COCA-COLA: ANSOFF MATRIX

The objective of every business is to grow, be it a start-up

that’s just closed its first deal or an established market
leader seeking to further increase profitability. But how
does a business decide upon the best strategy for growth?
The Ansoff Matrix management tool offers a solution to this
question by assessing the level of risk – considering
whether to seek growth through existing or new products
in existing or new markets.

To demonstrate the robustness and legitimacy of Ansoff’s

Matrix, it has been applied to Coca-Cola, the most well-
known trade name in the world and a company today
operating in over 200 countries; and a brand that has
undertaken countless growth strategies in its 100+ year
history.

Market Penetration: (EXISTING Market, EXISTING

Product)
This strategy involves an attempt to increase market share
within existing industries, either by selling more product to
established customers or by finding new customers within
these markets – typically by adapting the ‘Promotion’
element of the Marketing Mix. Due to the incredible
strength of Coca-Cola’s brand, the company has been able
to utilise market penetration on an annual basis by
creating an association between Coca-Cola and Christmas,
such as through the infamous Coca-Cola Christmas advert,
which has helped boost sales during the festive period.
For a full case study of a market penetration strategy, take
a look at this article I recently wrote about its
implementation at Heinz.
 

Product Development: (EXISTING Market, NEW Product)

This involves developing new products for existing markets
by thinking about how new products can meet customer
needs more closely and outperform competitors. A prime
example of this was the launch of Cherry Coke in 1985 –
Coca-Cola’s first extension beyond its original recipe – and
a strategy prompted by small-scale competitors who had
identified a profitable opportunity to add cherry-flavoured
syrup to Coca-Cola and resell it. The company has since
gone on to successfully launch other flavoured variants
including lime, lemon and vanilla.

For a full case study of a product development

strategy, see my article on crisp brand Walkers’ ‘Do Us A
Flavour’ campaign.
 

Market Development: (NEW Market, EXISTING Product)

Thirdly, the market development strategy entails finding a
new group of buyers for an existing product. The launch of
Coke Zero in 2005 was a classic example of this – its
concept being identical to Diet Coke; the great taste of
Coca-Cola but with zero sugar and low calories. Diet Coke
was launched more than 30 years ago, and whilst more
females drink it every day than any other soft drink brand,
it came to light that young men shied away from it due to
its consequential perception of being a woman’s drink.
With its shiny black can and polar opposite advertising
campaigns, Coke Zero has successfully generated a more
‘masculine’ appeal.

For a full case study of a market development

strategy, check out my post on Quorn’s recent emphasis on
the protein content of its veggie meals.
 

Related Diversification: (NEW Market, NEW Product)

This involves the production of a new category of goods
that complements the existing portfolio, in order to
penetrate a new but related market. In 2007, Coca-Cola
spent $4.1 billion to acquire Glaceau, including its health
drink brand Vitaminwater. With a year-on-year decline in
sales of carbonated soft drinks like Coca-Cola, the brand
anticipates the drinks market may be heading less-sugary
future – so has jumped on board the growing health drink
sector.

For a full case study of a related diversification

strategy, take a look at this article I recently wrote on the
launch of Aero into the hot chocolate industry.
 
Unrelated Diversification: (NEW Market, NEW Product)
Finally, unrelated diversification entails entry into a new
industry that lacks important similarities with the
company’s existing markets. Coca-Cola generally avoids
risky adventures into unknown territories and can instead
utilise its brand strength to continue growing within the
drinks industry. That said, Coca-Cola offers official
merchandise from pens and glasses to fridges, therefore
exploiting its strong brand advocacy through this strategy.

A more comprehensive case study of unrelated

diversification is explain in my article on Virgin’s frequent
use of the strategy.
 

Conclusion:
What is clear with Ansoff’s Matrix is the incremental
increase in risk offered by the five strategies, due to the
growing cost with each step beyond market penetration
and uncertainty of operating in new markets and
industries:
Going back to the example of Coca-Cola, the firm’s
emphasis on market penetration and other non-
diversification strategies therefore suggests it is a
relatively risk-averse company, when compared with a firm
like the Virgin Group.

That said, there is no one best strategy to select, with each

offering different benefits to companies in various
circumstances. For example, Coca-Cola has had little need
to diversify relative to the Virgin brand which traditionally
operates in uncertain markets such as the volatile airline
industry, meaning diversification actually spreads risk.

Even so, Coca-Cola would not be the power house it is

today without knowing when to step out of its comfort zone
– the Glaceau acquisition being a clear case in point. Even
though there was minor potential that it could dilute Coca-
Cola’s reputation for carbonated soft-drinks in the short
term, it has been deemed a suitable strategy given the
brand’s long-term view for growth in the face of a changing
market.

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