Generic Growth Matrix

Question 1

Generic growth matrix

axis

Answer 1

horizontal
left to right: existing to new market

vertical
up to down: new products to existing products

Question 2

Generic growth matrix

quadrants

Answer 2

upper left: product development

upper right: diversification

lower left: market penetration

lower right: market development

Question 3

Market penetration

Answer 3

The additional and improved exploration of existing product-market combinations. Old product for the old market. This is like-for-like (or same-store) growth.

1. Consolidation of the market position: maintaining the current sales at lower costs - doing the same thing, only better. This involves little risk.
2. Repositioning: Adapt the formula to create a new impulse for growth. Continue to serve the same target group with basically the same assortment, but in a different way. Is doing the same thing, but different. Involves more risk for the uncertainty of success of the innovation.

Question 4

product development

Answer 4

New products in the old market.

• Assortment expansion: adding to existing ranges in the same store
• Formula development: Serving the existing target group from a new store with acompletely new range.

Question 5

risk of product development

Answer 5

• Overshooting the market: the new assortment may have a negative impact on the old product range, which may reduce the consumers’ linking for the formula.
• Sector blurring: products that were previously sold by other companies are included in the range. Therefore, the formula faces more competitors than in the past, while the distinctive character of the assortment it carries may also decline. Product development should therefore always go hand in hand with the development of a new and unique selling proposition in the newly added ranges that can distinguish the retailer from what the competition is offering. Otherwise, we are just engaging in imitation and sector blurring.

Question 6

market development

Answer 6

Offering the existing formula in new markets or to new market segments. → old products in a new market.

Question 7

market development risk

Answer 7

• by appealing to new target groups, we may have to take measures that alienate the old target group
• much less familiar with the needs and wishes of this new target group.

Question 8

diversification

Answer 8

entry into a new market with a new product. The most difficult and risky growth (therefore rarely successful) strategy because we could not know the new market or not have the expertise of the new product.

Question 9

diversification risk

Answer 9

Diversification is the riskiest approach. This is about including new items and new assortments to reach new target groups. This strategy have both the risks associated with product development and those related to market development.

Question 10

types of market development

Answer 10

• Upgrading of the formula: if the new market segments involve higher-income target groups than before
• Downgrading: if involve lower-income groups
• Expansion or filialisation: Reach-out to the same target group addressed as before in new regional market areas
• Internationalization: if it concerns foreign markets. This often begins as market development, but often takes the form of diversification.
• Market development through the addition of new channels (omnichanneling): allow consumers to make purchases in a different way (via web or on mobiles). This allows new customers to be reached.
  Another form here is platform commerce: opening up the platform to third parties - as a collaboration with pure players such as Zalando or Amazon.

Question 11

strategy for growth through market penetration

Answer 11

• focus on optimizing the formula
• ‘improve profitability per existing meter of sales-floor space’ The implementation of this strategy is often a matter for the local branch manager

Question 12

strategy for growth through market development

Answer 12

• focus on creating technical opportunities to open new stores
• An external, project-oriented focus
• The strategic objective is ‘the profitable expansion of total market share or revenue growth, rather than the expansion of floor space’

Question 13

strategy for growth through product development

Answer 13

• Requires an externally oriented attitude with a focus on the wishes of the customers and coming up with creative solutions to satisfy them.
• We need developers instead of implementers
• The strategic objective here is usually ‘building new market share’
• The implementation in the retail sector often ends up at procurement