Leveraging the Ansoff Matrix: A Path to Sustainable Growth. Insights from the Carbonis Case Study
Introduction
Ukraine, a nation known for its abundant natural resources, often finds itself in a challenging position on the global stage. Ukrainian companies have traditionally been perceived as raw material suppliers, specializing in commodities such as agricultural raw materials like wheat or beans, or wood or coal. While Ukrainian companies excel in producing high-quality raw materials, they face difficulties in establishing their own brands and expanding their presence in international markets. Currently, the prevailing business model involves selling their supplies to distribution partners who repackage and sell them at higher margins, effectively capturing the value-added aspects of the business.
This case study explores the journey of Carbonis, a Ukrainian charcoal company, and their efforts to overcome the above-described challenges and redefine their market presence.
Carbonis, supplier of BBQ charcoal, activated charcoal, and filtering coal: http://carbonis.com.ua
Facebook: https://www.facebook.com/profile.php?id=100076011857143
The Role of KSE Consulting
Amidst the disruption of supply chain and severed ties with markets like Russia and Belarus and the impact of war aggression by Russia, Ukrainian SMEs are seeking guidance to navigate these turbulent times looking for growth in Ukraine and to the west of the border (EU, North America). KSE Consulting has been providing invaluable consultations to Ukrainian businesses, helping them chart new directions and strategies for success. Carbonis approached KSE Consulting for assistance in redefining its business strategy after a significant setback when its Polish partner terminated their Joint Venture relationship. This case study will describe the various consultations and strategies deployed by KSE Consulting to address Carbonis's challenges.
Challenges Faced by Carbonis
Carbonis, was primarily a charcoal supplier to a Polish distributor of BBQ charcoal. However, this partnership dissolved, necessitating a fresh start for the Ukrainian company. The main challenges faced by Carbonis included:
Rebuilding Distribution Channels: With the formal dissolution of their partnership with a Polish distributor, Carbonis needs to reestablish its distribution channels from scratch.
Seasonal Operations: Managing manufacturing capacity efficiently during the offseason to ensure year-round productivity.
Enhancing Profit Margins & Emphasizing Branding: Recognizing that the key to augmenting margins lay in effective branding, Carbonis aims to differentiate itself in a highly competitive landscape by building a reliable brand
Throughout the consulting process, KSE Consulting leveraged a range of tools and methodologies to address Carbonis's unique needs and challenges. Here are some key highlights from the consultations:
Defining the Path Forward
During the initial consultation, Sergiy Lavruk and Maksym Antonenko of KSE Consulting team identified critical areas of focus. They emphasized the need to develop a new distribution strategy and optimize the customer journey. The team also considered diversification into new product lines and explored potential markets, both domestically and abroad.
Market Research and Strategy Formulation
Next, the parties discussed market research and strategy formulation as well as complexities of entering new markets versus creating new products. Maksym introduced the Ansoff Matrix, a strategic tool that aids in assessing growth opportunities and together with Sergey, they began brainstorming potential strategies for Carbonis's growth and diversification.
Market Expansion and Segmentation
Another part of the consultations was focused on expanding Carbonis's market presence. The team discussed the importance of understanding market trends, audience segmentation, and other strategic tools like SWOT analysis. What are the ways to offer dedicated services to various segments, emphasizing new product development, quick deliveries, and tailored solutions?
By examining such tools as Business Canvas, SWOT, Ansoff Matrix, etc. in detail, we aim to provide actionable insights for businesses navigating complex growth and diversification challenges, not only in Ukraine but also in diverse global markets.
Introduction to the Ansoff Matrix
The Ansoff Matrix, developed by an American mathematician and business strategist Igor Ansoff in 1957, is a framework that assists businesses in making strategic growth decisions. This matrix helps businesses in analyzing and planning diversification strategies, allowing them to structure their approach towards making diversification decisions.
The Ansoff Matrix offers four distinct growth strategies, each designed to address different aspects of business expansion:
Market Penetration
This strategy involves selling existing products to existing markets. This is the strategy businesses take to increase market share, customer loyalty, and sales within their current market segments. Tactics may include pricing adjustments, marketing campaigns, or enhancing customer service.
Assess the size of your current market and its growth potential (look at trends to project). Identify any untapped segments or opportunities for expansion.
Analyze your existing market share and how it compares to competitors. Explore strategies to capture a larger piece of the market. Again, look at the sales trends.
Gain a deep understanding of your current customers' preferences, needs, and pain points by surveying them. At least 10, better more. Then tailor your offerings and communication to better address these factors.
Competition: Study your competitors, their strengths, and weaknesses. Identify areas where you can outperform or differentiate yourself.
