Marketing : Growth Model Using Ansoff - Essay Example

Kresta Introduction Any business organization, in order to sustain itself in the present competitive business scenario, has to adopt an appropriate growth model that suits its objectives and structure. There are several strategic models that have been adopted by organizations in the process of achieving their business growth related targets. One of the most important is the Ansoff Growth Model which is proposed by famous management expert Igor Ansoff. In this report the Ansoff matrix is analysed in the context Kresta Holdings ltd. which is one of the most respected companies in Australia. This report includes a brief description of the company, its main operational areas, its products and services and other important aspects related to the company. Furthermore the report also talks about the theoretical aspects of the Ansoff matrix. The most important part of the report is the section that deals with the development of the Ansoff growth model for Kresta. The report ends with a properly developed conclusion. Kresta Kresta Holding Ltd is one of the largest companies in Australia and the biggest organization in the blind and curtain manufacturing industry of the country (Kresta-a, n.d.). The company is involved in manufacturing, distributing and selling window components and treatments through its retail outlets in Australia and New Zealand. The company is famous for offering various customized version of blinds and curtains. Different types of blinds include Californian, aluminum Venetian, DoubleView roller, Cellular, Hawaiian woven wood, Drapefold, Kinetic cordless, kimono etc. the company also offers Timber Venetian, child safe blinds and child safe and timber shutter curtains (Bloomberg Businessweek, n.d.). There are several manufacturing facilities of Kresta in Australia. The company has a strong retail network throughout the country. There are mainly four retail brands – Kresta blinds and curtains, Decor2Go, Vista Blinds and Curtain Wonderland. Wholesale operations are done through Mardo and Sharatan brands. Online sales take place through InnerCity brand. Products are also exported to the major global markets like Canada, Japan, United States, UK and to some countries in South-East Asia. According to the annual report of the company there were 954 employees till 30 June, 2009. In 2009, Kresta’s total revenue was $117 million which is marginally higher than the previous year’s figure, but the company has failed to retain its profit level. In 2009, the company’s profit was $3.7 million which is lower from the last year’s figure by almost $0.5 million (Kresta, n.d.). Over the past few years the company has been adopting aggressive growth strategies. For instance, in 2006 it acquired Curtain Wonderland. New distribution agreement was also formed with Myer in order to improve sales and earnings (Lease-Quality, n.d.). Ansoff Matrix Ansoff growth matrix, proposed by Igor Ansoff is one of the most commonly used growth models. The matrix mainly focuses on the two most important aspects of business – product and market. There are four quadrants that represent the four strategic options that can be adopted by the firms in order to achieve their growth objectives. The four options are market penetration, market development, product development and diversification (Stone, 2001). Each of the strategies is explained below. [Source: Phil Stone, 2001] Market penetration Market penetration helps in achieving strategic objectives like, increasing market share of the firm’s existing products, securing the supremacy in the potential growth market, increasing the product usage rate and driving out the rivals. Strategies that can be adopted for achieving such objectives are aggressive promotional campaign, adoption of competitive pricing policies, and allocation of more resources to personal selling. As far as Kresta is concerned, various objectives regarding market penetration can be achieved by proper use of the above mentioned strategies. Kresta, in order to increase the current market share must focus on developing aggressive promotional campaigns. Effective sales promotion strategies are also likely to be important. Each and every sales leads has to be properly captured in the showroom. Number of sales consultants in the showrooms can also be increased in order to convert the potential leads. Growth markets can be dominated by focusing more on those products that are in the growth phase in their respective ‘product life cycle’. For instance, shutters have been more preferred by the customers over the traditional timber blinds over the past few years. As a result Kresta should give more focus on this product category. As far as usage rate is concerned, it can be increased by giving additional discount or extended warranty period. Such facilities are likely to create a sense of urgency among the consumers and they are likely to purchase it with increased eagerness. Market Development This strategic option is adopted by firms in order to expand business in new geographic areas. This strategy helps organizations to offer its existing range of products and services to the new customer base that is located in a new geographic area in or outside the home country. New market can be developed by creating a new distribution channel. As far as Kresta is concerned, it should focus on the market which is untapped by the company. Tasmania is found to be such a potential market where the company has hardly any presence. Markets can also be developed outside the domestic market. New stores can be opened in the emerging markets like China and India. Market can also be developed through franchising. Kresta needs to focus on new distribution channels especially for the new category of products like DIY readymade blinds. A new website can be launched for selling DIY readymade blinds. Furthermore a new showroom can be opened up for the purpose of selling such products. Market development is certainly an effective strategic option that should be adopted by the company. Product Development In this popular growth strategy, organizations launch new products in markets where they have already a strong presence. Products that will be newly launched should complement the existing product line. New products can be either entirely ‘new’ or the existing product line can be modified to make a new product line. New products can also be launched with the purpose of replacing an unsuccessful one. Kresta has recently taken over an awning manufacturer in order to complement its present indoor WC range. The company should make the best use of its existing retail network before launching the awnings. It is speculated that the company is likely to come up with the motorized version for all its blinds. It is also likely to address social issues like child safety by launching Kinetic cordless option. Such option will be available for all the existing blinds of the company. As far as replacing any existing product is concerned, the company can think of launching innovative products which will be less expensive. Diversification Diversification is referred to the strategy of selling completely new product to the new customer base in an entirely new market. It is one of the risky strategic growth options to be adopted by any kind of organization. There are two types of diversification strategies – related and unrelated. In ‘related diversification’, strategy products are not entirely different from the present product line. The new product range is likely to fall in the broad limit of the industry. On the other hand in ‘Unrelated diversification’ strategy, newly introduced product will be completely different from the existing product offerings of the company. As far as Kresta is concerned, it should adopt related diversification strategy in order to achieve its growth target. The company has the opportunity of diversifying into ‘wallpaper’ or ‘flooring coverings’. However, diversification is likely to be the most risky strategic option for Kresta. Conclusion Business growth is very important for any organisation to attain long term sustainability. Ansoff matrix is one of the most useful models that are used by the organisation for facilitating the process of identifying appropriate strategic option. Kresta, being one of the largest companies in its sector also needs to adopt some of the effective growth strategies. The company can increase its market share by promoting its products more aggressively or by modifying the pricing policies. Furthermore the company can target new markets like Tasmania. It has also the option of developing new products for its existing customer base. Diversification should be the last strategic option for the company as it is one of the most risky strategies. References Bloomberg Businessweek, No Date. Kresta Holdings Ltd, [Online] Available at: http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=KRS:AU [Accessed on June 3, 2010]. Kresta, No Date. Annual Financial Report, Kresta Holdings Ltd. [Pdf] Available at: http://www.aer.com.au/announcements/2009/0907/00985774.pdf [Accessed on June 3, 2010]. Kresta-a, No Date. So many great reasons to choose Kresta, [Online] Available at: http://www.kresta.com.au/about-kresta-blinds-curtains-shutters/index.php?54866 [Accessed on June 3, 2010]. Lease-Quality, No Date. Kresta Confident of Growth, [Pdf] Available at: http://www.lease-equity.com.au/upload/docs/Hay_St_Mall_pulls_in_Perth_punters.pdf [Accessed on June 3, 2010]. Stone, P. 2001. 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