Ansoff Matrix: All You Need to Know

In order to sustain in the increasingly competitive business environment, an organization needs to adopt strategies for constant growth. The growth strategies allow a firm to determine the business strategies that the company can adopt in the future, which can lead to its growth. Sustained growth in an organization is essential for it to satisfy its stakeholders, create more compelling value and attract superior talents. It should be noted that the growth strategies help a company to move forward, however it does not change its sole objective which is to maximize shareholders’ return sustainably. In this PenMyPaper article, we have discussed about different growth strategies that an organization can follow, using the Product/Market Expansion Grid, most commonly known as the Ansoff Matrix. The Ansoff matrix is tool for portfolio-planning for identifying the growth opportunities of a firm. Learning about the Ansoff matrix can help you formulate future growth strategies for your college essay.

The Ansoff Matrix

A close look at the Ansoff matrix reveals that this model provides four distinct strategies that an organization can adopt for its growth. Each of them is based on decisions involving product and market entry decisions. Let us now look at the matrix itself.

The X-axis contains the products: new or existing, whereas the Y-axis contains the markets: new and existing. These are combined to form four key strategies which are: market penetration, product development, market development and diversification. According to urgent essay writing service, you can adopt any of these growth strategies depending on what you are trying to achieve.

Market Penetration

The market penetration involves selling existing products in the existing markets. The sole objective of this strategy is to increase the sales of the current product line up in the current market by adopt new and more aggressive marketing strategies. Instead of selling new products, the company pushes the existing products in new ways in an effort to increase its sales volume. Typically, companies achieve growth through market penetration by making certain adjustments in its marketing mix strategies. Certain adjustments to the product design, offer discounts or promotional pricing, catering to more local markets by widening it distributing channels and aggressive promotional campaign can help a company to increase the sales of the existing products in the existing market, thus resulting its growth. It should be noted that market penetration strategy is suited for companies that want to make most out of its current product line and its existing customer base. Taking an example of Uber business model we can see that to promote its usability, it offers occasional promo codes as discounts.

Market Development

The market development strategy involves selling existing products to a new market. In this strategy, the company explores new market locations, which offer opportunities for higher sales and enters that market to sell its existing products. It should be noted that entering new markets can be both geographic markets or demographic markets. In simple words, the company wants new group of customers to purchase its products, in order increase its sales volume. In case of catering to new demographic markets, the company pushes its products to age groups or income groups by highlighting the values suitable for them. For example, Blackberry previously only catered to business and corporate users with its range of mobile devices. Eventually, in an effort to increase its sales, the company started to attract the younger generation as well. This as a result widened the target demography of the company, allowing it to earn more revenue.

On the other hand, the geographic market develop involves entering new market regions, in order to cater to more customers. This market development strategy typically involves internationalization of business through direct exporting, licensing, franchising, joint ventures and strategic acquisitions. An organization usually enter new market locations under certain conditions, which includes increase in competitiveness in the home market and untapped market potential in the host markets. For example, Tesla, an American electric car manufacturer started its business in the domestic market and eventually extended its presence to other international markets such as the UK and China. This strategy has enabled the company to earn more revenue from different markets. Market development strategy also reduces the dependence of the company on a single market, thus reducing its operating risks. While writing this in your research paper abstract, you must focus on different market entry strategies; if you're struggling to choose the most suitable market entry strategy for your company, you can ask for an expert guide to improve the quality of your research.

Product Development

Product development involves introducing new products to its existing markets. In this strategy, the company develops a new product which is designed to meet different set of needs and preferences for the customers. An organization adopts this strategy when the competition becomes quite severe in the existing product categories, or the industry growth has reached it saturation level. Typically, a new product is introduced in a category where the competition is lower and there are a lot of growth prospects in that category. The life cycle of the existing products also plays an important role behind the decision of product development strategy. Whenever, a product reaches maturity stage and is about to cross over the decline stage, the company needs to replace that product with a new one, with more benefits and unique values.

It should be noted that the company chooses to cater to the existing markets only, but with new products and services. For example, Apple competitive advantages states starting a business with selling personal computers, which eventually grew to offering new products like iPhone, iPad, Apple Watch, etc. to satisfy new needs and preferences of the customers. In order to successfully implement product development strategy, a company needs to invest heavily into research and development, to create innovative product designs that can appeal to the changing needs of the customers. In a steep competitive environment, other market players are also looking forward to develop new and appealing products. Therefore, a company first needs to assess the value offered by the competitors before developing its own products, so that it can have a stronger impact on the market.

Diversification

Diversification involves starting up new business operations, outside its current product and markets. In simple words, it allows the company to introduce new products to new markets. It should be noted that diversification allows a company to develop new products which are specifically designed to be introduced in a new market. This strategy is developed by companies to enter new markets with different needs and preferences. New products are developed that are specific to the target markets. This localized approach makes it easier for the companies to enter to new international markets.

In order to successfully implement diversification strategy, a company first needs to gain an in-depth understanding of the host market, the consumption behavior of the customers, their affordability, social customs, etc. Based on these factors, the company can design new products and services that best suits the chosen market. The localization makes it easier for the customers to accept the new products offered by the company as it aligns with their needs and preferences, and even their social customs. For example, McDonald’s when entering the Indian market had to completely change their food menu, replacing beef with chicken, due to cultural customs in India which prohibits the majority of the people from consuming beef. This localization has enabled the company to gain massive success in the host market.

Let's Sum it Up

Before you go and ask someone, ‘write this paper for me’, let us summarize what we have learnt so far. The Ansoff matrix or the product/market expansion grid is a strategic tool which offer four different strategies for organizational expansion which are market penetration, product development, market development and diversification. The market penetration allows a firm to reinforce its position in the market by pushing its existing products in the current market. The product development involves introducing new products into the current markets to offer new values to the customers. The market development strategy involves entering new markets with existing products to cater to a new customer base. Finally, the diversification allows the companies to offer new products that is designed specifically for a new market.

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