Page 120 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes Concentration Strategies
Without moving outside the organisation’s current range of products or services, it may be
possible to attract customers by intensive advertising, and by realigning the product and market
options available to the organisation. These strategies are generally referred to as intensification
or concentration strategies. By intensifying its efforts, the firm will be able to increase its sales
and market share of the current product-line faster. This is probably the most successful internal
growth strategy for firms whose products or services are in the final stages of the product life
cycle. Most of the approaches of intensive strategies deal with product-market realignments.
Thus, there are three important intensive strategies:
1. Market penetration
2. Market development
3. Product development
1. Market penetration: Market penetration seeks to increase market share for existing
products in the existing markets through greater marketing efforts. This includes activities
like increasing the sales force, increasing promotional effort, giving incentives etc. Market
penetration is generally achieved through the following three major approaches:
(a) Increasing sales to the current customers: This can be done through:
(i) Increasing the size of the purchase
(ii) Advertising other uses
(iii) Giving price incentives for increased use
For example, if customers of toothpaste who brush once a day are convinced to
brush twice a day, the sales of the product to the current consumers might almost
double.
(b) Attracting competitor’s customers: If the firm succeeds in making the customers to
switch from the competitor’s brands to the firm’s brands, while maintaining its
existing customers intact, there will be an increase in the firm’s sales. This can be
done through:
(i) Increasing promotional effort
(ii) Establishing sharper brand differentiation
(iii) Offering price cuts
(c) Attracting non-users to buy the product: If there are a significant number of non-users
of a product who could be made users of the product, there will be an opportunity to
increase market share. This can be done through:
(i) Inducing trial use through sampling, price incentives etc.
(ii) Advertising new uses

Notes In India, there is a very large rural market for cosmetics, which can be tapped
through this approach. This strategy will be effective when:
1. Current markets are not saturated
2. Usage rate of present customers is low
3. Economies of scale can bring down the costs
4. Market shares of major competitors are declining while total sales are increasing

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