Ansoff Matrix

Ansoff Matrix

igor Ansoff was a Russian/American mathematician who

applied his work to the world of business.To portray alternative corporate growth strategies, Igor Ansoff presented a matrix that focused on the firm's

present and potential products and markets

(customers). Igor examined ways in which an organization could grow through the products and the market and he came up with four possible combinations which are:

Market penetration, product development, market development and diversification.

Market Penetration:

Market penetration strategy seeks to increase the market share of present products and services in present markets through greater marketing efforts. It can be achieved by increasing the number of sales person and advertising expenditures and offering discounts or sales promotion. The market penetration strategy takes place at the maturity stage of a product or service,it is also used during a period of decline in market share of competitors while total industry sales have been increasing

Market development:

Market development as the name implies involves seeking out new geographical locations to introduce products or services. Globalization is bridging the gap between companies and new emerging markets, the climates for international markets is becoming more favorable. Market development is used when nee channels of distribution are available that are reliable,inexpensive and of good quality.

Product development:

Firms that adopt this strategy seek to improve sales by modifying present products or services. A lot of research is usually put into the development of new products, and as the development of a new product is a project which would consume time and money, the organization must carry out a feasibility study on if the new products would be viable or not. A firm that has successful products in their maturity stage can attract satisfied customers to try new (improved) products as a result of their positive experience with the organization's present product or service.

Diversification:

Diversification requires both product and market development and as such is considered the most risky of the four growth strategy. The risk there is that an expansion of the market and products might lead to producing goods that are not within the organization's core competency. According to David (1991) There are three types of diversification strategies which are : concentric, horizontal and conglomerate. The aim of a diversification strategy is to diversify so as not to be dependent on any single industry.It is mostly useful when organizations are in the decline stage.

The strategy of adding new,unrelated products or services for present customers is known as horizontal diversification. Adding new unrelated products is called a conglomerate diversification. It is used in an industry that is experiencing declining annual sales and profits.