case study on ansoff matrix

Ansoff Matrix: Use, Examples, Case Study, and Template – Comprehensive Overview

What is the ansoff matrix.

Ansoff matrix also known as corporate Ansoff matrix and product/market expansion grid is an essential business strategy tool used in business schools globally. The model focuses on providing a structure for business owners and marketers to strategize growth and risks of growth for their businesses. The Ansoff Matrix can be used during various stages of a product or a company life cycle making it one of the most versatile tools for managers. From Strategic Exercise to Market Planning,

Ansoff matrix helps marketers get opportunities to grow their sales and generate revenue by using different combinations of new markets and products and existing markets and products.

Ansoff Matrix finds wide usage in almost every field of management. Ansoff Matrix also helps in identifying potential growth areas and areas where management should retract, making it an important tool for business prioritization as well. The universality of the tool makes it a favorite of strategic consultants who carve out new and niche strategies for the organization. in this blog, we will discuss in detail the history, usage, and advantages of a case study.

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History of Ansoff matrix

H. Igor Ansoff, an applied mathematician, and business manager developed the Ansoff model. The matrix was first published in Harvard Business Review in 1957 under an article called “strategies for diversification”. In his model, Ansoff has hinted at some of the strongest and weakest business strategies. 

According to Ansoff, there are only two approaches to developing a growth strategy, diversifying Product Growth and Market Growth. 

 Uses of Ansoff matrix

Ansoff matrix can be used to assess the different strategies for business growth also known as the four quadrants of the Ansoff model. The four quadrants are: 

Market penetration

Product development, market development.

• Diversification 

In the first quadrant, market penetration is the safest with minimum risk. This strategy focuses on increasing sales of existing products or offerings in the markets you are already familiar with. This can be achieved by:

• Lowering your prices or giving discounts
• Promoting your business on a larger scale
• Buying or obtaining a rival’s company in the very market
• Changing  opening hours for stores
• Focusing on product refinement

For a better understanding, let us take an example: Popular brands like coca cola are known to focus a lot on getting their brand distributed among the right target audience. They spend a lot of money on getting help from supermarkets, sports stadiums, diners, etc. to penetrate the market and get their brand sold on a higher scale.

In the second quadrant, product development is riskier than market penetration. This strategy focuses on selling new products in the existing markets. You can also modify the products or extend the range of existing products. The strategy also focuses on the needs and welfare of target customers and markets. This can be achieved by:

• Making investments in the research and development of new products.
• Buying someone else’s products and obtaining the rights to claim them as one’s own.
• Acquiring the rights to build someone else’s products
• Creating new packaging for the existing products

The strategy also focuses on the needs and welfare of target customers and markets. A good example of product development can be taken from the pharmaceutical companies that have been actively investing in the research and development of new drugs. 

Market development or the third quadrant carries furthermore risks. The strategy focuses on sales of existing offerings in new markets and among different types of customers. This can be accomplished by:

• Promoting your offerings in different customer segments
• Targeting markets in new areas of the country
• Foreign marketing
• Taking the help of online sales

Market development strategy is not that risky if the new markets are similar to the previous ones that you are familiar with. This can be better understood with an example, such as: google started in California, United States but extended its business to Chinese markets.

Diversification

In the last quadrant, diversification is the riskiest of all. It focuses on taking new products into new markets . Even with high risks, diversification can sometimes procure greater rewards. This strategy can be of two types, related and unrelated. 

• Related diversification : there remains a connection between the new offerings and the existing firms/businesses.
• Unrelated diversification : there are no connections between the businesses and the new offerings. 

The strategy proves to give an edge in a way that, if one business fails to flourish, the others will remain unaffected. Let us take two examples to understand each of these diversifications better. 

A shoemaker making shoe with leather decides to make belts and bags instead. This is a case of related diversification as the products are different but the raw material is common for both. Another example can be the company Samsung. Samsung offers a variety of products from mobile phones, laptops, and air conditioners to hotel chains, insurance, and chemicals. This example is of unrelated diversification. Even if the hotel chains don’t return promising results, mobile phone sales of Samsung won’t be affected.

Advantages/Benefits of using Ansoff Matrix

Simplicity : Ansoff Matrix is a very simple yet powerful tool for visualization for managers. Many managers depend on Ansoff Matrix to find the right strategy for the organization

Easier for brainstorming : Unlike other strategic tools, Ansoff Matrix is perfect for a brainstorming session.

