Penetration strategy is the concept of taking aggressive action to greatly expand one's share of total sales in a market. The resulting increased sales volume typically allows a business to produce goods or obtain merchandise at lower cost, thereby allowing it to generate a higher profit percentage. Also, as the organization acquires more market share, this reduces the sales of its competitors, possibly forcing some to drop out of the market. There are a number of ways in which a business can engage in penetration strategy.
Market Share Vs. Market Penetration
Market penetration - Wikipedia
There are many techniques for measuring the value of a company. Corporate success is quantified using parameters influenced by different aspects of performance. A company's market penetration is one of these numbers that offers useful information about the entity's past success. But market penetration also provides clues about potential future success. The mathematics behind market analysis can be quite complex, but the concept is relatively simple. It is possible to quickly understand what a high market penetration means. Market penetration refers to the portion of products sold in a particular category or sector by one company in relation to all products sold by all companies in that business.
Starting and running a successful business requires you to attract enough customers with your products and services to generate revenue in excess of your company's expenses. Market share and market penetration are common terms in business management that describe different aspects of the relationship between businesses, their products and services and their consumers. Market share describes the proportion of sales in a given market that a certain company controls. In other words, your company's market share is the percentage of customers that choose to buy your company's products or services. For example, if you own a bike shop in a town with two other bike shops, and your bike shop accounts for 50 percent of the bike sales in the town while the other two stores each account for 25 percent of the sales, then your store has a 50 percent market share and the smaller stores each have a 25 percent market share.
Market penetration is a measure of how much a product or service is being used by customers compared to the total estimated market for that product or service. Market penetration can also be used in developing strategies employed to increase the market share of a particular product or service. Market penetration can be used to determine the size of the potential market. If the total market is large, new entrants to the industry might be encouraged that they can gain market share or a percentage of the total number of potential customers in the industry. The penetration numbers might indicate the potential for growth for cell phone makers.