Ansoff Matrix - Know How

Who is Igor Ansoff?

H. Igor Ansoff Ansoff was a mathematician and a business manager. He known as the father of Strategic management. Ansoff was born in Vladivostok, Russia on December 12, 1918. In 1937 Ansoff emigrated to the USA and graduated at Stuyvesant High School, New York City.

Following graduation Ansoff studied General Engineering at Stevens Institute of Technology where he received a Master of Science degree in the Dynamics of Rigid Bodies.

The Ansoff Growth matrix is a tool that helps firms decide their product and market growth strategy based on objective analysis of industry structure and product type. It is one of the more popular tools for strategic management analysis, in the scenario of deciding the case for a related diversification of businesses and firms, which itself is a highly risky strategic decision.died General Engineering at Stevens Institute of Technology where he received a Master of Science degree in the Dynamics of Rigid Bodies.

Market Penetration:
When companies enter markets with their existing products or services it is called market penetration. This is done by taking part or all of a competitor's market share. 

Other ways to penetrate the market could be by finding new customers for your product or by getting current customers to use more of your products. Market penetration is considered a low risk method to grow the business.

Market penetration seeks to achieve four main objectives:

  • Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling 
  • Secure dominance of growth markets 
  • Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors 
  • Increase usage by existing customers – for example by introducing loyalty schemes A market penetration marketing strategy is very much about “business as usual”. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research. 

Product Development:
Companies develop new products in existing markets. This is called product development.

An organization that already has a market for its products might try and follow a strategy of developing additional products, aimed at it's current market.

Even if the new products are need not be new to the market, they remain new to the business. Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets.

Market Development:
When companies develop existing products into new markets, it is known asmarket development.
An organization's current product can be changed improved and marketed to the existing market. The product can also be targeted to another customer segment. Either way, both strategies can lead to additional earnings for the business.

This looks at ways you can increase sales by selling your existing products or services to new markets. Things you could consider include:
  • Geographical reach – if you currently only sell your product in one region, could you increase that area to include more regions? 
  • Guest posting on blogs in different niches i.e. if you write about personal finance, guest on blogs that are about other topics, but are read by people in your target audience.  
  • Language – is it possible to get your e-book translated into foreign languages to increase sales?  
  • Is your product suitable for other industries? Say you help realtors with their web marketing. Could you offer the same suite of services to attorneys?  
  • Is there a new or different use for your product that makes it attractive to new markets?

Product Diversification:
An organization that introduces new products into new markets has chosen a strategy of diversification. When companies have no previous industry nor market experience this strategy is called Unrelated diversification. Related diversification describes how companies stay in a market with which they have some familiarity.

This is perhaps the toughest one to get right. It involves moving into a totally different line of business selling different products to a different market. Virgin is a good example of a company using a diversification strategy – their airline has little in common with their banking company. Ideas here include are unlimited – forget what you’re currently selling. Is there another opportunity that you consider to be profitable?

1. The problems of getting data on the market share and market rate

2. There is no clear definition of what constitutes a ‘market’

3. A high market share need not necessarily lead to profitability all the time.

4. The model employs only two dimensions – market share and growth rate. This may tempt management to emphasis a particular product or divest prematurely.

5. Low share businesses can be profitable too.