Management Summary : The final outcome of a strategic exercise is often very complex. With Ansoff Matrix, it is relatively easier to find a management summary easily. It also becomes easier for an organization to communicate new or changed strategies down the line.

Universality : The Ansoff matrix is very universal. It can be used in a wide range of problems ranging from consulting to new business expansion to strategic marketing problems. It is widely used in assessing the current strategy and finding what’s needed to go to derived strategy

Ansoff Matrix: Case Studies

Founded by Henri Nestle, the famous multinational company, Nestle is one of the world’s largest food and drinks processing companies. Nestle was started in 1866 as a small firm known to produce infant milk and now it has earned the name of a business with the most winning marketing strategy. It is headquartered in Switzerland. The products the company offers are diverse, such as beverages, ice creams, baby food, pet food, bottled water, etc.

For over 150 years, their business has been flourishing. The company also possesses a special focus on sustainable development. They have the largest research and development network in the food and beverage industry which makes them stand out. With the tagline “Good Food, Good Life”, the brand has created a catalyst to promote its sales. 

Nestle is a multibillion-dollar company with a market capitalization of more than 247 billion USD. As of 2021, the brand has generated a revenue of around CHF 87.10 billion. Nestle has made use of Ansoff Matrix successfully over the years to become the leading international food processing brand in the world. Let us have a look at the strategic analysis of the Ansoff Matrix of Nestle.

Market penetration by Nestle

For smooth market penetration, Nestle uses its existing products in the existing markets to grow their sales. They focus on aggressive marketing to increase purchases. Nestle uses various tactics to grow their sales such as manufacturing different packaging sizes to give customers a wider choice of selection, offering discounts on larger purchases, lowering prices on certain products, etc.

They are also known to acquire similar brands and companies to reduce competition. Nestle uses promotion strategies like encouraging people to purchase their products by including the customers’ pain points in their advertisements. The brand also keeps on introducing new flavors to keep their customers interested in their products.

Product development by Nestle

Nestle launches new products in the existing markets almost regularly. For instance, they first manufactured chocolates that many customers liked. They later went one step ahead and introduced ice creams using those chocolate flavors.

To promote these ice creams they kept the prices low, advertised more, and used different channels to increase the reach of their products. Once the ice creams were a hit, they adjusted the prices, improved the packaging, and also introduced more variants of the product. All this helped them generate revenue from the ice creams and grew their sales. This is how Nestle focuses on its product development

Market development by Nestle

Nestle uses exciting products in new markets for market development. They expand consistently to new geographical areas where they haven’t marketed yet. They make sure that the products are readily available with the help of different distribution channels to help them increase their reach to the local markets. For this very goal, they also advertise the products through the regional media. They also focus on making the products affordable, targeting the customers’ needs, and introducing variants according to the preference of customers from that particular region. For example, India has more variants of Maggi instant noodles that aren’t available elsewhere. 

Diversification by nestle

Nestle regularly launches new products in new markets for diversification. The new products can be related to the existing range of products or can be a different range itself. For example, Nestle offers baby food but they can also launch diapers and other baby products in new markets to grow their sales. Of course, it takes a strategic plan to execute such a stunt with so much risk. But with such marketing understanding, Nestle rarely disappoints.

Coca-Cola is a giant in the beverage industry. It serves almost every continent in the world.

Samrat is a Delhi-based MBA from the Indian Institute of Management. He is a Strategy, AI, and Marketing Enthusiast and passionately writes about core and emerging topics in Management studies. Reach out to his LinkedIn for a discussion or follow his Quora Page

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The Ansoff Matrix: 4 Growth Strategies Explained (With Examples)

• Ansoff Matrix is a popular strategic framework for decision-makers, entrepreneurs, and business managers tasked with evaluating opportunities for business growth.
• Marketing teams can also use it in the marketing planning phase.
• Best for companies with a serious commitment to aligning their efforts and prioritizing transparency
• Pros: Simple to use and easy to understand, helps stakeholders understand the level of risk associated with different strategies.
• Possible cons: It can’t be used as a standalone tool and it’s hard to make accurate predictions. 

The Ansoff Matrix, also known as a product/market expansion grid, is a 2x2 strategic framework designed for organizations that want to move beyond 'business as usual’ and prioritize their strategic options.

