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Ansoff Matrix
2880 Strategy Yr 13
Background
• Long-term business strategy is
  dependant on planning for their
  introduction
• Ansoff Matrix represents the
  different options open to a marketing
  manager when considering new
  opportunities for sales growth
Variables in the matrix

 Two variables in Strategic marketing
              Decisions:
 – The market in which the firm was going to
   operate
 – The product intended for sale

 In terms of the market, managers had
               two options:
 – Remain in the existing market
 – Enter new ones
In terms of the product, the two
           options are:
– selling existing products
– developing new ones
Existing                   PRODUCTS               New


Existing                                 INCREASING RISK
                         MARKET
                                                   PRODUCT
                      PENETRATION
                                                 DEVELOPMENT




                                                                   INCREASING RISK
                 Sell more in
                                            Sell new products in
                 existing Markets
                                            existing markets
MARKETS
                         MARKET
                       EXTENSION            DIVERSIFICATION


                  Achieve higher           Sell new products in
New                                        new markets
                  sales/market
                  share of existing
                  products in new
                  markets
Existing                 PRODUCTS         New


Existing                               INCREASING RISK
                         MARKET
                      PENETRATION




                                                           INCREASING RISK
                 Sell more in
                 existing Markets

MARKETS




New
MARKET PENETRATION
• This is the objective of higher
  market share in existing markets

  – E.g. in 2000, Mitsubishi announced a 10%
    reduction in prices in the UK in order to
    encourage purchases
Existing                   PRODUCTS         New


Existing                                 INCREASING RISK
                         MARKET
                      PENETRATION




                                                             INCREASING RISK
                 Sell more in
                 existing Markets

MARKETS
                         MARKET
                       EXTENSION


                  Achieve higher
New
                  sales/market
                  share of existing
                  products in new
                  markets
MARKET EXTENSION
• This is the strategy of selling an existing
  product to new markets. This could involve
  selling to an overseas market, or a new
  market segment

  – Nintendo are making hand held games consoles
    (e.g. DS) appeal to the adult/grey market by
    introducing games such as Brain Train
Existing                   PRODUCTS             New


Existing                                 INCREASING RISK
                         MARKET
                                                   PRODUCT
                      PENETRATION
                                                 DEVELOPMENT




                                                                  INCREASING RISK
                 Sell more in
                                           Sell new products in
                 existing Markets
                                           existing markets
MARKETS
                         MARKET
                       EXTENSION


                  Achieve higher
New
                  sales/market
                  share of existing
                  products in new
                  markets
PRODUCT
      DEVELOPMENT
• Least risky of all four strategies
• This involves taking an existing
  product and developing it in existing
  markets
  – E.g. Coca-Cola. This has been developed
    to have vanilla, lime, cherry and diet
    varieties (amongst others) in the SOFT
    DRINKS market
Existing                   PRODUCTS               New


Existing                                 INCREASING RISK
                         MARKET
                                                   PRODUCT
                      PENETRATION
                                                 DEVELOPMENT




                                                                   INCREASING RISK
                 Sell more in
                                            Sell new products in
                 existing Markets
                                            existing markets
MARKETS
                         MARKET
                       EXTENSION            DIVERSIFICATION


                  Achieve higher           Sell new products in
New                                        new markets
                  sales/market
                  share of existing
                  products in new
                  markets
DIVERSIFICATION
• This is the process of selling
  different, unrelated goods or
  services in unrelated markets
• This is the most risky of all four
  strategies

  – E.g. the Virgin group
Summary
• Risks involved differ substantially
• The matrix identifies different
  strategic areas in which a business
  COULD expand
• Managers need to then asses the
  costs, potential gains and risks
  associated with the other options

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Ansoff matrix

  • 2. Background • Long-term business strategy is dependant on planning for their introduction • Ansoff Matrix represents the different options open to a marketing manager when considering new opportunities for sales growth
  • 3. Variables in the matrix Two variables in Strategic marketing Decisions: – The market in which the firm was going to operate – The product intended for sale In terms of the market, managers had two options: – Remain in the existing market – Enter new ones
  • 4. In terms of the product, the two options are: – selling existing products – developing new ones
  • 5. Existing PRODUCTS New Existing INCREASING RISK MARKET PRODUCT PENETRATION DEVELOPMENT INCREASING RISK Sell more in Sell new products in existing Markets existing markets MARKETS MARKET EXTENSION DIVERSIFICATION Achieve higher Sell new products in New new markets sales/market share of existing products in new markets
  • 6. Existing PRODUCTS New Existing INCREASING RISK MARKET PENETRATION INCREASING RISK Sell more in existing Markets MARKETS New
  • 7. MARKET PENETRATION • This is the objective of higher market share in existing markets – E.g. in 2000, Mitsubishi announced a 10% reduction in prices in the UK in order to encourage purchases
  • 8. Existing PRODUCTS New Existing INCREASING RISK MARKET PENETRATION INCREASING RISK Sell more in existing Markets MARKETS MARKET EXTENSION Achieve higher New sales/market share of existing products in new markets
  • 9. MARKET EXTENSION • This is the strategy of selling an existing product to new markets. This could involve selling to an overseas market, or a new market segment – Nintendo are making hand held games consoles (e.g. DS) appeal to the adult/grey market by introducing games such as Brain Train
  • 10. Existing PRODUCTS New Existing INCREASING RISK MARKET PRODUCT PENETRATION DEVELOPMENT INCREASING RISK Sell more in Sell new products in existing Markets existing markets MARKETS MARKET EXTENSION Achieve higher New sales/market share of existing products in new markets
  • 11. PRODUCT DEVELOPMENT • Least risky of all four strategies • This involves taking an existing product and developing it in existing markets – E.g. Coca-Cola. This has been developed to have vanilla, lime, cherry and diet varieties (amongst others) in the SOFT DRINKS market
  • 12. Existing PRODUCTS New Existing INCREASING RISK MARKET PRODUCT PENETRATION DEVELOPMENT INCREASING RISK Sell more in Sell new products in existing Markets existing markets MARKETS MARKET EXTENSION DIVERSIFICATION Achieve higher Sell new products in New new markets sales/market share of existing products in new markets
  • 13. DIVERSIFICATION • This is the process of selling different, unrelated goods or services in unrelated markets • This is the most risky of all four strategies – E.g. the Virgin group
  • 14. Summary • Risks involved differ substantially • The matrix identifies different strategic areas in which a business COULD expand • Managers need to then asses the costs, potential gains and risks associated with the other options