Review your pricing strategy. Consider adjustments such as competitive pricing, bundling, or discounts to attract and retain customers.
Marketing Campaigns: Develop marketing campaigns that resonate with your target audience. Utilize data-driven insights to create more personalized and effective campaigns.
Market Development
Market development involves introducing existing products to new markets. Use this strategy if you aim to tap into new customer segments or geographical regions while using their existing products. Market research and adaptation to local preferences are often essential components of this approach. Here are the possible options:
New Segments: Explore opportunities to tap into new customer segments, such as expanding from B2B to B2C markets or targeting different age groups. Ensure your product aligns with the preferences of these segments (if it doesn’t, skip right to “Product Development” or “Diversification”)
Geographical Expansion: Assess the feasibility of expanding into new geographical regions. Evaluate the existing distribution chain and identify potential local partners or competitors in these regions.
Pricing Segments: Consider the introduction of products or services catering to different pricing segments. This may involve creating simplified versions for lower-priced markets or premium offerings for higher margins. In BBQ charcoal markets, offering cheaper (bulk) versions of the same product may help capturing lower priced segments, or hand-picking size-unified charcoal lumps with same guaranteed color, will help accessing higher-priced premium segments, people who look for specific features and are willing to pay for them (filling their backyard fire tables for example).
Production Adaptations: Review your production processes to ensure they can accommodate the requirements of new markets. Adjust product specifications or packaging as needed. Entering new geographical market, like new country with different language and labeling regulations, is a new game for a company who was used to sell their product in bulk to distributors. New markets may be more or less forgiving for the dust in your BBQ charcoal, flavour it adds to their food (what food do they cook? Is it mostly pork? Fish? Steak? veggies?), and heat it generates. To determine these specifics, do the research, by asking final consumers about how they use your product and what made them decide to buy your product vs competitor. Availability? Price? Distributor? Promotion?
Product Development
In the product development strategy, businesses focus on creating new products or modifying existing ones to cater to existing markets. This approach employs innovation and the expansion of product lines, chasing or leading to meet evolving customer demands. Extensive R&D efforts are typically required.
Consider adding new features or functionalities to existing products or services. This can increase their appeal and value to customers. If you like Carbonis, sell charcoal, add features like guarantees of size or little to no dust, ensure less breakable product, play with leftover packaging usage (like plantable packaging: biodegradable packaging embedded with plant seeds. After use, customers can add leftover burned charcoal, fill it with leftover plant-based food, water and plant the packaging, and it will grow into flowers or herbs - great for picnics!)
Explore opportunities to upgrade existing products, making them more efficient, durable, or sustainable. Consider the increasing demand for environmentally conscious options.
Simplify product usage or design to make it accessible to a broader audience (women, children, seniors), including those with less expertise or limited accessibility (like injured or handicapped).
Diversification
Diversification is the strategy with the highest risks, involving the introduction of entirely new products or services in order to capture entirely new markets/segments. This approach seeks to spread risk and reduce reliance on existing products or markets (for instance branching off the dependance on seasonality of the main product). Diversification can be either related (entering markets or developing products with some synergy to the current business) or unrelated (venturing into entirely unrelated markets or products).
Accompanying Products: Develop accompanying products or services that complement your existing offerings.
For example, if you produce and sell BBQ charcoal, an extension could be offering grills or other outdoor cooking equipment.
Or, instead of only selling BBQ cooking products, go for decorative charcoal stones, expanding to landscaping market.
Bundling: Create bundled packages that include your current products along with new, related offerings. This can provide added value to customers, but will keep you limited to the same segment constraints, like seasonality.
Adding fire starters to your BBQ charcoal packages
Wood briskets for additional flavour while cooking
Diversify to reduce reliance on a single product or market. Address vulnerabilities, such as seasonality, by introducing products with different demand patterns.
In unrelated diversification, explore entirely new and unrelated markets or products. This can be a bold move but may offer significant growth opportunities. Like branching out from selling B2B specific supplies to consulting.
By utilizing the Ansoff Matrix, businesses that decide to diversify their product/service lines, can assess their growth opportunities, evaluate risks, and select the most appropriate strategy to achieve their objectives. Each quadrant of the matrix presents a unique set of challenges and opportunities, enabling organizations to tailor their growth initiatives according to their resources, capabilities, and market conditions.
Carbonis, a medium-sized Ukrainian company, took all the expert suggestions very seriously. Sergey participated fully in the discussions, completed his “homework” assigned by Maksym, and immediately verbalized the ways he was going to use the newly acquired knowledge.
We are watching Carbonis and their growth, ready to help with insights to be sure that consultations were utilized 100%.
For more information about growth strategies, contact me.