It's designed to help you figure out which of four strategic directions you should take to successfully grow your business. The chosen approach should then inform which tactics should be used in the strategy execution phase .

Tip: Consider the fact that you don't have to stick to one strategy. Some organizations adopt multiple strategies to reach different markets. 

In this article, we are going to explain each of the 4 growth strategies and how to use the Ansoff Matrix in your strategic planning process.

⚠️ The Ansoff Matrix offers options, but don't get stuck in analysis. Cascade Strategy Execution Platform bridges the gap between growth plans and real execution. Talk to our experts to translate your Ansoff Matrix insights into a clear action plan for achieving sustainable growth.

Now, let's take a closer look at the matrix and its four quadrants.

What are the 4 growth strategies of the Ansoff Matrix? 

1. Market Development Strategy

new markets / existing products

This is all about selling more of your current product or service to a different or expanded group of people. In other words, you will focus on finding new market segments to sell your product to.

These new customer segments will have the same needs as your existing customers, but perhaps aren't aware that your product could help them.

Some examples of market development strategies that would fit into this part of the matrix would be:

• Expanding into foreign markets (international expansion)
• Use of new sales channels such as online
• Franchising

A great example of market development:

Coconut Water had been on sale in health stores for decades. More recently, several large manufacturers decided to change how they marketed the product.

They enlisted sports stars and celebrities, positioning Coconut Water as the healthy alternative to sports drinks such as Gatorade. A year later, Coconut Water had snagged nearly 6% of the global juice market.

📚 Recommended read: Market Development Strategy In 6 Steps (With Free Template)

2. Market Penetration Strategy

existing markets / existing products

Market penetration strategy is focused on selling your current product to the same people but in larger quantities. 

Here are some possible examples of how you can approach it: 

• You may be more aggressive with your marketing but in the same customer segment
• You may also offer incentives for people to buy more of your product in exchange for a discount
• Change pricing strategy: Lower or increase the price of your product
• Identify a business partnership that can help you grow your market share 

A great example of market penetration: 

Have you ever wondered how and why Coca-Cola is associated with Christmas? The answer is that they decided to implement an aggressive strategy of market penetration.

They invested heavily in marketing to create a positive association between the two. The target of the marketing effort was existing customers who already loved Coke, and already loved Christmas.

By linking the two, Coca-Cola created a 13% revenue increase linked directly to Christmas sales.

3. Product Development Strategy

existing markets / new products

This strategy is all about developing new products and selling them to your existing customer base. For example, makers of sports shoes have aggressively developed products such as sports clothing to sell to the same group of people who were originally just buying shoes.

A great example of product development: 

McDonald's seems to have done a pretty good job of weathering the changes in consumer taste over the years. They've done this by supplementing their mainstream fast-food products with new additions.

The strategy was to appease customers who've grown tired of high-fat junk food (but love the convenience/low cost that McDonald's offers). A great example is the McSalad, a completely different product from burgers and fries.

The McSalad debuted on the Maccas menu to stop an increasingly health-conscious customer base from going elsewhere.

4. Diversification Strategy

new markets / new products

Diversification is the riskiest of all 4 growth strategies. This quadrant involves selling new products to new markets.

The risk lies in your lack of familiarity with either the product or the market. In spite of this, diversifying can often result in substantial gains.

There are two types of diversification strategy: 

• Related diversification: It happens when the company moves into a new market that has similarities with the company’s existing market. 
• Unrelated diversification: It happens when the company moves into a new market that has little to no similarities with the company’s existing market. 

A great example of related diversification: 

Long ago, Apple was a brand that only appealed to serious graphic designers and a certain type of tech geek. Then came the iPod (and eventually the iPhone).

These products were actually very different from anything that had come before (from Apple or anyone else). They were designed from day 1 to appeal to a totally different customer base than had previously been buying Apple products.

What enabled them to do that? 

As both products share similar manufacturing processes, Apple could share resources across both product groups.

This is probably the single best-executed example of a new product + new customer the world has seen.

How to use Ansoff Matrix?

OK, so now we know what the Ansoff Matrix is all about, and how powerful it can be in helping organizations grow their business. Let's take a look at how exactly to implement it.

1. Analyze the current state and evaluate your options

Ansoff Matrix is essentially a brainstorming tool that can help you in your strategic planning phase. Preparation isn't necessary, but we believe it's key to success. It will make your brainstorming session more focused and productive. Set an agenda and tell each invitee which data or insights should they bring to the table. 

