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 PENETRATION
THE 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.
Existing product
New product
Existing
Market
Market penetration
Increase sales to the existing
market,
Penetrate more deeply into
the existing market
Product development
New product developed
for existing markets
New market
Market development
Existing products sold to new
markets
Diversification
New products sold in
new markets
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 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 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.
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.
GROWTH OF TESCO
Market Penetration Increase in its share of
GROWTH OF SCOTTISH BANKS
Market Penetration Increases sales 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
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
- 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