Understanding Ansoff matrix – an example of Coca-Cola

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What is Ansoff matrix?

Organisations often need to decide on the best strategy for growth. Although a number of options are available, not all strategies are suitable for every organisation. Factors such as market demand, capabilities of organisations and their willingness to take or avoid risks impact on the choice of strategies. Ansoff matrix guides organisations in their pursuit of strategies.

Harry Igor Ansoff, a Russian American mathematician, developed the Matrix in 1957. The matrix outlines four possible growth strategies available for an organisation. These strategies are market penetration, market development, product development and diversification. The article ‘What is Ansoff Growth Matrix’ offers more insights into the matrix.

Coca-Cola: Ansoff Matrix

To demonstrate usefulness of Ansoff matrix, we have applied it to Coca-Cola. Coca-Cola is one of the most well-known brands in the world. It is available in almost every country and has a history of more than 100 years.

Market Penetration

It refers to selling existing products to existing markets (BPP Learning Media, 2010). Coca-Cola pursues market penetration as one of its growth strategies. It has been possible for the company due to an incredible strength of Coca-Cola’s brand name.

Market Development

It is the ‘process by which the firm seeks new markets for its current products’ (BPP Learning Media, 2010, p.161). Coca-Cola started its journey in USA. It now operates in almost every country in the world. This is an example of geographical market development. Coca-Cola had a successful launch of Vanilla Coke in USA. The company then decided to launch it in the UK.

Product Development

It refers to the ‘launch of new products to existing markets’ (BPP Learning Media, 2010, p.162). A good example of product development is the launch of Cherry Coke in 1985. It is considered to be Coca-Cola’s first extension beyond its original recipe. Another example is the development of Fanta Icy Lemon.  Coca-Cola developed this new product to sell to its existing markets to increase sales.

Diversification

It ‘occurs when a company decides to make new products for new markets’ (BPP Learning Media, 2010, p.162). Coca-Cola has used diversification as one of its strategies on a number of occasions. For example, it has added Chi Ltd, a Nigeria-based leading dairy and juice company, to its enormous portfolio. Likewise, Coca-Cola spent $4.1 billion to acquire Glaceau, including its health drink brand Vitaminwater in 2007. As markets in many parts of the world are heading less-sugary future, Coca-Cola is focusing on the growing healthy drink sector.

The article publication date: 21 May 2017

Further reading/references

BPP Learning Media (2010) Business Strategy, London: BPP Learning Media

Johnson, G., Scholes, K. and Whittington, R. (2006) Exploring Corporate Strategy: Text and Cases, 7th Edition, UK: Prentice Hall

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Author: Zia Ahmed

Graduated with a BA (Hons) in Sport Management from Loughborough University, UK. Ahmed writes regularly on sports science and relevant subjects. His other areas of interest are business development, customer service and social media marketing.