Ansoff Matrix of Estee Lauder

1. Introduction

The Ansoff matrix is a strategic tool developed to facilitate and guide businesses in decision pertaining to business growth. The Ansoff matrix offers four strategic choices to businesses to choose from – market penetration, market development, product development and diversification. An organization or a business is to choose any of these four strategies, or a combination – deepening on various internal and external factors.

The external factors may include aspects of political stability and economy of a region, and internal factors may include aspects of talent management, and resource capacities. Based on an analysis of the internal and external factors, organizations decide different strategies for growth – which may be broadly defined under the Ansoff matrix

Figure 1 Ansoff Matrix (Daft, 2016)

 ۱.۱. The Estee Lauder makes use of the Ansoff matrix for successful international growth

The Estee Lauder has been successful in its global operations and business based on its strategic growth choices and decisions. These growth decisions and growth paths have been varied for different regions, at different time points – based on the internal and external organizational factors. However, the Estee Lauder has successfully made use of the Ansoff matrix repeatedly to become one of the leading beverage giants internationally. Some of the strategies that Estee Lauder has successfully used under the Ansoff matrix and categories are detailed below.

2. Market penetration

The market penetration strategy is used by businesses that seek growth for existing products in markets where their brands are existing, and already operational.

۲.۱. Increase production capacity

    Increased production capacity will allow Estee Lauder to reach more customers within the same market

    Increased production capacity would also lead to more efficiency and effectiveness – especially for controlling overhead costs

    Controlled overhead costs would lead to competitive pricing and would appeal to the consumers in the same market

    Increased attractiveness and competitive pricing within the same market will lead to increased sales and consumption – and thus a higher market penetration

۲.۲. Increased marketing investment

    The Estee Lauder can also increase its investment in marketing and advertising activities to increase market penetration

    The Estee Lauder should try to develop and design engaging communication content that is relevant to its various market groups

    Engaging communication and investment in marketing activities, and advertising will allow the Estee Lauder to reach more consumers within the same market

    With higher marketing investment, the Estee Lauder will be able to increase its market penetration within the existing markets for existing products

۲.۳. Enhanced distribution

    The Estee Lauder can explore new and innovative means of distribution

    The Estee Lauder can also explore new channels of distribution for their products

    New and enhanced distribution channels and strategies will allow the Estee Lauder to reach new consumer segments and consumer groups in the same market – which may have been inaccessible previously

    Improved supply chains and distribution systems may lead to increased penetration within the same market by improving accessibility

۲.۴. Competitive pricing

    The Estee Lauder may introduce competitive pricing and price cuts to increase the appeal of its products

    Competitive pricing will be a source of competitive advantage for the company, and will lead to enhanced consumer engagement with the product

    At the same time, competitive pricing will increase the sales for the Estee Lauder and lead to increased penetration

۲.۵. Reduce operational costs

    The Estee Lauder can reduce operational costs to increase competitive pricing

    Competitive pricing will help the Estee Lauder increase its sales volume and consumption

    Lower operational costs will lead to less costs being passed on to the consumers, and will make the products offered by the Estee Lauder more desirable and affordable

    Higher affordability and accessibility will help the Estee Lauder increase its market penetration

۲.۶. Acquiring competitors

    The Estee Lauder can acquire competing players in the market

    The acquisitions will give the Estee Lauder leverage in reaching different consumer groups and segments

    The acquisitions will also allow the Estee Lauder to develop leverage through diversified supply chain and distribution channels

    Acquisitions will lead to higher penetration through improving the Estee Lauder’s accessibility of different consumer groups and segments in existing markets

۲.۷. Partnerships and joint ventures

    The Estee Lauder can also enter strategic p[partnerships and joint ventures with other players in the market

    These can be players belonging to similar industry, or even different industries

    Strategic partnerships and joint ventures will allow the Estee Lauder to gain access to different consumer groups, and their market behaviour and consumption patterns

    Additionally, the Estee Lauder will be mitigating risk factors through limited investment – which in turn will safeguard it against potential losses

    Joint ventures and partnerships can provide the Estee Lauder with guided means of increasing penetration in existing markets

۲.۸. New product benefits and features

    The Estee Lauder can identify new features and characteristics in existing products for existing markets

    This identification will lead to innovative and novice product consumption purposes and behaviour

    Consumers should also be made aware of these new and innovative usage patterns and consumptions ways of the Estee Lauder products by the company

    Increased marketing and communication of new product use and benefits, along with characteristics and features will lead to increased consumption in existing consumer groups and segments, as well as in new consumer segments and groups

    This will facilitate the Estee Lauder in improving its overall market penetration in existing companies

۲.۹. Increased frequency of consumption

    The Estee Lauder can also initiate communication and marketing aimed at increasing the frequency of consumption of the products in existing markets

    Increased consumption frequency will lead to an overall increased consumption

    The Estee Lauder will thus be able to increase the sales volume sold to existing consumers in existing markets

    The company will be able to increase its market penetration through these means

3. Market development

With market development strategies, the Estee Lauder can enhance its business growth through introducing existing products in new markets. This will be possible for the Estee Lauder with different strategies.

