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The 4 Business Segment Strategy
Written by Björn Otto on Jan. 22th 2020
4 Strategies of the Product Market Matrix

There are various models for defining and determining a target market. The next decision is to work the market properly with the necessary resources. Today I would like to present one way to successfully gain market share.

Most companies consider growth in some way in order to secure their future market success. In principle, a company can grow in two directions: either it develops new offers and services or it wins new customers or sells more to existing customers.

However, there are basically four business field strategies when it comes to a product-market matrix:
Market Penetration

The company tries to achieve a larger market share with the existing product and service offering. The average probability of success is 50% while the resource input is 100%, i.e. no further resources are needed.

Market Development

New markets are searched and developed for the existing product and service offering. The average probability of success is 30% with a resource input of 400%.

Product Development

The aim here is to expand the existing product range, which is to be offered to existing customers in the future. The average probability of success is 20% with a resource input of 800%.


Diversification means a new market opportunity for growth outside the existing product and service offering. The average probability of success here is less than 5% while the resource input is at least 1200 - 1400%.

Due to the ever decreasing probability of success and at the same time the ever increasing use of resources, the market penetration should first be fully exhausted in order to significantly increase the market share and only then should the other options be considered. Finally, only when all other growth opportunities have been truly utilised and no more growth can be generated should the possibility of diversification be considered.

Simply put, the Z-method can be used to get the most out of this strategy:
Most of the time, however, this does not happen nowadays. Due to growth targets set by stakeholders, these opportunities, which usually generate slower growth, are bypassed by including other companies into the group with the aim of gaining a higher market share and/or generating faster growth through synergy effects but according to the Harvard Business Review, 70-90% of all acquisitions are "catastrophic failures"!

Here are the top 5 reasons why they often fail:

1. synergies are often overestimated
2. strategic goals are not achieved because they are incorrectly anticipated
3. financing is not clarified or refused
4. insufficient integration of the respective corporate cultures
5. the purchase price is too high

I know many have to follow the dictated strategies, but with the right knowledge of these numbers, you can also convince investors or other management members to focus on a different growth strategy. Good luck.
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About the Author
Björn Otto, born on 07 August 1979, is an environmental engineer and passionate marketer. 

He recognized early on his passion for explaining things and facts as well as selling and marketing them convincingly.
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