Lets look at this product diversification strategy, also known as the Ansoff Matrix, right? The Matrix suggests that there are two possibilities, to diversify in existing products or via new products or in existing markets or in new markets and each one of these four possibilities have a different name. If I diversify with existing products in existing markets, we call this penetration. If we enter a new market but with the same products, we call this market development. Alternatively, we can introduce new products in the existing market, it's called product development, diversification strategy. Or if we go with new products in new markets, we will call this diversification. So let's look at a couple of examples of how does this diversification strategy might work for each one of these four cases. So for the first diversification example let's take the case of Dodot, the leading manufacturing of diapers also known as Pampers in the rest of the world, which is the case that we're using for Week Two of the course. So the penetration strategy of diversification in their particular case consists on expanding through different channels of distribution. Whereas originally they used to sell in pharmacies and in the traditional food shops that were close to people's homes. When modern distribution came up, supermarkets and hypermarkets they would extend to sell in those channels and eventually, even through the internet. So that would be an example of how you actually achieve a penetration strategy to achieve diversification. Okay? For a second case, let's take the case of Netflix. Netflix fundamentally has the same platform, and even though the content may vary little from here to there, fundamentally the product is the same. Most of the library and collections is similar from country to country. So geographical expansion entering with the same product into new markets is a second case of diversification, okay? For the third case, when you're actually introducing a new product into an existing market, let's look at the case of ABInBev. You may have heard, or may have not heard of ABInBev, but they are the largest beer producer and marketeer in the world. They own brands like Stella Artois, Budweiser, Corona, Becks, Leps, and many, many other ones. So their product or diversification strategy consists of introducing some of these premium beers in all of the markets and there are hundreds in which they operate. New products in some of the existing markets to be able to conquer market share for different tastes and for different moments of consumption. Bars, hotels, restaurants,during the night, during lunch, during meals etc,with a premium portfolio of beers for all those instances of consumption and for the different tastes. And finally if we want to think of another strategy is one of introducing complete new products in new markets, right. And the new markets don't necessarily need to be different countries. Let's take the case of Nespresso. They already had soluble coffee inside and they already produced premium quality gourmet coffee for consumption by self-preparation at home. But they introduced a ready to drink premium coffee experience and market, which has completely revolutionized the coffee category by introducing a ready to drink, as I said before, high quality coffee, which only was served in retail stores, cafes, and shops before. So it's absolutely a new product in a new market because it tends to fulfill a different price point and a different experience, practically, of consumption both in the office and at home,right? So, which one of these diversification strategies has the highest chance of succeeding? And which one is more risky? Think for a second. You have guessed right. Let's take the case of Dodot, simply introducing the same new product in existing markets, proposes the less risk, and is the most likely to succeed, right? Whereas the most risky on the other side, diagonally speaking, is that of Nespresso. It is a new business model, a new way to sell coffee that entail partners and a new way of distribution completely different where everything is new. Both markets and new products, so when things are new necessarily they entail more risk. Right. The other two strategies lie probably somewhere in between and their chances of succeeding and actually achieving profits. [MUSIC]
