Concentration Strategies
For many firms, concentration strategies are very sensible. These strategies involve trying to compete successfully only within a single industry. McDonald’s, Starbucks, and Subway are three firms that have relied heavily on concentration strategies to become dominant players.
| Market penetration involves trying to gain additional share of a firm’s existing markets using existing products—often by relying on extensive advertising. Perhaps the most famous example of two close rivals simultaneously attempting market penetration is the “cola wars” where Coca-Cola and PepsiCo fight for share in the soft drink market. Pepsi’s blind taste tests in 1975 called the Pepsi Challenge is one of the more famous attacks in this ongoing battle. |
| Market development involves taking existing products and trying to sell them within new markets. Starbucks engages in market development by selling their beans and bottled drinks in grocery stores. Apple engages in market development by allowing customers in Starbucks stores to connect directly to iTunes store and Starbucks Now Playing content. Customers are offered a free download to get them to visit iTunes—and to perhaps purchase more songs. |
| Product development involves creating new products to serve existing markets. King Gillette, an American businessman whose family hailed from France, pioneered the safety razor that bears his family name. His company’s more recent innovations in the razor market include Trac II (the first two-bald razor), Altra (first razor with a pivoting head), Sensor (first razor with spring-loaded blades), Mach 3 (first three-blade razor), and Fusion (first six-blade razor). Is the ten-blade razor coming soon? |
Table 1 Concentration Strategies. Concentration strategies involve trying to grow by successfully competing only within a single industry. We illustrate the three concentration strategies in table 1.
Market Penetration
There are three concentration strategies: (1) market penetration, (2) market development, and (3) product development. A firm can use one, two, or all three as part of their efforts to excel within an industry (Ansoff, 1957). Market penetration involves trying to gain additional share of a firm’s existing markets using existing products. Often firms will rely on advertising to attract new customers with existing markets.
Nike, for example, features famous athletes in print and television ads designed to take market share within the athletic shoes business from Adidas and other rivals. McDonald’s has pursued market penetration in recent years by using Latino themes within some of its advertising. The firm also maintains a Spanish-language website at http://www.meencanta.com; the website’s name is the Spanish translation of McDonald’s slogan “I’m lovin’ it.” McDonald’s hopes to gain more Latino customers through initiatives such as this website.
Market Development
Market development involves taking existing products and trying to sell them