Question 1

Isn't diversification always the best strategy because it leads to the most growth?

Accepted Answer

Not necessarily. While diversification has the potential for high rewards, it is unequivocally the highest-risk strategy. A business could invest millions in developing a new product for a new market and fail completely, jeopardising the entire organisation. Often, lower-risk strategies like market penetration or development are more sensible and sustainable, depending on the business's resources, objectives, and the market conditions. The 'best' strategy is always contextual.

Question 2

If a clothing store that only sells in physical shops starts selling online, is that Market Penetration or Market Development?

Accepted Answer

This is a classic example of Market Development. While the geographical market might be the same, the business is entering a new distribution channel (the internet) to reach a new market segment (online shoppers, who may not visit their physical stores). It requires new skills in e-commerce, digital marketing, and logistics, which carries more risk than simply trying to get more customers into the existing physical stores (which would be market penetration).

Question 3

Is a soft drinks company launching a 'sugar-free' version of its most popular drink an example of Product Development?

Accepted Answer

Yes, this is a perfect example of Product Development. The company is introducing a new product (the sugar-free variant) into its existing market (current and potential drinkers of its brand). It is leveraging its brand name, distribution network, and understanding of its customers' changing health preferences. It is not diversification because the market is the same, and it is not market penetration because the product is new.

Marketing strategy

What you need to know

Marketing strategy