You are probably trying to get your head around some questions like “what Ansoff matrix is,” “Ansoff matrix theory,” “Ansoff matrix examples,” and “Ansoff matrix strategy.” Well, you’re at the right place because this post has been designed to clarify all the questions you have in mind on this subject.
What Is Ansoff Matrix
The Ansoff Matrix theory was developed by the Russian-American mathematician and business manager Igor Ansoff. It’s a framework that’s designed to help firms decide their market growth as well as product growth strategies. Clearly, this tool is not just handy for big businesses, but also for small businesses and start-ups. A big business might want to diversify its products, but a start-up might just want to penetrate the market. Having this knowledge, let’s take a look at the breakdown of these strategies.
What Is Ansoff Matrix Example?
Coca-Cola is one of the companies used as examples of the Ansoff matrix, since the company has used it to determine its strategy for expanding its market share and creating new products. The firm has located unfilled niches, which it is now supplying with its new offerings. In order to adapt to consumers’ preferences, the corporation is always releasing new products.
What Are the 4 Strategies of the Ansoff Matrix?
In the Ansoff matrix, there are four strategies: getting into the market, growing the market, making new products, and expanding.
Breakdown of the Ansoff Matrix Strategy
There are 4 quadrants in the matrix, and as a company, you can choose from any of the quadrants, the strategy that maximizes your market potential. So, let’s break down this Ansoff Matrix Strategy by taking a look at all the components of the framework. The picture below gives a nice summary of the strategies.
#1. Market Penetration in Ansoff Matrix:
This is the least risky strategy in the Ansoff Matrix. It focuses on getting more out of an existing product in an existing market. So, a company tries to sell more of its products in its present market through any of the following: an increase in advertising and distribution support, a reduction in price, or the acquisition of a rival. One prerequisite for this is having a small market share. So, you try to get more control of the market through this strategy. But if you already have a sizeable chunk of the market, then you may want to select any of the other three.
#2. Product Development in Ansoff Matrix:
In this strategy, the firm creates more products in its existing market to satisfy consumer needs. In this, you already have a customer base for a certain product, but the product has attained a level of market saturation. So, to solve this you offer consumers another product within the same market. The new product can be actualized by patent acquisition to produce someone else’s product, badging a product bought as your brand, investment in research, and development of an additional product.
#3. Market Development:
By applying this Ansoff matrix strategy, a firm aims at reaching out to a new market segment with their existing products that have gained market penetration in another market segment. For instance, some companies, after gaining national market penetration in a given country, move forward to reach out to consumers in other countries where they’ve not been established. You can actualize this in a local business by moving your product which has gained market penetration in a state/province to other states. However, it’s advisable not to take up this strategy until your products have penetrated at least one market.
#4. Diversification:
When companies adopt this Ansoff matrix strategy they introduce new products to a new market. Since the company is investing in both a new market and a new product, this causes a two-quadrant move in the Ansoff matrix. So, this makes this strategy the riskiest. Diversification strategy could be related or unrelated. In related diversification there is relationship and hence potential synergy between the firms. In unrelated, there is no relationship between the firms. Unrelated diversification can also be called conglomerate growth.
Hence, you can select any of these strategies depending on your position in the market.
What Is the Riskiest Strategy in the Ansoff Matrix?
The Ansoff Matrix shows that diversification is by far the most risky strategy. It’s a plan that completely changes the way an organization works by putting its products on completely new markets.
How Do Businesses Use the Ansoff Matrix?
The Ansoff matrix’s market penetration quadrant helps you figure out how to sell more of your existing products or services to your current customers by promoting and distributing them more aggressively. Hence, with this strategy, the company tries to increase its share of the market in the way it is now.
How Can Ansoff Matrix Be Applied?
The Ansoff Matrix is utilized during the strategy phase of marketing planning. It is utilized to determine which overarching strategy the organization should employ and then to determine which marketing methods should be employed. Occasionally, a company will employ two tactics to target distinct audiences.
Why Is Ansoff Matrix Effective?
It is effective because the matrix provides a basic and practical method to product and market development strategy. It investigates potential for expansion through current and new goods, as well as new and existing markets. It presents four possible growth sectors with varying levels of risk.
READ ALSO: 7 STRATEGIES TO POSITIONING YOUR BUSINESS IN 2020 [WITH CASE STUDY]
Some Ansoff Matrix examples in reality
We are going to list the different Ansoff Matrix examples in reality based on the component of the quadrant they best fit in.
#1. Market Penetration
Android is a good example of this. Apple and blackberry dominated the U.S smartphone industry about 12 years ago. But today, Android shares an almost equal amount of the market with Apple, and we can’t find BlackBerry anywhere.
#2. Product Development
Smartphone companies like Apple and Samsung putting out new phone models every few years is an example of product development in the Ansoff Matrix.
#3. Market Development
A good example of a market development strategy is PayPal. They initially started their service in the US and expanded to other countries. Another example is Apple, after releasing iPod which is an expensive device for music lovers. They released the iPod shuffle, which is cheaper and targets a market segment of consumers who love music but are less willing to pay a premium price for it.
#4. Diversification
Alphabet incorporation exemplifies this. They started on the internet with a Google search but gradually moved into different markets, including the oil sector.
READ ALSO: FAST FOLLOWER STRATEGY: [DETAILED CASE STUDY]
Finally, the Ansoff matrix theory and strategy are good for startups, small business owners, and big business owners. So, you need to know you position in the market and select the strategy that will work best for you.
Related Posts
- Market Penetration: Best 2022 Strategies & Definitive Examples (Updated)(Opens in a new browser tab)
- Diversification Strategy: Overview, Examples, Types, Pros & Cons
- PENETRATION PRICING POLICY: HOW YOU CAN GAIN MARKET ENTRY(Opens in a new browser tab)
Ansoff Matrix FAQs
What is Ansoff Matrix used for?
The Ansoff is a marketing planning model which helps marketers identify chances to increase income for a company by producing new products and services.
What is Diversification in Ansoff Matrix
This entails carrying out a whole set of activities (market research, R&D, product creation, and sales) and carefully measuring them. It is also necessary to examine the dangers.
How to use an Ansoff Matrix
- Design your matrix using the tool of your choice
- Next, draw a map of probable strategies for each quadrant.
- Conduct a risk assessment.
- Prepare for your hazards.
- Choose your strategy.
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