The Ansoff Matrix
Ansoff Matrix growth strategies
The four growth strategies within the Ansoff Matrix include:
Market penetration
The first quadrant of the Ansoff Matrix and the least risky of the four growth options is the market penetration strategy. It occurs when a company makes an effort to expand into a market where it already has existing products, services, or other offerings. By finding new customers in the same market or selling more of its products to an existing customer base, market penetration aims to increase an organization’s market share.
To achieve this, the majority of businesses employ more dynamic marketing, though specific strategies may vary from organization to organization. A business may achieve market penetration by:
Market development
The second quadrant of the business model is market development, which is when an organization uses its current products and services to expand into new markets. If a business is local, this could mean expanding to other cities, other states, or even other countries. Whatever the new market may be, whenever a company expands from its current market into another where they do not yet exist, it is using a market development growth strategy.
The likelihood of this strategy succeeding is higher than that of the market penetration growth strategy if the company can increase output without adversely affecting finances or distribution, the market they are entering is similar to the one they are already successful in, and their products are distinctive enough to stand out in the new market.
With market development, a business may:
Product development
Product development, the third segment of the Ansoff Matrix, is when a company develops new products for its current market. About as risky as the market development strategy is the product development growth strategy. With this approach, the company will have a wider selection of products for customers to choose from. As part of their product development plan, a business may:
Diversification
Diversification is the fourth and final Ansoff Matrix segment, and it presents businesses with the greatest risk. An organization that wants to expand will use this strategy by launching new offerings in untapped markets. Because it involves an untested product in a market you are unfamiliar with, this is the riskiest option.
There are two types of diversification:
What is an Ansoff Matrix?
Ansoff Matrix is a tool that can assist managers and marketers in an organization in figuring out how to expand and developing plans for doing so. The matrix combines market penetration, market development, product development, and diversification, all of which are growth strategies that a company can use to expand its reach into new markets or increase the range of products it offers. Organizational leaders can evaluate the risks associated with implementing each of these strategies before deciding to use it.
How to make an Ansoff Matrix
To create your own Ansoff Matrix for the office, take the following actions:
1. Use a design tool or program
To create your Ansoff Matrix, think about utilizing a design tool or program like PowerPoint or Photoshop. You can change the color of the table and make it user-friendly and simple to understand by using these. Using paper and pens, anyone can create an Ansoff matrix even without access to computer programs.
2. Create a table with four segments
When you combine all of the segments, they should be the same size to form a square. Think about giving each segment a unique color so they can be distinguished from one another.
3. Label your x- and y-axes
The horizontal line at the bottom or top of your matrix is your x-axis, and the vertical line is your y-axis. Markets should be your x-axis, and products and services should be your y-axis. With this in place, you’ll be able to set up the necessary columns and rows, then put the growth strategies in the appropriate places.
4. Label your rows and columns
Labeling your rows and columns is crucial so that you can group each growth strategy into the appropriate segment. Label one of your rows as “new” and the other as “existing” to begin with. ” Do the same for your columns. The top row and right column are frequently “new,” while the bottom row and left column are “existing,” despite the fact that there are numerous ways to create this. “.
5. Label each of the four quadrants
Once your rows and columns are labeled, you can assign a specific growth strategy to each segment. Here is where each should appear:
How to use an Ansoff Matrix
Follow these steps to use an Ansoff Matrix:
1. Understand the matrixs segments
Understanding what each of the four segments in the Ansoff Matrix stands for is the first step in using it. Be aware of the benefits and dangers of each so you can make a decision with confidence.
2. Evaluate your options
Consider how you would implement each of the growth strategies for your company. Here are a few examples of possible decisions for each:
3. Assess your risk tolerance
Market penetration carries the least amount of risk in the Ansoff Matrix, while diversification carries the most. Each strategy has its own unique set of risks. Write down any potential risks you may encounter for each strategy during this step, along with your plan for dealing with them.
4. Choose your growth strategy
You should be able to select the best option for your business once you’ve evaluated your options. Organizations frequently return to the Ansoff Matrix later when they are prepared to grow even more.
Examples of an Ansoff Matrix
Examples of an Ansoff Matrix in use for each of the four quadrants are provided below:
Market penetration
There is already a cell phone company in the market, but they want to increase sales. They might create a family plan that offers discounts on all lines to members of the same family who sign up for the same cell phone plan. More of the company’s smartphones are being sold to the same market where they are already successful.
Market development
A fashion designer makes clothing for businesses in North America but wants to expand internationally. To expand into new markets with the same products that have been successful in their current market, they might collaborate with manufacturers and distributors throughout Europe.
Product development
Initially producing only sedans, a car manufacturer has learned over time that its customers are growing their families and have different needs. The company starts manufacturing SUVs to appeal to their customers. Although they serve the same customer base, their product lineup has been expanded to include the kinds of vehicles that their market would find most useful.
Diversification
Normally, a cloud computing business sells its services to businesses and other organizations, but it decides to use its experience to create and distribute home computers to people and families instead. By expanding their clientele and offering a new product, they are breaking into a new market.
FAQ
What is Ansoff Matrix used for?
The Ansoff Model, also known as the Ansoff matrix due to its grid layout, aids marketers in spotting chances to increase sales for a company by creating new goods and services or “tapping into” new markets.
What is Ansoff Matrix in simple words?
- Market Penetration (lower left quadrant). This is the safest of the four options.
- Product Development (lower right quadrant). …
- Market Development (upper left quadrant). …
- Diversification (upper right quadrant).
