All organisations aspire grow and be bigger, potentially to expand into new markets as well. This is not an easy process to undertake as there are many considerations to make before deciding how to break into the new market will entail. There are various growth strategies and it just depends on factors relating to the main strategy.
For this blog, I chose a local Swaziland brand of still water. What was initially a water cooler rental and bottling plant was later relocated to another part of the country called Bulembu and officially named Bulembu Water in 2009. Through a borehole, the brand bottles about 12,000 units of 500ml natural spring water, for local distribution. They also have a 5 litre size and water coolers as part of the offering.
The brand has a lot of potential to grow and do more. It is a trusted brand, with strong brand equity for price and value. Alongside its competitors, which are Valpre, Aquelle, Nestle, Bulembu Water is affordable. Most competitors are imported as well, so this makes it a truly Swazi product. They have built a regular clientele of organisations that have their water coolers and developed a relationship of trust and loyalty.
In making the decision of how best the brand can expand, I referred to the Product Market Expansion Grid, also called the Ansoff Matrix, below.
This is a popular model created by Igor Ansoff, one of the world’s most influential management thinkers. It examines the relationship between new and existing products, new and existing markets, and the risk associated with each possible relationship. The matrix aids growth plans through the introduction of existing or new products, in existing or new markets. It is designed so that as a company plots its new and existing products and markets, the amount of risk associated with that strategy corresponds with its position on the grid. Developing a strategy with existing products and markets is low in risk, but with new products and markets risk increases.
Out of the four strategies, I chose the diversification strategy. The company can leverage on it’s core technical know-how to diversify its current bottled water offering into new geographical areas by expanding the distributon network. Diversification involves the introduction of new products and reaching out to new markets that the brand is not available to now. In terms of new products, I would suggest the introduction of flavoured and sparkling water to the current range. My chosen strategy, however, also happens to be the riskiest of all. It requires the most resources and time. However, if done right, it would bring the brand maximum value. Currently diversification would require that Bulembu Water acquires new staff with skills that relate to the new products and that can reach the new areas where potential customers are. They would also need new techniques as these additional variants of water cannot be produced through a borehole. The production process and quality control is different. Even though the bottling plant exists, the facilities would need to be upgraded to accommodate the extra revenue streams. Out of the diversification strategies, this would be concentric diversification.
The brand extension strategy I would recommend would be a line extension. This is when an already existing brand comes out with a product that is similar or in the same category, as another one of the brand’s products. It is just used to enter a new product category using an established brand name. The strength of the Bulembu Water brand would help to launch the Bulembu Sparkling water and the Bulembu Flavoured Water into the market. This new extension would still maintain relevance in that space as the variants are not too far removed from the core brand.
The benefits of this approach is that should any of the additional variants not perform well initially, the others would still help keep it afloat. The main objective is to ride on the existing brand name to hasten adoption of the new variants. It would also minimise marketing and advertising costs, as the whole offering can be on the same marketing platforms. There would be no need to develop a new brand from scratch, just modify what is already available.
The line extension would be perceived as an improvement of Bulembu Water. The customer will now have more options and variety, depending on what their preference is. The brand would gain more awareness, reach and ultimately revenues. The strength of the parent brand is key, to help increase penetration levels and quicken adoption in the market. A horizontal line extension would just mean pricing the other variants of water within the same price range as the still water. The main objective for this expansion would be to enter into new markets and through increased numbers, grow profits.
The future benefits of this strategy would be increased dominance of the Bulembu brand name within the bottled water brand category. As more people become health conscious and deliberately cut down on carbonated drinks, there is increased demand for bottled water as a beverage of choice. The bottled water market is competitive, all for the same share of wallet. Brands like Bonaqua are imported, but better known because of their association to Coca Cola parent. However patriotic Swazis would support a local brand that proves over time that it can deliver a refreshing drink of great quality.
2. Klopper, H. B. & North, E, 2011. Brand Management. Cape Town: Pearson