INTENSIFICATION STRATEGIES

(Intensive growth strategies/ Concentration strategies)

An intensification strategy in strategic management involves focusing on maximising growth within

the company's current market and product offerings. This strategy aims to extract more value from
existing resources and capabilities. It can encompass various tactics such as increasing marketing
efforts, enhancing distribution channels, improving customer service, and optimising operational
efficiency. The goal is to increase market share, sales, and profitability by deepening the company's
roots in its current business environment. In teaching strategic management, you can highlight that
intensification strategies leverage the familiarity of the existing market and products, minimising the
risks associated with entering new territories. This strategy underscores the importance of
operational excellence and effective utilisation of core competencies to drive sustainable growth and
competitiveness.

MARKET PENETRATION

This is a growth strategy. It focuses on increasing market share. It is a business approach where a
company seeks to increase its market share within its current market or customer base. This is
typically done by attracting new customers, offering various deals on existing products or services, or
even by lowering prices to encourage more sales. Market penetration falls into two areas viz.,
customer acquisition and customer retention. Customer acquisition focuses on attracting new
customers. Customer retention focuses on keeping existing customers. Often firms rely on
advertising to attract new customers with existing markets. Consider the case of Nike. Nike features
famous athletes in print and television ads designed to take market share within the athletic shoes
business from Adidas and other competitors.

Similarly, McDonald is too well known to market its mouth- watering delicacies. It penetrated the
Indian market with its now famous Aloo Tikki Burger because most of the clients relish vegetarian
dishes. Adopting market penetration strategy is a tricky issue. There are few issues to consider before
using market penetration strategy.

Some of the pertinent questions are:

(i) Why does the company require higher market penetration?

(ii) Does the company need it to increase total profitability?

(iii) Is it needed in order to increase profitability per product line?

(iv) Is the survival of the company threatened?

(v) Is comprehensive plan needed to overcome the situation?

Example : Customer acquisition: McDonald’s entering India with vegetarian dishes in their menu to
create customer base. Customer retention: McDonald’s adding chicken nuggets to their menu in
India to face the competition from KFC and later starting McCafe and a separate App for exclusive
dine-in offers to compete with Burger King

MARKET DEVELOPMENT

Market development strategy involves expanding a company's presence by entering new markets or
targeting new customer segments. This strategy aims to utilise the company's existing products or
services in untapped markets where it doesn't currently operate. This could mean exploring different
geographical regions, demographic groups, or even industries. The goal is to leverage the company's
core competencies to attract new customers who have not yet been exposed to its offerings. By
doing so, the company seeks to grow its revenue and customer base beyond its current limitations.
Market development requires careful market research, understanding consumer needs, and adapting
the product or service to suit the preferences of the new market. It's about taking what the company
does well and applying it in new contexts to drive expansion and diversification.

Market development strategy targets non-buying customers in currently targeted segments. It also
targets new customers in new segments. One way to reach a new market is to enter a new retail
channel. Starbucks has stepped beyond selling coffee beans only in its stores and now sells beans in
grocery stores. It helps Starbucks to reach consumers that do not visit its coffeehouses. Entering new
geographic areas is another way to pursue market development e.g. marketing edible oil in sachet in
rural India.

Market development strategy aims at expanding the potential market through new users or new
uses of the product. New users will include: new geographic segments, new psychographic segments,
new demographic segments and new institutional segments. Another way is to educate consumers
about the new uses of the product. Before adopting market development strategy, marketing
manager has to conduct SWOT analysis.

Market development is a two-step process to utilise untapped market. It begins with market research
wherein a firm does a segmentation analysis and shortlists market segments which are worth
pursuing. Another aspect is the pricing of the product. If there are competitors in the market, the
firm may price the product accordingly or come out with a superior product to command higher
price. In case the competitor is dominating, the firm will initially settle for penetration pricing and
price the product below competitor to gain market share. Market development is a costly affair. It
needs huge capital investment to keep the project going. If the investment in the new segment
does not payoff as desired, the firm will face losses.

Example: 1) Amazon entering India and developing its market in a country where people’s mentality
was to buy products physically.

2) Starbucks targeting its non buying customers by selling its coffee beans and other products
through premium grocery stores. Recently Starbucks have also started selling its products through
online delivery platforms like Blinkit or Zepto, targeting those customers who do not visit their cafés.

NEW PRODUCT DEVELOPMENT

New product development strategy involves creating and introducing entirely new products or
services to the market. This strategy is pursued when a company aims to innovate and meet the
evolving needs of customers. It could involve developing variations of existing products, introducing
entirely new solutions, or entering new categories altogether. The goal is to stay ahead of the
competition, capture new customer segments, and drive revenue growth through innovation. New
product development requires a deep understanding of customer preferences, market trends, and
technological advancements. It involves research, design, testing, and often involves a degree of risk
due to uncertainties surrounding market acceptance. This strategy showcases a company's ability to
adapt and evolve, keeping it relevant in an ever-changing business landscape. As the name indicates,
new product development is the process of bringing a new product to the market. Adoption of this
strategy may become necessary because of changes in consumer preferences and increasing
competition. Innovative business prospers by understanding what their market wants, making
product improvements and developing new products to meet customers' expectations. New
products can be:

1. products that the firm has never made

2. product innovation.

When a firm is not able to manufacture a new product, it can consider purchasing new products
through licensing or copyright acquisition. With well-considered new product development strategy,
the firm can avoid wasting time, money and business resources. New product development is a
lengthy and time consuming activity. In the case of many companies, initial products introduced may
be one or two. In due course, the create a product line of 10 to 15 products. This is the result of their
sustained efforts to develop new products.

