Existing Products in Existing Markets

Increasing sales of existing products in the current market by enhancing marketing efforts or adjusting pricing strategies.

Example: Coca-Cola increasing its sales in the U.S. by offering discounts and launching an advertising campaign targeting younger generations.

Advantages:

• Low risk since the company operates in familiar markets with known products.

• Quick implementation and lower costs than other strategies.

Disadvantages:

• Limits on growth as markets may eventually become saturated.

• Competitors may respond with aggressive marketing, reducing the effectiveness.

Existing Products in a New Market

Expanding into new geographic regions or customer segments with existing products.

Example: Starbucks expanding into China and tailoring its product offerings, like introducing green tea-flavored beverages, to appeal to local tastes.

*I wasn't sure if this example was market development or related diversification, but it could be argued as both. 

Market Development: Since Starbucks is known for both their coffee and tea beverages it's not a new product and therefore is market development. 

Related Diversification (new market and new product, however the new product is related to the original product): 

If the green tea-flavored beverages in China are a new product then it could be considered related diversification. By tailoring its product line to meet local tastes while still operating within the beverage sector, Starbucks is effectively engaging in related diversification 

Advantages:

• New revenue streams from untapped markets.

• Can leverage existing products without the need for significant R&D.

Disadvantages:

• High risk due to unfamiliar market dynamics and consumer behaviors.

• Potential cultural or regulatory barriers that can slow market entry.

New Product in a New Market

Introducing new or improved products to the current customer base.

Example: Apple launching new iPhone models each year with updated features like improved cameras and faster processors to keep existing customers engaged.

Advantages:

• Builds on customer loyalty, leading to repeat purchases.

• Enhances brand reputation by showing innovation.

Disadvantages:

• High costs associated with R&D and marketing.

• New products may cannibalize sales of existing products.

New Product and New Market.

Entering a new market with a new product. This is the riskiest strategy since both the product and the market are new.

Example: Amazon entering the cloud computing market with AWS (Amazon Web Services), offering cloud storage and computing power, which is completely different from its e-commerce platform.

Advantages:

• Spreads risk by reducing reliance on a single market or product line.

• Offers potential for high returns if the new product and market succeed.

Disadvantages:

• High levels of uncertainty and risk due to lack of experience in both the new product and market.

• Requires significant investment in terms of resources, time, and expertise.

Related diversification occurs when a company expands into industries or markets related to its current operations. This typically involves leveraging existing skills, technologies, or supply chains to enter new but related sectors.

Example: PepsiCo acquiring Tropicana is an example of related diversification, as both companies operate in the beverage industry.

Advantages:

1. Synergies: The company can use shared resources, expertise, and marketing to lower costs and enhance efficiency.

2. Brand strength: Related industries can benefit from established brand reputation and customer loyalty.

3. Risk Reduction: By diversifying into related areas, companies can spread their risk across different but related segments, reducing reliance on a single product or market.

Disadvantages:

1. Over-dependence on the same market: If the industry experiences a downturn, all related businesses may suffer.

2. Integration challenges: Acquiring related businesses may still lead to operational or cultural integration difficulties.

3. Overextension: the company may stretch its resources too thin, leading to inefficiencies and diminished focus on core operations.

4. Management Complexity: Managing multiple related businesses can become complex and may require different operational strategies, which could lead to increased administrative costs.

Unrelated diversification occurs when a company expands into industries that have no significant connection to its existing business activities. It usually considered the highest risk of the growth strategies.

Example: Virgin Group expanding into diverse industries such as airlines (Virgin Atlantic) and mobile telecommunications (Virgin Mobile) is an example of unrelated diversification.

Advantages:

1. Risk Diversification: Unrelated industries provide a cushion against market-specific downturns, as different sectors face different economic pressures.

2. New revenue streams: Entering unrelated industries opens up opportunities for profit from completely different markets.

Disadvantages:

1. Lack of expertise: Entering unfamiliar markets can be risky due to a lack of industry-specific knowledge.

2. Management challenges: Running businesses in different sectors requires more complex organizational structures and may spread management too thin.