The Ansoff Matrix is often used in conjunction with other business and industry analysis tools to support more robust assessments of business growth drivers. You need to know where you stand today so you can plan for your future. What are your strengths and weaknesses? Where do you see opportunities and challenges? 

You can choose from a range of tools, including GAP analysis , SWOT analysis , and PESTLE analysis , or Porter’s Five Forces . 

No matter which you use, ultimately, it's about asking yourself critical questions such as:

• What makes me different from my competitors?
• Why do people buy from me instead of others?
• How are we currently performing?  
• What is our current market share? 
• What are competitors doing? 
• What are our internal capabilities to innovate?

Answering those questions should give you some insight as to which part of the Ansoff Matrix to attack first.

2. Determine your risk appetite

OK, so just because you're good at something, doesn't mean you should stick to doing only that. In fact, the right move may be to push yourself a little harder - either because you see a big opportunity or even a big looming threat to your current industry.

The more risk appetite you have, the further away from your strengths you might want to push yourself. Generally speaking, the risk factors of the Ansoff Matrix look like this:

As a company moves away from its comfort zone - from what it is currently doing and therefore knows to work - the level of risk increases.

Figure out where you want or need to sit on that spectrum and use that to influence your decision as to which quadrant to attack.

3. Make a strategic plan

Now that you've chosen which part of the Ansoff Matrix you want to attack, it's time to make a plan. Start by creating a succinct vision statement that captures what you're trying to achieve.

If you were Apple and were about to pursue the diversification strategy, you might have had a vision statement somewhere along the lines of:

"To capture the hearts, minds (and wallets) of a new generation of a computer geek, through innovative technology that increases their access to pop culture staples such as music and movies."

(OK, so I made that up on the spot - it's not an actual Apple vision statement, but you get the idea!)

Once you've got your vision, the rest of your strategic plan should be much easier to create.

We've created a detailed guide on how to do just that here - and you'll definitely want to check out our own Cascade Strategy Execution platform when you get to this part of the journey.

Don't be afraid to try creating plans for a few different quadrants of the Ansoff Matrix to see which one suits you best! As we mentioned before, many companies tackle 2 strategies at the same time due to their diversified range of products. 

This piece is part of a series that covers 5 of the best strategy frameworks out there. Be sure to have a read of the guide, as you may find that one of the other frameworks will fit a little better with your organization at this stage.

Frequently asked questions about Ansoff Matrix

Who created ansoff matrix.

The Ansoff Matrix was created by Igor Ansoff and was first published in Harvard Business Review in 1957. The matrix is as relevant today as it was over 50 years ago.

What is extended Ansoff Matrix?

Extended Ansoff Matrix is an upgraded version of the classic Ansoff Matrix. It’s a nine-field matrix with additional fields: market expansion, product modification or extension, limited diversification, and partial diversification.

What is the difference between Ansoff Matrix and PEST?

PEST is another useful strategy tool that helps you identify threats and opportunities in the market by analyzing political, economic, social, and technological factors. It can be used together with Ansoff Matrix so you can get a better understanding of external factors that could have an impact on your business in the future.

What is the difference between Ansoff Matrix and BCG Matrix?

BCG, also known as a product portfolio matrix, helps business prioritize their resource allocation based on two dimensions: market growth and relative market share. BCG Matrix focuses on the product, while Ansoff Matrix also takes into account the market. Both have their own pros and cons, but used together can provide great support in the strategic planning process.

Editor’s note: We've written extensively on strategic frameworks businesses can use. Check out some of our other articles below:

• Value Disciplines Model & Your Competitive Advantage
• The Benefits of Applying The Stakeholder Theory
• Maslow's Hierarchy As a Business Framework
• Unlocking the Power of the Balanced Scorecard
• Using the VRIO Framework to Create Sustained Competitive Advantage
• McKinsey's Three Horizons of Growth Can Help You to Innovate

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The Ansoff Matrix: A Powerful Tool for Business Strategy and Growth

In today's fast-paced and ever-changing business landscape, companies must continuously seek out new opportunities for growth in order to remain competitive and thrive. However, identifying the most promising avenues for expansion and weighing the associated risks can be a daunting challenge for any business leader. This is where the Ansoff Matrix comes in - a simple yet highly effective strategy framework that has helped countless organizations successfully navigate the complexities of business growth for over half a century.

