The UAE has the highest bottled water consumption level in the world due to climatic factors and high per capita income. The country’s bottled water market is driven by an increasing urban population and tourism and surge in demand for functional and flavored water (United Arab Emirates bottled water market growth, trends and forecasts, n. d.). Since 2019, the market has witnessed a growth rate reduction due to rising prices and increasing fears of an economic downturn. To address the current challenges, companies have to develop new intensive growth and integrative growth strategies to maintain and increase their market presence.
About the Company
Masafi Co. is the UAE’s oldest bottled water brand founded in 1976 in the village of Masafi and named after its natural springs. It produces the only bottled water in the UAE labeled as mineral water and sourced from underground wells, as opposed to other local manufacturers that use a desalination process (Masafi: The leading producer of bottled mineral water in the Gulf, n. d.). The brand also makes juices, chips, rice, and a variety of tissue products. It currently holds a dominant position on the market, and its market strategy is based on retaining higher-than-average prices and promoting its products to wealthy customers.
Intensive Growth Strategies
Intensive growth strategies are business plans intended to improve the company’s performance and achieve further growth of existing products and/or markets. A firm undergoes intensive growth when it introduces new products, enters a new market, or increases its advertising efforts (Types of growth strategies, n. d.). The most common types of intensive growth strategies are marketing penetration strategy, marketing development strategy, product development strategy, and related diversification.
Marketing Penetration Strategy
The market penetration strategy is intended to increase the company’s market share using current products or services. Typically, it aims to seek a higher volume of sales of the existing products in the present markets through aggressive promotion and distribution (Mahajan et al., 2016). It is an attempt by a company to get more sales and convert customers from competitors without creating new products or entering new markets. For Masafi, the recommendations for the marketing penetration strategy may include:
- Offering value packs, such as selling several bottles of water instead of one in supermarkets.
- Offering deals and launching advertising campaigns to encourage existing customers to use more (for example, introducing premium home and office bottled water delivery deals).
- Adopting new types of promotion (such as sponsoring conferences or sports events).
Marketing Development Strategy
The marketing development strategy is a growth strategy that aims to expand the company’s potential market through identifying and developing new market segments for existing products and attracting non-buying customers in the already covered segments. The most popular type of the marketing development strategy is geographical expansion (Mahajan et al., 2016). With Masafi, however, it cannot be implemented due to the ban on the export of bottled outside of the UAE. Therefore, to expand its potential market and gain new customers, Masafi can:
- Add new distribution channels to expand consumer reach of the products (for example, install branded vending machines in business centers).
- Change its advertising strategy to focus on the health benefits of mineral water to attract new consumers.
Product Development Strategy
This type of strategy involves the modification of existing products and the development of new products that can be marketed to current customers through established channels. The strategy is typically employed when there is little opportunity for new growth in the company’s current market (Types of growth strategies, n. d.). Masafi can use the following product development approaches to expand its market presence:
- Introduce budget product offerings to attract lower-income consumers.
- Develop additional sizes of water bottles to suit the varied preferences of customers.
Related diversification is a strategy to enter into new markets and new types of products that involves the implementation of substantially different skills and technologies. It stands apart from the other intensive growth strategies because it requires the company to involve new resources instead of using the existing ones, which exposes the business to higher levels of risk (Types of growth strategies, n. d.). Masafi has implemented this strategy by expanding its product line to include juices. To further develop in this direction, the company needs to:
- Conduct extensive market research to identify potential areas of expansion and the required technology and management changes in the company’s operation.
- Develop the marketing and advertising strategy of entering into new types of products that would be beneficial to the brand’s image.
Integrative Growth Strategies
Integrative growth strategies are strategies that are aimed to increase the company’s sales and profits through horizontal, backward, and forward integrations within the industry. They involve acquiring competing businesses or the elements of the distribution chain of which the company is a member (Types of growth strategies, n. d.). There are two types of integrative growth strategies: same-level integration and integration of different levels or stages of business.
Horizontal integration is a type of same-level integration that involves either a merger of two or more companies or firm expansion by creating other companies in the same line of business. The purpose is achieved when a combination of two business units, existing or created, results in greater effectiveness that the total yielded by those businesses when they operate separately (Types of growth strategies, n. d.). Two approaches can be taken by Masafi to implement horizontal integration:
- Merging with another company in the same market segment.
- Establishing a new brand in the same line of business (for example, targeted at a more democratic segment of consumers).
Backward and Forward Integration
Backward and forward integrations are the two types of horizontal integration strategies. Backward integration primarily targets the suppliers of raw materials and aims to achieve smoother flow of production and reduction of operation costs (Types of growth strategies, n. d.). As Masafi uses its water sources, it does not greatly depend on suppliers, and backward integration may only involve acquisition of package manufacturing companies or logistics operators. Forward integration means acquisition of competing businesses with the aim to achieve greater control over sales, distribution channels, and prices, and increase barriers to entry for potential competitors (Types of growth strategies, n. d.). For Masafi, two types of forwarding integration strategies can be suggested:
- Straightforward integration by purchasing a competing company.
- Diversification strategy with forwarding linkage, which means purchasing a company operating in the related line of business (for example, a company producing juices).
Unrelated Growth Strategies
Unrelated growth strategies are a form of diversification when the business expands its area of operation by adding unrelated product lines and penetrating new markets. Masafi started to employ this type of strategy when it began producing rice, chips, and tissue products (Masafi: The leading producer of bottled mineral water in the Gulf, n. d.). To further expand into unrelated market segments, the company can:
- Search for new market opportunities based on the existing company’s resources.
- Acquire small companies in different segments of business to expand its area of operation without making internal changes.
As a market leader in the bottled water segment, Masafi can implement different types of strategies to maintain and further increase its market presence. The proposed solutions are mainly focused on expanding into more budget market segments by introducing new products and offerings, establishing new brands, and redirecting the company’s advertising efforts. The business diversification strategy, implemented by Masafi in recent years, can be further developed into both related and unrelated market segments.
Mahajan, J. P., Mahajan, A., & Dewan, D. (2016). Management principles and applications. Vikas Publishing.
Masafi: The leading producer of bottled mineral water in the Gulf. (n. d.). Dubai Business Pages. Web.
Types of growth strategies. (n. d.). Economics Discussion. Web.
United Arab Emirates bottled water market growth, trends and forecasts (2020–2025). (n. d.). Mordor Intelligence. Web.