Strategic Frameworks Ansoff Matrix
The Ansoff Matrix is a planning tool that provides a framework for devising options and choices for future growth. Often, a firm will employ several of the strategies outlined below to maximize growth. However, the firm should be cautious not to extend its resources beyond capacity while pursuing multiple growth strategies.
In Market Penetration strategy, growth is gained using existing offerings in existing markets. This can be done by selling more products or services to current customers or by finding new customers within current markets. The organization seeks increased sales on current products in its current markets through more aggressive promotion and distribution. This can be accomplished through price decrease, increased promotion and distribution support, acquisition of a rival in the same market or product enhancements / innovation.
In Market Development strategy, growth is gained by expanding into new markets using its current products / services. This can be done by pursuing:
- Different customer segments
- New Channels such as industrial buyers for a good that was previously sold only to consumers
- New areas or region of the current country
- Foreign markets.
This strategy is successful where a firm has a unique product aspect it can leverage in the new market and will benefit from economies of scale output. It is also effective when the new market is similar to the firm’s current markets or where buyers in the market are intrinsically profitable.
In Product Development strategy, growth is gained by creating new products and services targeted at its existing markets to achieve growth. This involves broadening the range of products / varieties available to the firm’s existing markets. These new products may be developed by investment in R&D, Licensing, Co-branding, or Joint development with ownership of another company.
In Diversification strategy, growth is gained by creating new offerings and introducing them into new markets. It is the most risky strategy because both product and market development is required.