Effective leaders understand that they cannot stick to a “business as usual” attitude even when things are going well if their organization is to grow in the long term. They need to find new ways of growing income and appealing to new clients. Many choices are available, such as creating new products or entering new markets
Ansoff Matrix is often known as the Ansoff product and Product/Market Expansion Grid Market Growth Matrix is a marketing strategy method that typically allows a company to assess product and market growth. This is generally decided by concentrating on whether new or existing products are available and whether the market is now existing. The matrix shows four strategies that can be used to help a firm expand and the risk associated with each strategy is also evaluated. This model was developed by H. Igor Ansoff. Ansoff was a mathematician with expert knowledge in business management.
The four strategies of Ansoff Matrix are:
- Market Penetration
- Product development
- Market development
Typically, when we look at market penetration, it covers products that are existing and that is also existent in an established market. Under this strategy, further manipulation of the products can take place without actually altering the product or the product outlook. It would be possible by using promotional strategies, putting in place different pricing policies that could draw more customer base, or could make the distribution wider.
The risk involved in its marketing strategy is typically the least as the products are already known to customers and the developed market is likewise. Another way to improve market penetration is to come up with different strategies that will promote increased use of the product.
For example, telecommunication companies all cater to the same market and employ a market penetration strategy by offering introductory prices and increasing their promotion and distribution efforts.
New products are launched into developed markets as a part of the product development strategy. Product creation may vary from the launch of a new product in an existing market or may require an existing product change. By changing the product, one will possibly alter its outlook or appearance, boost the efficiency or quality of the products. This will make it more attractive to the already established market.
For example, automotive companies are creating electric cars to meet the changing needs of their existing market. Current market consumers in the automobile market are becoming more environmentally conscious.
This strategy is often known as market expansion. The firm markets its current goods to new markets under this strategy. This can be made possible by further segmentation of the market to help establish a new group of clienteles. This approach is based on the assumption that the existing markets have been completely penetrated and hence the need to penetrate new markets.
For example, sporting goods companies such as Nike and Adidas recently entered the Chinese market for expansion. The two firms are offering roughly the same products to a new demographic.
This growth strategy includes targeting a company or, at the same time, introducing new goods to new customers. Among the others, it is the riskiest strategy, as it involves two unknowns, new products are developed and the company is unaware of the production problems that may occur in the process. There is also the fact that a new market is being entered which will carry with it the issue of having unknown features. For a company to take a step towards diversification, they must have their facts correct as to what it intends to benefit from the plan and have a reasonable understanding of the risks involved.
There are two kinds of diversification:
- Related Diversification: The existing business and the new product/market have potential synergies to be discovered. For example, A leather shoemaker starts a line of leather wallets or accessories pursues a similar diversification strategy.
- Unrelated Diversification: There are no possible synergies between the existing business and the new product/market to be achieved. For example, A leather shoemaker begins manufacturing phones, pursues an unrelated diversification strategy.
11 thoughts on “Ansoff Matrix”
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