development: Netflix

Netflix is one of the world’s leading streaming platforms that has achieved remarkable growth by using a market development strategy. Netflix has focused on selling its existing products to new markets by expanding to different countries, customizing its content offerings, partnering with local providers, and adapting its pricing models. For example:

• Netflix has expanded to over 190 countries around the world , reaching millions of customers who are looking for convenient and affordable entertainment options.

• Netflix has customized its content offerings by producing original and exclusive shows and movies that cater to different languages, cultures, genres, and preferences , such as Money Heist, Lupin, The Queen’s Gambit, The Crown, and Squid Game.

• Netflix has partnered with local providers such as telecom operators, cable companies, and device manufacturers to increase its distribution and accessibility , such as T-Mobile, Comcast, and Roku.

• Netflix has adapted its pricing models by offering different plans and features that suit different customer needs and budgets , such as basic, standard, premium, mobile-only, and free trials.

3. Product Development: Apple

Apple is one of the world’s leading technology companies that has achieved remarkable growth by using a product development strategy. Apple has focused on creating new products for its existing markets by innovating and improving its existing products, developing new product categories, and integrating its products and services. For example:

• Apple has innovated and improved its existing products by adding new features, benefits, and variations to itsiPhone, iPad, Mac, Apple Watch, AirPods, and other devices , such as Face ID, Retina display, M1 chip, MagSafe, and Pro models.

• Apple has developed new product categories by introducing products that create or redefine markets , such as iPod, iTunes, App Store, Apple TV+, Apple Arcade, Apple Card, and Apple Fitness+.

• Apple has integrated its products and services by creating a seamless ecosystem that connects and enhances the user experience across devices , such as iCloud, iMessage, AirDrop, Handoff, Continuity, and Siri.

4. Diversification: Amazon

Amazon is one of the world’s leading e-commerce companies that has achieved remarkable growth by using a diversification strategy. Amazon has focused on creating new products for new markets by entering different industries, acquiring different businesses, and launching different ventures. For example:

• Amazon has entered different industries by offering products and services that are unrelated to its core e-commerce business , such as cloud computing (Amazon Web Services), artificial intelligence (Alexa), digital streaming (Amazon Prime Video), online gaming (Twitch), and space exploration (Blue Origin).

• Amazon has acquired different businesses that give it access to new markets and capabilities , such as Whole Foods Market (grocery retail), Zappos (online shoe retail), Audible (audiobook service), Ring (smart home security), and MGM Studios (film and TV production).

• Amazon has launched different ventures that explore new opportunities and challenges , such as Amazon Go (cashierless stores), Amazon Pharmacy (online prescription service), Amazon Luna (cloud gaming service), Amazon Halo (health and wellness service), and Amazon Sidewalk (neighborhood network service).

Conclusion: 

The product market expansion grid is a powerful tool that can help you plan and evaluate your growth strategies. It can help you understand the relationship between your products and your markets, and the level of risk and reward associated with each option. It can also help you identify potential opportunities and threats in each quadrant and plan accordingly.

By using the product market expansion grid, you can choose the best strategy for your business goals, capabilities, and resources. You can also learn from the examples of successful companies that have used each strategy effectively. Whether you want to increase your sales in your existing markets or explore new ones, whether you want to leverage your existing products or create new ones, or whether you want to combine both approaches, the product market expansion grid can help you achieve remarkable growth for your business.