The product/market matrix is an accepted method of categorizing and identifying market and product developments and opportunities. The matrix basically identifies the various strategies that are available to organizations and divides them into four categories. These strategies are mainly geared towards helping the firm expand using the four categories.
These four categories are; market penetration, market development, product development and diversification. The matrix simply shows firms which category works best for existing products and new products and also which work best for existing markets and new markets. Where existing products are concerned, market penetration works for existing markets while market development works for new markets.
On the other hand, product development works for new products in existing markets while diversification works for new products in new markets.
Where a company brings into the existing market a new product, product improvement may get it competitive advantage over its competitors. Market development basically involves bringing in existing products into completely new markets for example overseas markets. Improved consumer targeting, enhanced research, effective market segmentation usually aids firms to pinpoint new markets that they could get into.
When it comes to diversification though, movement of new products into new markets is what is involved. This may result in a complete shift from the usual to something completely different. It is the representation of a step into ground that is less familiar and at times completely unfamiliar territory.
? Market Penetration
With market penetration, the firm looks to expand using existing products in their current market segments with an aim to grow their market share. Simply put, the firm looks to delve deeper into their existing market and reach out to all those potential customers that they might not have been able to do so before. This only works effectively when the market the firm is dealing with is not saturated and is still growing.
? Market Development
Market development involves the targeting of growth by the firm by its expanding its current products to new market segments. New market segments are always emerging. This is usually due to changes in the demographics and lifestyles of the consumers and firms can use innovativeness to use these changes to their advantage. A good example would be with the mature products.
Firms can take advantage of the changing consumer demographics and lifestyles by using their innovativeness to revive the mature product and target it towards the emerged market segments. Market development works well when a regional or local business looks to widen its market to maybe a continental level.
? Product Development
Product development involves the firm coming up with new products that are geared towards its current market segments. Product development may also involve upgrading the product to newer versions that are up to date with the current tastes, styles and preferences in the market. Remember that the world today is changing fast and styles, tastes and preferences are changing on a daily basis. To remain relevant, one has to be able to keep up with all these changes. This works very well for firms that have a core of very strong brands
With diversification, the firm looks to expand by getting their existing products into new market segments. It simply involves the firm getting into new markets that they had not gotten into before.
Diversification can also involve a complete shift to different products. Changing the product is a very good way to get into newer markets as different products can help the firm to target a different market segment. The main purpose of diversification is to prevent the firm from becoming too dependent on a single product line.