The Three Concentration Strategies The three concentration strategies consist of (1) market penetration, (2) market development, and (3) product development (Ketchen & Short, 2012). Moreover, these three strategies are utilized to compete in a single industry. All three methods allow a firm to grow within a specific industry and often make use of mergers and acquisitions as part of an overall concentration strategy. Another feature of this strategy is that a firm can use only one aspect such as market penetration, two aspects or all three concentration strategies simultaneously.
Market penetration relies on gaining market share of a firm’s existing market while making use of existing products. For instance, Proctor & Gamble may decide to increase sales by simply selling more diapers. The strategy here is to expand advertising efforts to attract new customers within their existing market. Through increased advertising a customer may be swayed to buy Luvs (a P&G product) over Huggies (Kimberly-Clark Brands). This aspect of market penetration can be applied to a myriad of other consumer products including dishwashing soap and brand names such as Bounty, Charmin and Tide.
2. Market development:
Market development is the strategy utilized when firms find new markets in which to sell their existing products. One way to do this is to expand the firm’s channels of distribution (marketing channels). An example of this Starbucks selling their coffee beans in supermarkets as well as their retail stores. A similar example is Panera. They have expanded by finding a new market. Indeed, they sell their salad dressings and soups in supermarkets. By doing this Panera can sell their products to customers who do not go to the Panera restaurants. Customers can also order online and elect to pick up the order or have it delivered (Panerabread.com, n.d.).
3. Product Development
Product development is exactly that i.e., developing new products to serve existing markets. An example is Disney expanding from cartoons into film. A little pixie dust and voila, a new product. Along this same line of thinking both Netflix and Amazon have expanded their products that serve existing [streaming] customers by going into film production (Berman, Eliza (March, 2017). Coke has a new product called, “Coke with sugar”! This might be a bit confusing to customers who are not sure they completely understand this product. But suffice it to say it is a new soft drink that serves existing customers. This “new product” uses real sugar (cane sugar) as opposed to corn syrup (Sodafinder.com, n.d).
As a final example, Apple is always introducing new products to stay ahead of the curve. They continue to launch new IPhones and other products (Verizonwireless.com, 2017). The phone has new features such as wireless charging instead of the archaic plug-in charger. etc. But is it really a new product? The answer is yes. It has new features and even though it is still a cell phone it is a new product in consumer’s minds since the enhancements differentiate it from older models. Indeed, here is Apple’s advertising to solidify this:
“The iPhone 11 Pro Max includes a transformative triple-camera system that adds tons of capability without complexity. An unprecedented leap in battery life. And a mind-blowing chip that doubles down on machine learning and pushes the boundaries of what a smartphone can do. The iPhone 11 Pro Max comes in 4 new textured matte glass finishes and features a 6.5-inch Super Retina XDR display2 and the toughest glass in a smartphone.” (Verizon, 2020).
Berman, Eliza (March, 2017). Retrieved October 27, 2017 from, http://time.com/4595553/netflix-original-movies-streaming-2017/
Ketchen & Short (2012). Retrieved October 27, 2017 from, http://jsmith.cis.byuh.edu/books/strategic-management-evaluation-and-execution/s12-01-concentration-strategies.html
Panereabread.com (n.d.). Retrieved October 27, 2017 from, https://catering.panerabread.com/#!/orderProcess/
Sodafinder.com (n.d). Retrieved October 27, 2017 from, https://www.sodafinder.com/products/coca-cola-coke-w-real-sugar
Verizonwireless.com (2020). Retrieved October 6, 2020 from, https://verizonwirelessdeals.com/?kwid=380342EF-28F4-4F0C-9E58-3FD0811AD002&afsrc=1&gclid=CjwKCAjwq_D7BRADEiwAVMDdHm1333YXeWoj8wTiVRAZVCvKHvmmRgZZUtpIvMAhqSlcXntwIoMndhoCrfAQAvD_BwE
Artickle by Dr. George W. Alexander, student of LIGS University