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Ansoff matrix

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Ansoff matrix

  1. 1. Product-Market Growth MatrixThe Ansoff Product-Market Growth Matrix isa marketing tool created by Igor Ansoff andfirst published in his article "Strategies forDiversification" in the Harvard BusinessReview (1957). The matrix allows marketersto consider ways to grow the business viaexisting and/or new products, in existingand/or new markets – there are four possibleproduct/market combinations. This matrixhelps companies decide what course of actionshould be taken given current performance.The matrix consists of four strategies:Market penetration (existing markets,existing products): Market penetration occurs when a company enters/penetrates a marketwith current products. The best way to achieve this is by gaining competitors customers (partof their market share). Other ways include attracting non-users of your product or convincingcurrent clients to use more of your product/service, with advertising or other promotions.Market penetration is the least risky way for a company to grow.Product development (existing markets, new products): A firm with a market for its currentproducts might embark on a strategy of developing other products catering to the samemarket (although these new products need not be new to the market; the point is that theproduct is new to the company). For example, McDonalds is always within the fast-foodindustry, but frequently markets new burgers. Frequently, when a firm creates new products,it can gain new customers for these products. Hence, new product development can be acrucial business development strategy for firms to stay competitive.Market development (new markets, existing products): An established product in themarketplace can be tweaked or targeted to a different customer segment, as a strategy to earnmore revenue for the firm. For example, Lucozade was first marketed for sick children andthen rebranded to target athletes. This is a good example of developing a new market for anexisting product. Again, the market need not be new in itself; the point is that the market isnew to the company.Diversification (new markets, new products): Virgin Cola, Virgin Megastores, VirginAirlines, Virgin Telecommunications are examples of new products created by the VirginGroup of UK, to leverage the Virgin brand. This resulted in the company entering newmarkets where it had no presence before.The matrix illustrates, in particular, that the element of risk increases the further the strategymoves away from known quantities - the existing product and the existing market. Thus,product development (requiring, in effect, a new product) and market extension (a newmarket) typically involve a greater risk than `penetration (existing product and existingmarket); and diversification (new product and new market) generally carries the greatest riskof all. In his original work, which did not use the matrix form, Igor Ansoff stressed that thediversification strategy stood apart from the other three.While Ansoff are usually followed with the same technical, financial, and merchandisingresources which are used for the original product line, diversification usually requires newskills, new techniques, and new facilities. As a result it almost invariably leads to physicaland organizational changes in the structure of the business which represent a distinct breakwith past business experience.For this reason, most marketing activity revolves around penetration.

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