Coca-Cola: Ansoff Matrix | the Marketing Agenda

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Coca-Cola: Ansoff Matrix

The objective of every business is to grow, be it a start-up thats just closed its first deal or an established
market leader seeking to further increase profitability. But how does a business decide upon the best strategy
for growth? The Ansoff Matrix management tool offers a solution to this question by assessing the level of
risk considering whether to seek growth through existing or new products in existing or new markets.
To demonstrate the robustness and legitimacy of Ansoffs Matrix, it has been applied to Coca-Cola, the most
well-known trade name in the world and a company today operating in over 200 countries; and a brand that
has undertaken countless growth strategies in its 100+ year history.

Market Penetration: (EXISTING Market, EXISTING Product)

This strategy involves an attempt to increase market share within existing industries, either by selling more
product to established customers or by finding new customers within these markets typically by adapting
the Promotion element of the Marketing Mix. Due to the incredible strength of Coca-Colas brand, the
company has been able to utilise market penetration on an annual basis by creating an association between
Coca-Cola and Christmas, such as through the infamous Coca-Cola Christmas advert, which has helped boost
sales during the festive period.
For a full case study of a market penetration strategy, take a look at this article I recently wrote about its
implementation at Heinz.
Product Development: (EXISTING Market, NEW Product)
This involves developing new products for existing markets by thinking about how new products can meet
customer needs more closely and outperform competitors. A prime example of this was the launch of Cherry

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Coke in 1985 Coca-Colas first extension beyond its original recipe and a strategy prompted by
small-scale competitors who had identified a profitable opportunity to add cherry-flavoured syrup to
Coca-Cola and resell it. The company has since gone on to successfully launch other flavoured variants
including lime, lemon and vanilla.
For a full case study of a product development strategy, see my article on crisp brand Walkers Do Us A
Flavour campaign.
Market Development: (NEW Market, EXISTING Product)
Thirdly, the market development strategy entails finding a new group of buyers for an existing product. The
launch of Coke Zero in 2005 was a classic example of this its concept being identical to Diet Coke; the
great taste of Coca-Cola but with zero sugar and low calories. Diet Coke was launched more than 30 years
ago, and whilst more females drink it every day than any other soft drink brand, it came to light that young
men shied away from it due to its consequential perception of being a womans drink. With its shiny black
can and polar opposite advertising campaigns, Coke Zero has successfully generated a more masculine
appeal.

For a full case study of a market development strategy, check out my post on Quorns recent emphasis on the
protein content of its veggie meals.
Related Diversification: (NEW Market, NEW Product)
This involves the production of a new category of goods that complements the existing portfolio, in order to
penetrate a new but related market. In 2007, Coca-Cola spent $4.1 billion to acquire Glaceau, including its
health drink brand Vitaminwater. With a year-on-year decline in sales of carbonated soft drinks like
Coca-Cola, the brand anticipates the drinks market may be heading less-sugary future so has jumped on
board the growing health drink sector.
For a full case study of a related diversification strategy, take a look at this article I recently wrote on the
launch of Aero into the hot chocolate industry.
Unrelated Diversification: (NEW Market, NEW Product)
Finally, unrelated diversification entails entry into a new industry that lacks important similarities with the
companys existing markets. Coca-Cola generally avoids risky adventures into unknown territories and can
instead utilise its brand strength to continue growing within the drinks industry. That said, Coca-Cola offers
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official merchandise from pens and glasses to fridges, therefore exploiting its strong brand advocacy through
this strategy.
A more comprehensive case study of unrelated diversification is explain in my article on Virgins frequent
use of the strategy.
Conclusion:
What is clear with Ansoffs Matrix is the incremental increase in risk offered by the five strategies, due to the
growing cost with each step beyond market penetration and uncertainty of operating in new markets and
industries:

Going back to the example of Coca-Cola, the firms emphasis on market penetration and other
non-diversification strategies therefore suggests it is a relatively risk-averse company, when compared with a
firm like the Virgin Group.
That said, there is no one best strategy to select, with each offering different benefits to companies in various
circumstances. For example, Coca-Cola has had little need to diversify relative to the Virgin brand which
traditionally operates in uncertain markets such as the volatile airline industry, meaning diversification
actually spreads risk.
Even so, Coca-Cola would not be the power house it is today without knowing when to step out of its
comfort zone the Glaceau acquisition being a clear case in point. Even though there was minor potential
that it could dilute Coca-Colas reputation for carbonated soft-drinks in the short term, it has been deemed a
suitable strategy given the brands long-term view for growth in the face of a changing market.

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