Developed by applied mathematician and business manager H. Igor Ansoff in 1957, the Ansoff Matrix (also known as the Product/Market Expansion Grid) provides a structured approach for evaluating different growth strategies based on whether they involve new or existing products and markets. By examining the four distinct quadrants of the matrix - Market Penetration, Market Development, Product Development, and Diversification - decision makers can gain valuable insights into the potential risks and rewards associated with each option, enabling them to make more informed choices and allocate resources effectively.

In this article, we will take an in-depth look at the Ansoff Matrix and its applications in business strategy . We'll explore the key characteristics and considerations for each of the four growth strategies, discuss the benefits and challenges of using the Ansoff Matrix, and provide practical tips and examples for putting this powerful tool into action. Let's dive in!

Understanding the Four Quadrants of the Ansoff Matrix

At the heart of the Ansoff Matrix lie four distinct growth strategies, each defined by a unique combination of products and markets (existing or new). These strategies are:

• Market Penetration: Focusing on increasing sales of existing products in existing markets.
• Market Development: Introducing existing products into new markets.
• Product Development: Developing new products for existing markets.
• Diversification: Creating new products for new markets.

The Four Growth Strategies of the Ansoff Matrix

Let's take a closer look at each quadrant and the key considerations for pursuing growth within these areas.

1. Market Penetration

The market penetration strategy focuses on increasing sales of existing products within existing markets. This approach is generally considered the least risky of the four options, as it leverages the company's established strengths and market knowledge. Typical tactics for achieving market penetration include:

• Increasing marketing and promotional efforts to attract new customers.
• Improving product quality or features to encourage repeat purchases.
• Adjusting pricing strategies to boost sales volume.
• Acquiring competitors to gain market share.

For example, a consumer packaged goods company seeking to increase its share of the snack food market might invest in targeted advertising campaigns, introduce new packaging designs, or offer promotional discounts to drive sales of its existing product lineup.

The primary advantage of the market penetration strategy is that it allows businesses to capitalize on their current assets and capabilities, minimizing the need for substantial investments in new product development or market exploration. However, the potential for growth may be limited, particularly in mature or saturated markets where competition is fierce and opportunities for differentiation are scarce.

2. Market Development

The market development strategy involves taking existing products into new markets, whether by targeting different customer segments, expanding into new geographic regions, or exploring alternative distribution channels. This approach enables companies to leverage their proven product offerings while tapping into fresh sources of demand. Common market development tactics include:

• Adapting products or marketing messages to appeal to new demographics.
• Establishing a presence in untapped geographic markets, either domestically or internationally.
• Partnering with new distributors or retailers to reach wider audiences.
• Developing online sales channels to complement brick-and-mortar operations.

A classic example of successful market development is Apple's expansion into the Chinese market, where the company's iconic iPhone and iPad products have found a massive new customer base.

While market development can open up significant growth opportunities, it also comes with its own set of risks and challenges. Entering new markets often requires substantial investments in market research, localization, and infrastructure development, and companies may face intense competition from established players or cultural barriers to adoption.

3. Product Development

Product development focuses on creating new products to serve your existing market. This strategy aims to leverage your brand's reputation and customer loyalty to introduce innovative offerings that address evolving customer needs or capitalize on emerging trends.

To implement a product development strategy , businesses should:

• Invest in research and development to identify opportunities for innovation and create products that align with customer needs.
• Gather customer feedback and insights to inform product design and features.
• Collaborate with key stakeholders, such as suppliers and distributors, to ensure successful product launches.
• Develop a strong value proposition and marketing strategy to generate interest and demand for the new product.

An example of product development is a smartphone manufacturer introducing a new model with advanced features to appeal to its loyal customer base.

4. Diversification

Diversification is the riskiest of the four growth strategies, as it involves entering entirely new markets with new products. This strategy can be further divided into two types:

a. Related Diversification: Expanding into new markets or products that are related to your existing business, allowing for potential synergies in terms of resources, capabilities, or customer base. An example of related diversification is a car manufacturer expanding into the electric bicycle market, leveraging its expertise in vehicle design and manufacturing.

b. Unrelated Diversification: Venturing into markets or products that are unrelated to your current business, which can help mitigate risks associated with relying on a single market or product line. An example of unrelated diversification is a software company acquiring a chain of fitness centers to diversify its portfolio.