Example: Apple Co. has always been developing new products from time to time. They started with
their first product i.e. desktop computer, then laptop, iPod, iPhone, iWatch, and now iVision.

Why new product development is needed?

(1) Meeting the growing and changing needs of consumers: New product development is necessary
to meet the growing and changing needs of consumers. People always prefer new products which
are as per their needs and expectations. They welcome new products for convenience, prestige and
higher level of satisfaction. A company has to respond to consumers by introducing new products in
the market.

(2) Pressures from environmental changes/threats: Environmental changes include technological

development, social and economic changes, government policies and regulations (legal restrictions),
changes in the economic policies of the government and so on. All such changes create new threats
and opportunities before marketing firms. They can face such situation through new product
development.

(3) Earning more profit: New product development is needed for earning additional profit through
marketing a new product with promising market demand. The established products are popular and
give reasonable profit to the company. However, their capacity to raise the profitability of the
company over a long period is limited. The progressive companies have to replace old products by
new products for long term survival and profitability.

(4) Extending the product line: New product development is needed in order to extend the product
line of the company. Addition of new products facilitates easy marketing of new products along with
the existing products.

(5) Expansion of business: New product development is needed in order to expand and diversify the
business activities of the company and in order to earn more profits.

INNOVATION

An innovation strategy in strategic management is a deliberate approach taken by a company to

foster and capitalise on new ideas, technologies, and creative solutions. It encompasses a range of
activities aimed at driving breakthroughs, improving processes, and creating novel products or
services. Innovation strategies can involve both incremental improvements and disruptive
innovations, depending on the company's goals and capabilities. By prioritising innovation, a
company aims to gain a competitive edge, enhance its market position, and address evolving
customer demands. In teaching strategic management you can emphasise that successful innovation
strategies require fostering a culture of creativity, encouraging cross-functional collaboration,
investing in research and development, and effectively managing risks associated with
experimentation. This strategy highlights a company's forward-thinking approach and its ability to
stay relevant and responsive in dynamic business environments.

Innovation strategy is a plan made by an organisation to encourage advancements in technology or

services usually by investing in R&D activities. An innovation strategy developed by a high technology
business might entail the use of new management or production procedures and the invention of
technology not previously used by competitors.

Innovation is the process of taking a creative idea and turning it into a product or process that can be
used or sold. One possible measure of the increasing commercialisation of innovation is the number
of patents made available in the market duly passed by government authorities. Innovation is any
good, service or idea that is perceived by someone as new. According to Peter Drucker innovation "is
any efforts to create purposeful, focused change in an enterprise's economic or social potential."
Innovation converts new ideas into usable applications. New ideas alone are not sufficient to
guarantee success. Such ideas must be relevant. They must be well implemented in order to improve
business results. In the words of Edward B. Roberts "Commercialising innovation is the process of
turning new ideas into products or processes that can increase profits through greater sales or
reduced costs." Large corporations, today, generate higher revenue from products that did not exist
five years ago. The credit goes to the R&D for doing excellent job in making available newer and
novel products at regular intervals. Innovation extends through all forms of business. Innovation in
manufacturing is as important as in distribution and innovation in product design is as important as
in banking system. Innovation is crucial for success in business. It should be the primary activity of
every business.

Innovation brings about new ideas, identifies new possibilities and establishes proven knowledge.
Progressive management should encourage the creation of favourable environment supporting
innovation. It is important that employees do what they think is right rather than what their seniors
desire. In order that innovation becomes successful, it must have commercial acceptability. Every
innovation has a process of spreading a new idea from its source of creation to its final users. A
consumer must firstly accept innovation mentally and later he is prepared for its physical acceptance.

In order that a consumer adopts innovation, he passes through five stages which are:

(1) Awareness: The consumer comes to know about innovation but does not possess sufficient
information. At this stage, the consumer possesses only bare knowledge but does not know details
like utility, performance, quality etc.

(2) Interest: The consumer develops desire to know more about the innovation. Now the consumer
desires to know more about the product — its quality and utility. He carefully screens the ads and
speaks to sales personnels and friends to collect more detailed information about innovation
product.

(3) Evaluation: The consumer is indecisive whether to use the innovation. The consumer evaluates
the factors in favour and against the value of the new product and how far it will be useful to him.
The new product is mentally evaluated.

(4) Trial: The consumer is prepared to try the innovation and find out if it comes up to his
expectations. The consumer is ready to try sample purchase. If he is satisfied, he will decide to go in
for large scale and regular purchases.

(5) Adoption: The consumer, having been satisfied, is ready for regular use of the innovation. This is
the final stage and the consumer decides to adopt the new product on regular basis. If his post-
purchase experience is satisfactory, he will go in for repeat purchase and will also recommend the
product innovation to friends and acquaintances.

It is quite likely that a majority of consumers may get stuck in the interest stage because the money
involved in buying a consumer durable product is substantially high. In order to break this resistance,
the business can offer trial-use plan with option to buy.

Many of the multinational and transnational corporations are working on wide variety of
technologies that will revolutionise products and production processes. Some commendable work is
being done in the areas of computers, robotics, designer materials, biotechnology,
telecommunications and microelectronics. Along with this rigorous research is being done in
obtaining AIDS cures, non- fattening foods, happiness pills and insulin capsules. Robots are being
designed to do firefighting, underwater exploration and industrial works. Small flying cars are a
fantasy today but scientists are working to make it a reality in near future. The main challenge in the
field innovation is to develop affordable versions of these products.

Example: Apple Co. has been innovating their existing products since a long time. After introducing
iPhone, they have always come up with new innovations and new features and today they are having
the 15th version of their iPhone with future plans to provide more different and innovative features
to their customers.