۳.۱. Research and development

    The Estee Lauder should invest in research and development to identify possible new markets and consumer segments for its products

    The R&D should focus on identifying and understanding different market cultures, trends, and consumer behaviours – and how they differ dim consumer behaviour patterns in existing markets

۳.۲. Regional expansion

    The Estee Lauder can expand regionally

    This will include expansion locally to different cities, or within the same geographic region

    Regional expansion should also take into consideration any cultural differences that will need to be accommodated in the expansion process in terms of marketing or product modifications and consumption methods.

۳.۳. International expansion

    The Estee Lauder an also enjoy business growth through international expansion

    International expansion will allow Estee Lauder to access different consumer groups, and increase its overall share of the pie

    International expansion will require the Estee Lauder to conduct in-depth PESTLE, Porters 5 forces and SWOT analyses to develop a comparative strategy and overview for planned expansion

    The company will also need to understand the possible cultural differences, and make accommodations to its expansion strategy accordingly. Cultural differences should be taken into account in the process of global expansion.

۳.۴. New customer segments

    The Estee Lauder can also explore new consumer segments in the same market for its products

    The company can identify new product uses and features and target new consumer segments for the existing products

    This will allow the company to tap into new markets and new market trends within the same market to help in growth and expansion

۳.۵. Brand awareness

    The Estee Lauder also invests in activities of building brand awareness

    Building brand awareness is important to help the company reach new consumer segments, and increase visibility

    Increased brand awareness for the Estee Lauder also leads to increased brand recall – which is important for purchase decisions

    Consequently, building brand awareness is important for increasing sales, and driving growth in new markets

۳.۶. Customer education

    The Estee Lauder should also educate consumers in new markets for its products

    This market education is important for allowing consumers in understanding the products, and its offerings

    The consumers will also be able to understand consumption patterns for the products better with education

    The Estee Lauder increases sales through educating new consumer segments in existing and new markets to lead to overall business development and growth/

4. Product development

When a company seeks to expand business growth in existing markets through new products, it is termed as product development. The Estee Lauder drives product development in different ways.

۴.۱. Modifications to existing products

    The Estee Lauder can introduce modifications and improvements in existing products to offer consumers new and enhanced offerings

    This will lead to increased sales and consumption of the product

۴.۲. Launch new products

    The Estee Lauder also often engages in R&D activities to understand and identify new points of consumer demand

    The company then undergoes a NPD process, and develops and launches new products in the market for consumers

    This increases the breadth of the company’s reach, and also allows Estee Lauder to penetrate new market segments

۴.۳. Research and development

    Estee Lauder regularly invests in research and development – especially pertaining towards understanding market trends and consumer behaviour

    Investment in R&D has allowed the Estee Lauder to remain competitive through innovation and creativity – in product launches as well as other functional areas such as marketing, operations and finances

    Research and development has also built the Estee Lauder to become more efficient in its operations and routine activities.

۴.۴. Strategic partnerships

    The Estee Lauder engages in strategic partnerships to explore options for product development as well

    Strategic partnerships allows Estee Lauder to have access to new product developments, and processes with limited financial investment- and thus limited risk involved

    This is important for Estee Lauder – to be able to understand the new product, and development process along with the market reaction and acceptability of the same before engaging in fill fledged production of own

۴.۵. Product quality

    The company can also engage in new product development through introducing different quality products in the same market

    This will allow the Estee Lauder to penetrate new market and consumer segments, as well as target new consumer groups

5. Diversification

Diversification refers to business growth and development that occurs when a company engages in new product development in new markets. Diversification is an important and allows businesses like the Estee Lauder to remain competent, innovative, and competitive – thereby remaining relevant for the consumer markets.

۵.۱. Vertical diversification

    Vertical diversification for the Estee Lauder means looking for growth and business development by introducing new products under existing product lines.

    This means that the new product developments and launches by the Estee Lauder would be similar to, and categorized under existing product groups and categories.

۵.۲. Horizontal diversification

    Horizontal diversification occurs when the Estee Lauder decides to introduce and engage with new product developments and launches that are not associated with the existing products

    It is however beneficial to introduce new products launches and developments for products that share similar economic environments with the visiting products.

۵.۳. Diversification towards a new business

    The Estee Lauder can also diversify into becoming a conglomerate by engaging in a different business altogether

    Diversification through a new business would involve the Estee Lauder to explore new business ideas and option to launch or acquire for purposes of growth and development

۵.۳.۱. Mergers and acquisitions

    One of the ways through which the Estee Lauder may explore conglomeratic growth of entering new businesses is through mergers and acquisitions

    The Estee Lauder can partner with, or acquire companies and businesses that interest it in an effort to diversify into new markets and new consume groups with products and services that are completely new, and not related to existing offerings

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