To pursue a diversification strategy, businesses should:

• Thoroughly assess the risks and potential returns associated with entering new markets or developing new products.
• Conduct extensive market research to validate the demand for the new product or service in the target market.
• Develop a clear understanding of the resources and capabilities required to successfully execute the diversification strategy.
• Create a robust plan for integrating the new business into the organization's overall structure and operations.

By carefully considering diversification opportunities through the lens of the Ansoff matrix, business leaders can make strategic decisions that drive growth while managing risk. The key is to find the right balance between leveraging existing strengths and exploring new opportunities in a way that aligns with the company's overall vision and goals.

Benefits of Using the Ansoff Matrix

The Ansoff Matrix offers several key benefits for business leaders and organizations:

• Strategic clarity: By providing a clear framework for evaluating growth options, the Ansoff Matrix helps business leaders gain clarity on their strategic direction and prioritize initiatives based on their risk-return profile.
• Risk assessment: The matrix helps businesses understand the relative risks associated with each growth strategy, enabling them to make informed decisions and allocate resources appropriately.
• Structured decision-making: Using the Ansoff Matrix encourages a structured approach to decision-making, ensuring that all relevant factors are considered when evaluating growth opportunities.
• Alignment with business objectives: By aligning growth strategies with the overall business strategy and objectives, the Ansoff Matrix helps ensure that initiatives are focused and purposeful.
• Adaptability: The framework can be applied to various industries, business sizes, and market conditions, making it a versatile tool for any organization seeking growth.

How to Apply the Ansoff Matrix in Your Business

To effectively use the Ansoff Matrix in your business, follow these steps:

• 1. Assess your current situation: Evaluate your existing products, markets, and capabilities to establish a clear understanding of your starting point.
• 2. Identify potential growth opportunities: Brainstorm potential growth options within each of the four quadrants of the Ansoff Matrix, considering your business's strengths, weaknesses, and market trends.
• 3. Evaluate risks and potential returns: Assess the risks and potential returns associated with each growth option, taking into account factors such as market demand, competition, and required resources.
• 4. Prioritize growth strategies: Based on your risk assessment and alignment with business objectives, prioritize the growth strategies that offer the best balance of risk and return for your organization.
• 5. Develop an implementation plan: Create a detailed plan for executing your chosen growth strategy, including resource allocation, timelines, and key performance indicators (KPIs) to measure success.
• 6. Monitor and adapt: Continuously monitor the performance of your growth initiatives and be prepared to adapt your strategy as market conditions or business circumstances change.

Real-World Examples of Ansoff Matrix Application

Here are some real-world examples of Ansoff Matrix application:

• Market Penetration: Coca-Cola, the global beverage giant, has successfully employed market penetration strategies by increasing its advertising efforts, running promotional campaigns, and expanding its distribution network to reach more consumers within its existing markets.
• Market Development: Netflix, the streaming service provider, has pursued market development by expanding its services globally, entering new countries, and adapting its content offerings to suit local preferences.
• Product Development: Apple, the technology company, consistently engages in product development by introducing new products and services, such as the iPhone, iPad, and Apple Watch, to its existing customer base.
• Diversification: Amazon, the e-commerce and cloud computing company, has diversified its business by entering new markets and offering new products, such as Amazon Web Services (AWS) and Amazon Prime Video, which are distinct from its original online retail business.

The Ansoff Matrix is a powerful strategy framework that helps business leaders evaluate and plan for growth. By considering market penetration, market development, product development, and diversification strategies, companies can make informed decisions about how to expand their business while managing risk.

Each growth strategy within the Ansoff Matrix comes with its own set of opportunities and challenges. Market penetration, the least risky option, focuses on increasing sales of existing products within current markets. Market development involves selling existing products in new markets, while product development introduces new products to existing markets. Diversification, the riskiest strategy, entails entering new markets with new products and can be further divided into related and unrelated diversification.

To effectively apply the Ansoff Matrix, businesses should assess their current situation, identify potential growth opportunities, evaluate risks and returns, prioritize strategies, develop an implementation plan, and continuously monitor and adapt their approach as needed.

Whether pursuing market penetration, market development, product development, or diversification, the key is to find the right balance between leveraging existing strengths and exploring new opportunities in a way that aligns with the company's overall vision and goals.

