1.6 Product-Market Expansion Matrix

Options for Growing a Business

Another useful way to think about growing a business is the product-market expansion matrix. Using products and markets as the two dimensions in the model, marketing managers have the following options:

1. Market Penetration—selling more of the existing products in existing markets.

2. Product Development—introducing new products to existing markets.

3. Market Development—introducing existing products to new markets.

4. Diversification—introducing new products to new markets.

Honda Motor Company provides examples for each option.

Market Penetration

Honda has been selling motorcycles in Japan since 1949. The company continually seeks opportunities to sell more motorcycles (existing product) in Japan (existing market).

Product Development

Once Honda was established as a successful motorcycle manufacturer in the United States (existing market), they successfully introduced new products such as automobiles, lawnmowers, and power generators into the United States, building on their competence in gasoline-powered engines.

Market Development

In 1958, Honda started manufacturing the Super Cub motorcycle in Japan. The Super Cub was a successful product in Honda’s home market. The Super Cub was small, easy to handle, and nothing like the much-larger motorcycles being sold in the United States. In 1963, the Super Cub (existing product) was successfully introduced into the United States (new market) with the famous ad campaign, “You meet the nicest people on a Honda."

Diversification

Before successfully introducing the Super Cub to the United States, Honda attempted to manufacture a new, larger motorcycle to compete directly with US and British motorcycles. Honda failed with this new-product-to-new-market strategy. The company was unfamiliar with the road conditions, driving practices, and service network in the United States. US buyers experienced many mechanical problems with the new bike and quickly lost interest. Honda didn’t succeed in the US market until it introduced the Super Cub, which led to the successful introduction of Honda automobiles.