Market Penetration Strategy
Market Penetration Strategy
situation, the competition and even government regulation. Some common growth strategies in
business include market penetration, market expansion, product expansion, diversification and
acquisition. Depending
Most small companies have plans to grow their business and increase sales and profits. However,
there are certain methods companies must use for implementing a growth strategy. The method a
company uses to expand its business is largely contingent upon its financial situation, the
competition and even government regulation. Some common growth strategies in business include
market penetration, market expansion, product expansion, diversification and acquisition.
One growth strategy in business is market penetration. A small company uses a market penetration
strategy when it decides to market existing products within the same market it has been using. The
only way to grow using existing products and markets is to increase market share, according to
small business experts. Market share is the percent of unit and dollar sales a company holds within
a certain market vs. all other competitors.
One way to increase market share is by lowering prices. For example, in markets where there is little
differentiation among products, a lower price may help a company increase its share of the market.
A market expansion growth strategy, often called market development, entails selling current
products in a new market. There several reasons why a company may consider a market expansion
strategy. First, the competition may be such that there is no room for growth within the current
market. If a business does not find new markets for its products, it cannot increase sales or profits.
A small company may also use a market expansion strategy if it finds new uses for its product. For
example, a small soap distributor that sells to retail stores may discover that factory workers also
use its product.
A small company may also expand its product line or add new features to increase its sales and
profits. When small companies employ a product expansion strategy, also known as product
development, they continue selling within the existing market. A product expansion growth strategy
often works well when technology starts to change. A small company may also be forced to add new
products as older ones become outmoded.
Growth strategies in business also include diversification, where a small company will sell new
products to new markets. This type of strategy can be very risky. A small company will need to plan
carefully when using a diversification growth strategy. Marketing research is essential because a
company will need to determine if consumers in the new market will potentially like the new
products.
Growth strategies in business can also includes an acquisition. In acquisition, a company purchases
another company to expand its operations. A small company may use this type of strategy to expand
its product line and enter new markets. An acquisition growth strategy can be risky, but not as risky
as a diversification strategy.
One reason is that the products and market are already established. A company must know exactly
what it wants to achieve when using an acquisition strategy, mainly because of the significant
investment required to implement it.