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Ansoff Matrix: Strategies and Practical Examples [2024]

Apr 28, 2024

Having a solid strategy in the constantly evolving business world is important. This allows you to navigate a competitive environment and seize growth opportunities. The Ansoff Matrix, a classic strategic planning tool, provides a framework to understand and explore these opportunities. In this blog, we will detail how the Ansoff Matrix can transform your business strategy, illustrating with concrete examples.

Introduction to the Ansoff Matrix

The economist Igor Ansoff formulated the Ansoff Matrix in the 1950s. This tool is essential in strategic management as it identifies four key strategies for business growth.

These strategies include market penetration, product development, market development, and diversification.

The matrix emphasizes the importance of strategic planning for businesses. This planning helps them evaluate their growth options in a changing market. Many managers and business strategists worldwide now use this tool to aid decision-making for their development.

Understanding the Four Strategies of the Ansoff Matrix

Market Penetration: Aims to increase market share in the existing market with existing products. To retain their customer base, companies implement impactful marketing campaigns, offer exclusive deals, and constantly improve their products.

Product Development: Aims to expand the existing product line in the existing market. This can be done by adding new features, product versions, or even colors. This strategy relies on a deep understanding of market needs and changing consumer preferences.

Market Development: Involves expanding into new markets with current products. This can be done by targeting new segments, regions, or countries. This strategy requires careful research and planning to ensure the product fits the new market.

Diversification: Proposes developing new products for new markets. This strategy is risky as it involves moving into a new area. However, if well executed, it can offer good growth opportunities.

Practical Ansoff Matrix Examples

Each Ansoff Matrix example below demonstrates how leading companies have used the Ansoff Matrix to boost their growth. These case studies illustrate the practical application of each matrix strategy to achieve successful expansion:

Coca-Cola - Market Penetration

Coca-Cola serves as an excellent example of effective market penetration in practice. The iconic soft drink brand has increased its market share by offering targeted promotions and advertisements to attract customers. By employing this strategy, Coca-Cola has achieved a high level of recognition with its existing products.

Apple - Product Development

Apple is renowned for creating innovative products that meet the needs and desires of today's consumers. By focusing on innovation and quality, Apple has significantly boosted its growth and remarkable success in the tech sector. The launch of revolutionary products like the iPhone, iPad, and MacBooks perfectly illustrates Apple's commitment to excellence and innovation.

Tesla - Market Development

Tesla is actively exploring new markets with its electric vehicles, targeting countries where their adoption is already strong. The company has also developed an extensive charging network to facilitate daily use of its vehicles. Thanks to this effective strategy, Tesla has strengthened its international presence and stimulated demand for its products.

McDonald's - Diversification

McDonald's exemplifies a successful diversification strategy by regularly enriching its menu with new products to adapt to the evolving tastes of consumers. This strategy has also strengthened McDonald’s position as a leader in the competitive fast food sector. By responding to changing customer preferences across different markets, McDonald's has affirmed its commitment to innovation and evolution.

Effectiveness of the Ansoff Matrix

The Ansoff Matrix is simple and flexible. It helps all businesses identify their growth opportunities, no matter their industry. This tool helps analyze current and potential markets and emphasizes the need to innovate products to stay competitive.

By diversifying strategic options, the Ansoff Matrix helps businesses minimize the risks associated with growth. It assists in deciding where to invest money to earn the most profit. The matrix matches growth plans with the long-term objectives of the company. However, success depends on effective execution of strategies and the company’s ability to adapt to market changes.

Limitations of the Ansoff Matrix

While the matrix offers a useful analytical framework for evaluating business strategies, it is not without limitations.

It fails to consider the competitive environment, which is crucial for understanding the forces at play in the market.

It overlooks the risks associated with each proposed strategy, which could lead to poorly informed strategic choices.

Despite challenges, analyzing competitors deeply can reveal useful insights into their tactics and weaknesses, improving your initial framework.

Moreover, strategic risk management, assessing and planning for potential risks, can strengthen decision-making.

How to Apply the Ansoff Matrix

To effectively use the Ansoff Matrix, start by analyzing your current market and products or services. This involves understanding market dynamics, consumer behavior, as well as the strengths and weaknesses of your current offerings.

Then identify potential opportunities for each strategy of the matrix - market development, product development, market penetration, and diversification.

Carefully evaluate these opportunities based on your capabilities and available resources. To succeed, it’s crucial to find a balance between your strategic goals and the concrete actions.

