Expansion strategies

Why Do Companies Go
For Expansion
Strategies?
To avoid annihilation in a restless and
competitive environment an organization
seeks growth as a long term goal.
It provides opportunities and is crucial for
survival of enterprise.
It helps maintain a competitive position .
Hence to survive and flourish an organization
adopts expansion strategy.
Expansion through intensification
Expanding within existing line of business
Safeguarding the present position and
expanding in the current product-market
space to achieve growth targets

Useful for the companies that have not fully
exploited the current product-market domain
Increasing its size of operations in its primary
business.

Ways of Intensification
market penetration
market development
product development
Internal Expansion Considerations
Net Present Value
Competitive Behavior
Internal Environment Scanning
Financial, Technological , Managerial
Capabilities
External Environment Scanning

Ansoffs Grid
Ansoffs Product-Market Expansion
Grid



Market Penetration: The firm seeks to achieve
growth with
existing products in their current market segments,
aiming to
increase its markets share.

Market Development: The firm seeks growth by
targeting its
existing products to new market segments.

Product Development: The firm develops new
products
targeted to its existing market segments.

Diversification: The firm grows by diversifying
into new businesses by developing new
products for new markets

Nestle Market Penetration
One of the largest confectionary
manufacturers
. Nestles latest move to consolidate its
position and compete with Cadbury,
McVities and Mars involves a market
penetration strategy using its popular Aero
chocolate bar.
minimal risk albeit the pay-off is limited
ideal for large firms with maturing products
how need to simply maintain
their competitiveness, like Nestle
The latest enhancement to the Aero bar is to
extend the brand further; this Easter a new
Aero Biscuit
market penetration aids Nestles competitive
strategy
Fundamental differentiation strategy used
by Nestle to position Aero as a lighter and
healthier chocolate bar remain as part of the
actual product the core and augmented
product benefits are also relatively similar to
the traditional bar
extension strategy, which aims to prolong the
life span of a mature product to prevent a
decline in sales thus, the product can
continue to fit in the firms wider product
portfolio as a Cash Cow
Microsoft Kinect Market
Development
Simplicity
Kinect is an extension strategy for the original
Xbox 360, but is targeting a new consumer
Microsoft intended to prolong the life of the
Xbox 360 by opening it up to casual gamers
Product easy to understand and use.
push marketing strategy
Microsoft gave retailers free Kinects and TVs
to allow consumers to try the product in-
store.
Business-to-business marketing strategy
Kinect requires no peripherals or controllers
or even knowledge of how to play video
games
Social appeal
Emphasized the social appeal of gaming
Kinect with friends; the boxing game is
particularly a great laugh!
truly enhances the consumers experience
more consumers understand your
product, and then a higher proportion
of these consumers will talk about the
product



EXPANSION THROUGH iNTEGARATION
Firms use integration to-
Increase market share
Avoid the costs of developing new products
Reduce the risk of entering new busines
Speed up the process of entering the market,
Become more diversified
To reduce the intensity of competition by
taking over the competitors business
Vertical Integration
Integration of firms involved in different stages
of supply chain starting from raw material to
delivery of final product to the end customer
It can be backward integration of forward
integration

Nirma -backward integration by setting up plant to
manufacture soda ash and linear alkyl benzene,
both important inputs for detergents and
washing soaps, to strengthen its hold in the
lower-end detergents market.

DCM, Mafatlal and National Textile Corporation
have set up their own retail distribution systems
to have better control over their distribution
activities.


Digital Gaints To Accelerate vertical
Integation
Samsung Electronics and LG Electronics plan
to streamline production
manufacture top-of-the-line products like cell
phones and digital TVs in a self-sufficient
fashion
LG Group will invest 30 trillion won by 2010 to
develop certain electronic components that
include system integrated chips, plasma
displays and camera modules.
Samsung Electronics already retains a strong
portfolio, comprising
Samsung Corning (display-specific glass),
Samsung SDI (displays)
Samsung Electro-Mechanics (camera modules),
Aims to further hone its push for vertical
integration
Horizontal Integration
The acquisition of additional business in the same
line of business or at the same level of the value
chain (combining with competitors) is referred to
as horizontal integration
Aditya Birla Groups acquisition of L&T Cements
from Reliance to increase its market dominance is
an example of horizontal integration. This sort of
integration is sought to reduce intensity of
competition and also to build synergies.