1) Ansoff’s matrix is a business tool that is used to plan precise growth strategies (Doole & Lowe,2004, p. 170). The precise growth strategy is dependent on whether the targeted market is new or existing (represented by the vertical axis of the matrix) and whether the proposed product is new or existing (represented by the horizontal axis of the matrix). Thus, if the growth project is an existing product in an existing market, the suggested growth strategy is market penetration, as shown in the upper left quadrant of the matrix. If the growth project is a new product in an existing market, the suggested growth strategy is product development, as shown in the upper right quadrant of the matrix. If the growth project is an existing product in a new market, the suggested growth strategy is market development, as shown in the lower left quadrant of the matrix. If the growth project is a new product in a new market, the suggested growth strategy is diversification, as shown in the lower right quadrant of the matrix.
The usefulness of the matrix is best seen in application. For an international company that produces paper towel products, it may choose to grow by increasing the sales of their standard paper towel in markets where they were already selling, such as the UK and US. The growth strategy in this case would be market penetration, which can be best described as “business as usual.” This approach includes at least maintaining, if not increasing market share through sales promotion such as a more personal selling approach to retailers, price strategies such as coupons, and/or advertising such as print or television targeted to their markets. Dominance in growth markets is a key goal for this strategy. Another approach is to force out competitors with a highly aggressive version of pushing market share. Finally, loyalty schemes to increase use by existing customers can be used to obtain market penetration.
If the choice was to take the standard paper towel into new markets, the growth strategy would be market development. This for international companies this strategy commonly involves picking new geographical areas to export the product to, for example Africa or India. Another useful international strategy is new distribution methods, such as having direct to consumer e-commerce sales (International Market Strategy, Topic 12, slide 5, 2013). Finally, new market segments could be pursued, such as selling the paper towels to businesses like car repair, for mechanic clean up, or to scientific manufacturing for laboratory spills.
The company could also chose to grow by producing a new paper towel product, such as a scented paper towel that has air freshening properties as well as absorbing function. In the markets where paper towel products were already sold, such as the UK or the US, the growth strategy would be product development. This would entail the research, development, and innovation needed to formulate how the scent would be embedded into the paper towel. Then there would be work to gather detailed insights into customer needs as to air-freshening while they were cleaning, such as preferred scents (lemon, mint, floral) and scent intensities and how to change their needs toward purchase of the scented paper towels. True success would also turn on being the first in the market with this new kind of paper towel and also determining which of the existing markets would be best for its introduction.
Finally, the company could attempt to sell the scented paper towels to a market that does not current have paper towels at all. This growth strategy is termed diversification. This strategy is involves the steps of the product development approach but is inherently more risky as the company does not have any experience selling in this market, let alone its scented towel product. To go forward with this approach, it is important for the company to have a clear view of the benefits and an understanding of the risks. But if successful, this growth approach can be highly profitable.
2) When marketing internationally there is a constant balance between having a standard approach to a product or adapting the products to each new targeted market. This adaption can involve changes to the physical products to make them more acceptable to the culture present in the new market. An example of this is the adaption that McDonald’s has done to some of its traditional products around the world to make them more palatable to that culture (Doole & Lowe,2004, p. 190). However, there are some severe downsides to this approach. For example, for a truly international company, adaptation for each country that the company would like to enter could be prohibitively expensive (Johnston & Beaton, 1998, p. 13). It could also be impossible given the legal requirements that need to be met in order to go to market, such as with a drug product that must obtain regulatory approval.
Although some companies believe that the adaptation policy is best in order to satisfy demand that is present in the market, others believe that exposure to a standarised product will alter the customer’s needs and change their tastes toward the standard version (Doole & Lowe, 2004, p. 272). This possibility, which could be an excellent approach for a company from the point of view of cost of production and distribution, would never occur if adaptation is the usual approach when entering a new market. This is another downside to adopting an universal adaptation approach.
But there are considerations as to how well the product “travels” into other cultures. This can be dependent on the characteristics of the product for sale. Food products are notorious for not traveling well across cultures, unless a demand for the food as “exotic” is developed (Doole & Lowe, 2004, p. 273). Clothing is another example of a product which may not travel well, unless a demand is built up for a look that is different or somehow preferred (i.e., Italian shoes or French couture). It should be noted that if the prime appeal of a product is precisely its foreignness, adaptation would destroy the desire for the product in the new international markets.
A further consideration is something as simple as the product name. Issues with language are common in this area and translation and unwanted association examples such as “Nova” for a car in Spanish speaking countries (no va = no go) are easy to find. However, with the advent of the internet and more widespread English language, these issues seem to be lessening.
In sum, the prime question for companies to ask is whether or not the buyer’s decision process, as developed in the AIDA analysis (International Marketing Strategy, Topic 10, slide 7, 2013), is able to be captured with a standarised product, or does adaptation need to occur to get this evolution? For example, awareness can be generally achieved without any change to the product, however, interest, desire, and ultimately, purchase action for a product could be profoundly affected by characteristics of the product, like color and style. It could be as basic as a particular culture not recognizing the need that the product meets. Sometimes the product doesn’t need adaptation, but just the name or packaging. Other products need major changes to just be considered. All of these many factors need to be taken into account when deciding whether to stay with a standard product or adapting to a new market.
References
Doole, I. & Lowe, R. (2004). International marketing strategy: Analysis, development, and implementation. London, UK: Cengage Learning EMEA.
Johnston, S. & Beaton, H. (1998). Foundations of international marketing (1st ed). Andover, Hampshire:International Thomson Business Press.
NCC Education (2013). International Marketing Strategy, Course Slides, Topic 10, Slide 7, A Simple Buyer Decision Process Often Used is – AIDA. Retrieved from
http://campus.nccedu.com/resources/dotlrn/uowba/IMS13_MAR10/pages/frames.html
NCC Education (2013). International Marketing Strategy, Course Slides, Topic 12, Slide 5, Introduction (continued). Retrieved from
http://campus.nccedu.com/resources/dotlrn/uowba/IMS13_MAR12/pages/frames.html
