Company analysis: Market Approach

We approached the standardization vs. adaptation challenge with the Ansoff Matrix. Here is our conclusion.

The Ansoff Matrix, also known as Ansoff Product-Market Growth Matrix, was first proposed by Igor Ansoff and published in HBR in 1957. The matrix helps marketers consider alternative ways to grow their business via existing/new products in existing/new markets. 

There are four possible product/market combinations. In this post, we’ll look at the four strategies of the matrix and see which one is appropriate for Starbuck’s entry to Finland.

Market penetration is when a company penetrates an existing market with current products. The best way to achieve market penetration is by gaining a part of competitors market share, i.e. acquiring their customers. Other ways include convincing old clients to use more of one’s products or attracting new non-users. This could be done by increased advertising and promotions. This strategy is the least risky way for a company to grow.

Product development happens when a firms does not change market but develops new products catered to the current market. These products do not necessarily need to be new to the market at hand, they need to be knew for the company. New product development is crucial in existing markets in order to gain new customers and sustain a competitive advantage.

Market development happens when a company enters a new market with an existing product or product portfolio in the case of Starbucks. This is a typical entry strategy for firms with standardized products and with an international presence, awaiting to be global.

Diversification is the most riskiest strategy. It’s when a company that is dominant in one market branches out into a new market, not with existing products but with a new line of products altogether.

When considering Starbuck’s entry strategy for Finland, they can go either with market development or diversification. We would recommend market development for Starbucks based on our hypothesis. This is because they are already a known brand for Finnish consumers and Finns have already visited their coffeehouses around the world. Therefore, Finns have a predetermined image of Starbuck’s, and entering a new market with a whole new product line would not be such a wise move. In addition, an essential part of the Starbucks experience is the fact that they serve ‘coffee with a twist’.

Having done field research in their first store, we noticed that the majority of customers are teenagers drinking specialty coffees. Furthermore, the fact that they had already ran out of some of their specialty coffees such as the Caramel frappucino supported our hypothesis. It’s not plain coffee Finns go drink there, they can drink it at home. Therefore, a market development strategy is more appropriate than diversification, since it’s their old products in the (new) Finnish market that consumers want.

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