The Ansoff Matrix is a strategic planning tool that helps senior managers and marketing professionals create strategies for future growth. It was developed by Russian-American Igor Ansoff and published in Harvard Business Review in 1957.
Ansoff suggested that there are only two effective ways to develop a growth strategy: renewing what is being sold (product development) and to whom it is being sold (market development). When combined as a matrix, these approaches provide four strategic options, each with a different level of risk.
This model is essential for strategic marketing planning as it can be applied to consider opportunities to increase the company's revenue by developing new products and services or tapping into new markets. Therefore, it is sometimes known as the "Product Market Matrix" rather than the "Ansoff Matrix". Focusing on growth means that it is one of the most widely used marketing models. It is used to assess opportunities for firms to increase their sales by showing alternative combinations of new markets (i.e. customer segments and geographic locations) versus products and services that offer four strategies as shown in the following graphic.
The Four Strategies of Ansoff Growth Matrix:
The Ansoff Growth Matrix presents four strategies that can be used for growth and helps analyze the risks associated with each. Ansoff describes four ways to growth:
1. Market Penetration
Market penetration is selling more of the company's existing products to existing markets. To penetrate and grow the customer base in the current market, The company may lower prices, improve its distribution network, increase investment in marketing, and increase existing production capacity.
Brands like Coca-Cola and Heineken are notorious for spending a lot on marketing in order to penetrate their markets. In addition to that, they try to maximize the use of distribution channels by making attractive deals with a large variety of distributors such as supermarkets, restaurants, bars and football stadiums for example.
2. Product Development
Located in the upper right quadrant. It's a bit riskier, because you're looking to developing and selling a new product in the current market. Companies can for example make some modifications to existing products to give more value to customers, to buy them or develop and launch new products along with the company's existing product offering.
One example of product development is Apple releasing a new iPhone every few years. Other examples can be found in the pharmaceutical industry where companies such as Pfizer, Merck and Bayer invest heavily in research and development (R&D), in order to create new and innovative drugs every now and then.
3. Market Development
Market development is about selling more of the company's existing products to new markets. This strategy relates to reaching new customer segments or expanding internationally by targeting new geographies.
If a company's product performs exceptionally well in one market, why not try to enter a new one with the same products? This is what IKEA, for example, has done over the past few decades in order to become one of the world's largest retailers of furniture.
IKEA began expanding into markets that are relatively close in terms of culture, in relation to its country of origin (Sweden) before targeting more challenging geographies such as China and the Middle East.
4. Diversification
Diversification strategies relate to entering new markets with new products either related or completely unrelated to the company's existing offerings. Diversification, in turn, can be categorized into three types:
Concentric/horizontal diversification (or related diversification) is entering a new market with a new product to some extent similar to the company's existing product offering.
Conglomerate diversification (or unrelated diversification) is about entering a new market with a new product completely unrelated to the company's current offerings.
A great example of conglomeration is Samsung which operates in businesses ranging from manufacturers of phones and refrigerators to chemicals, insurance and hotel chains, as well as tanks.
Vertical diversification (or vertical integration) means moving backward or forward in the value chain by controlling activities that were outsourced to third parties such as suppliers, OEMs or distributors.
Overall look at Ansoff Matrix
The Ansoff Matrix is a great framework for structuring the options a company has for growth.
Market penetration is the least risky of the four and is the most common in everyday business. Diversification is the riskiest since the company starts to enter a completely new and unfamiliar market with a new and unfamiliar product.
However, if the company can successfully enter into many unrelated markets, It has the advantage of having a well-balanced product portfolio that actually reduces the overall risk.
Best Ansoff Growth Matrix PowerPoint Template Diagrams
As you can see, the Ansoff Growth Matrix is very important tool for any company or corporation that is looking to extend its market and achieve greater growth with less potential risks possible. When you are about to explain the best way to do so, you will definitely want the best template on the subject, and that is this very Ansoff Growth Matrix PowerPoint Template. Try the awesome different 10 slides with tempting designs and discover what you and your company can do and go!
