The Ansoff Matrix Igor Ansoff
Function Ansoff matrix was created by Igor Ansoff, Which is a framework for showing corporate growth opportunities. Two dimensions shows the scope of options, they are products and markets. With each degree the matrix makes, the greater the risk:E.G - Market penetration= little risk - Market development= moderate risk - Product development= moderate risk - Diversification= high risk
Market penetrationThe strategies of penetration is to increase the share of todays market with todays product, and to secure dominance of a growing market a mature market by getting rid of competition. It involves an increase in sales of existing product to existing markets.They use market penetration when the market is not saturated, and when there is growth in the market. General summary
Existing product New product Chart Market penetration Increase sales to the existing market, Penetrate more deeply into the existing market Product development New product developed for existing markets Existing Market Diversification New products sold in new markets Market development Existing products sold to new markets New market
Market Penetration The strategy for Market Penetration is to increase share of the current market with the current products, and to secure dominance of a growth market by driving out the competition. This involves increase of sales of existing products to existing markets, but is difficult to achieve growth through increased market penetration. In a market increase in sales is possible by getting market share form rivals, the result would be the competition would be intense in the markets. There are very low risks, but the prospects of success are low unless there are strong growth in the market.
Market Development Market Development involves selling the same product to different people, entering new markets or segments with existing products, gaining new customers, new segments, new markets, and contacting overseas markets. This is used when the untapped markets are beckoning, the firm has excess capacity, and if there are attractive channels to access new markets.
Product Development Product development is the development of new products for todays market. They come in the form of mew products, new innovative products, product improvement, product line extensions, new products to complement existing products, and product at a different quality level. This is used when The Firm has strong R&D capabilities, when the market is growing, when there is rapid change, where the Firm can build on todays brands, and when rivals have better products.
Diversification In the Ansoff Matrix, Diversification means that new products are sold to new markets, and there are new products for new customers. It’s risky because in involves two unknowns, so new products and new markets should be selected. The one problem is to identify real life examples of firms developing new products for genuinely new groups of customers. Diversification can be sub-divided into the related and unrelated.
Examples GROWTH OF TESCO Market Penetration Increase in its share of the grocery business at the expense of Sainsbury's and Asda Market Development Involved the movement in the convenience store market Product Development It has the expansion into petrol sales, and the development of financial services Diversification Tesco is todays current society is adapting that diversification would involve something outside Tesco's range of activities and sold in foreign markets GROWTH OF SCOTTISH BANKS Market Penetration Increases sales of banking financial services in Scotland Market Development The Bank of Scotland and the Halifax bank combined to make HBOS, plus RBS took over Williamson and Glyn in1970 and runs Tesco’s banking business Product Development They had a growing involving insurance, and the RBS subsidiary direct line changed motor insurance Diversification Selling insurance in England might be seen as new markets and new products
Advantages Disadvantages • Is used to assess a strategy for two different product scenarios and two market scenarios • Useful to identify high level strategies • Take very complex scenarios and allow a rapid and easy assessment • over-simplistic two by two design does not account for the complexities of real world markets • If developing a broad strategy, should be followed by detailed market, product and customer assessments