How do you assess the risks and benefits of entering a new market or launching a new product or service?

1 What is a growth matrix?

A growth matrix is a simple framework that plots your existing and new products or services against your existing and new markets. It helps you identify four types of growth strategies: market penetration, market development, product development, and diversification. Each strategy has a different level of risk and reward, depending on how familiar you are with the product and the market.

2 How to create a growth matrix?

To create a growth matrix, you need to define your products or services and your markets. Products or services can range from goods, features, or solutions, while markets can be any segments of customers, such as geographies, demographics, or industries. Data, research, or intuition can be used to determine your products and markets. After that, draw a two-by-two matrix and label the axes with existing products or services on the left, new products or services on the right, existing markets on the top, and new markets on the bottom. This will result in four quadrants, each representing a different growth strategy.

3 How to use a growth matrix?

To use a growth matrix, you need to place your products or services in the appropriate quadrant based on their market fit. For instance, if your product is already popular in your current market, you would place it in the top left quadrant, which is market penetration. On the other hand, if your product is new to your current market, you would place it in the top right quadrant, which is product development. After that, you need to analyze each quadrant and decide which strategy is the most suitable for your goals, resources, and capabilities. To help you with this, here are some questions to consider: when it comes to market penetration, how can you increase your market share or customer loyalty in your existing market with your existing product or service? What are the benefits and challenges of doing so? For market development, how can you enter a new market with your existing product or service? What are the opportunities and threats of doing so? When it comes to product development, how can you create a new product or service for your existing market? What are the needs and preferences of your current customers? What are the advantages and disadvantages of doing so? Lastly, for diversification, how can you create a new product or service for a new market? What are the gaps and demands of the new market? What are the risks and rewards of doing so?

4 Growth matrix examples

To illustrate how a growth matrix works, let's look at some examples of growth strategies from different industries and sectors. For instance, Netflix started as a DVD rental service in the US, which was a market penetration strategy. Then, it expanded to online streaming and original content, which was a product development strategy. Later, it entered new markets such as Canada, Europe, and Asia, which was a market development strategy. Finally, it diversified its offerings by producing movies, documentaries, and interactive shows, which was a diversification strategy. Similarly, Starbucks began as a coffee shop in Seattle, which was a market penetration strategy. Then, it introduced new products such as tea, pastries, and merchandise, which was a product development strategy. Next, it expanded to new markets such as China, India, and Brazil, which was a market development strategy. Lastly, it diversified its business by partnering with other brands, such as Spotify, Uber, and Nestle, which was a diversification strategy. Tesla launched as an electric car maker in the US, which was a product development strategy. Then, it increased its market share and customer loyalty by offering superior performance, design, and technology, which was a market penetration strategy. After that, it entered new markets such as China, Europe, and Australia, which was a market development strategy. Finally, it diversified its portfolio by creating new products such as solar panels, batteries, and rockets, which was a diversification strategy.