Business and Management
Unit 1.7 Growth and Evolution
HL- Ansoff’s Matrix and Porter’s Generic Strategies
Ansoff’s Matrix is a decision-making tool to show the degree of risk associated with the four
growth strategies of market penetration, market development, product development and
diversification.
i.
Define each of these four growth strategies.
Strategic planning two main variables when considering marketing:
1. The market in which the firm was going to operate
2. The product(s) intended for sale
In terms of the market, managers have two options:
a. To remain in the existing market; or
b. To enter new markets
In terms of the product, managers have two options:
a. Sell exist products
b. Develop new ones
products
new
existing
market penetration
product development
sell more in exisiting
markets
sell new products in
exisiting markets
Markets
market development
sell exisiting products
in new markets
new
diversification
sell new products in
new markets
Increasing
risk
Evaluation of Ansoff’s MatrixTASK1. Use the supplied information to provide examples of each component of Ansoff’s Matrix
2. Is Ansoff’s Matrix useful??? One reason for YES and one reason for NO…….
Michael Porter, a famous management researcher, argues that a firm’s strength ultimately fall
under one of two headings:
a. Cost advantage
b. Differentiation (product uniqueness)
A firm can apply these strategies in a broad way (industry wide) or in a narrow way (a market
segment):
1. Cost leadership strategy- lowest price and best quality at that price point- market
leader OR competition-based pricing (below all other competitors) to increase market
share.
a. What internal strengths does a business need to implement a cost leadership
strategy?
2. Differentiation strategy- product or service that offers unique features valued by
customers. This strategy may allow for a premium price.
a. What internal strengths does a business need to implement a differentiation
strategy?
3. Focus Strategy- concentrating on a narrow marker segment, aiming to either achieve a
cost advantage or differentiation
Porter’s Generic Strategies
Target Scope
Broad
(industry wide)
Narrow
(market segment)
Advantage
Low Cost
Cost leadership strategy
Product Uniqueness
Differentiation strategy
Focus strategy
(low cost)
Focus strategy
(differentiation)