PRODUCT/
MARKET
EXISTING
NEW
EXISTING
MARKET
PENETRATION
PRODUCT
DEVELOPMENT
NEW
MARKET
DIVERSIFICATI
DEVELOPMENT ON
THE ANSOFF MATRIX
•Market penetration is a low risk growth strategy for businesses that choose to focus
on selling existing products in existing markets(to increase their market share of
current products)This can be done by better advertising to enhance the desirability of
the product or by offering more competitive prices.In addition to trying to attract new
customers,firms may also attempt to entice existing customers to make more frequent
purchases
•Product development is a medium risk growth strategy that involves b.aiming to sell
new products in existing markets(Apple’s launch of the iPhone).P.d.is suitable for
products that have reached the saturation(product extension strategies are needed
then)or decline stage of their product life cycle(new product development needed
then)in order to prolong their life and hence their ability to earn revenues for the b.
This strategy is also useful for businesses that use brand extension strategies.A well
established firm,such as Sony or Nike,can use its brand to introduce new products to
the market.
•Market development is the medium risk growth strategy that relates to businesses
selling existing products in new markets
•Diversification refers to the high risk growth strategy that involves a business
marketing new products in new markets.A key driving force for this strategy is that the
b.can spread its risks.
One way to diversify is to become a holding company(parent company).This is a b.that
owns enough shares to be able to take control and management of other
businesses.Subsidiaries are firms owned by a holding company(Time Warner the
parent company of subsidiaries such as Warners Brothers,CNN,Fortune magazine)
Another similar method is to establish SBU-strategic business units. These are similar
to subsidiaries in that they have separate vision and mission statement and are
independently run from their parent company.However, SBU do not have to be a
whole company but can include different product lines or individual
brands.(Toyota,Nissan and Honda all have SBUs that cater for higher income
customers-Lexus,Infiniti,Acura)