This will allow you to develop achievable strategies that align with your company’s objectives. Staying flexible and adapting to market changes is essential to maintain an effective approach over the long term.

Besides, check out these other articles on productivity methods that we’re sure you’ll find useful!

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References : https://en.wikipedia.org/wiki/Ansoff_matrix

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The Ansoff matrix: Comprehensive overview with examples

Numerous considerations are important in a decision-making context. One of those considerations is making the decision-making process transparent and easy to grasp in a quick glance.

The good news is that there are numerous decision-making techniques available — many of which are easy to learn and can provide visibility into trade-off decisions in particular.

In this article, we’ll take a look at one such technique: the Ansoff matrix.

What is the Ansoff matrix?

The Ansoff matrix is one of many manifestations of a 2×2 matrix that helps with product decision making. Being visually-oriented, the Ansoff matrix is especially appealing for making rapid trade-off decisions.

The idea behind the Ansoff matrix originated in a paper from the 1950s by the mathematician Igor Ansoff. In the paper, Ansoff articulated considerations behind product-market fit. In particular, he focused on ways in which organizations could balance risk by assessing the potential for new or existing products in new or existing markets.

What are the four factors of the Ansoff matrix?

The four components (quadrants) of an Ansoff matrix serve to help with making trade-off decisions. They’re each based on what is known about products and the markets they potentially operate in.

The four components are market penetration, product development, market development, and product/market diversification:

The decision-making power behind the Ansoff matrix has a lot to do with its ability to make the level of relative risk immediately apparent. There is a big difference between making adjustments to an existing product, in a familiar market, as opposed to playing in a completely different product and/or market space.

The four areas that an Ansoff Matrix focuses on are:

• Market penetration (lower left quadrant) — Low risk because it focuses on existing products in existing markets. Any idea that lands in this quadrant means that the organization is sticking with familiar terrain, and seeking to leverage the familiar to find ways to extract greater value with minimal investment
• Product development (lower right quadrant) — Moderate risk because it focuses on new products in existing markets . Any idea that is part of this quadrant looks to augment product offerings within a reasonably familiar market context. Risk exposure is minimized by introducing the new product to a familiar market segment or demographic, as it tests the new product before sending it to a less-familiar market
• Market development (upper left quadrant) — Moderate risk because market development focuses on existing products in new markets. Any idea that is part of the market development quadrant flips the risk to be mostly in the product domain instead of being mostly in the market domain, while keeping the risk manageable
• Product/market diversification (upper right quadrant) — High risk because it focuses on new products in new markets. Ideas that startup companies pursue tend to be in the product/market diversification quadrant, as in such cases the hypothesis is that there is a significant market opportunity open to the company that launches a “good enough” product into that space. The risk of failure is considerable

Risk is not the only factor worthy of consideration when making decisions about product-market fit, however. The flip side to risk is reward. And often, the highest potential reward tends to land in the upper right quadrant. Let’s take a look at each of the four components in greater detail.

Market penetration

We’re certainly on familiar terrain when it comes to evaluation of market penetration. When we’re working in this quadrant, we’re looking at products that already exist, and where we’re selling those products into an existing market.

For this and subsequent examples, let’s say we work for a company that makes chewing gum, and let’s call this company Chewing Yum. Let’s further suppose that at Chewing Yum, our products focus primarily on health-conscious adults, and that our product distribution is limited to the United States.

At Chewing Yum, our market analysis tells us that we’re seeing consistent erosion in market share. Given that information, we might decide to embark on a number of relatively low-risk strategies to address this situation, by experimenting in areas such as:

• Distribution
• Minor product enhancements

For example, we might choose to experiment by dropping the price, for:

• One of our products, in a single existing market segment
• One of our products, in multiple existing market segments
• A family of related products, in a single existing market segment
• A family of related products, in multiple existing market segments

We might even find that by swapping one ingredient with another, we can get more flavor, we can get a lower cost, or we may find that our customers are more likely to buy our product if it’s located in the health section of the store.

Product development

As we move into the lower right quadrant of the Ansoff matrix, we’ve entered the domain of introducing new products into existing markets. In some cases, when we say “new product,” it could mean releasing an existing product with significant modifications, it could mean a brand new product that takes us in a significantly different direction as a company, or multiple other variations around the same theme.

On the less ambitious end of the spectrum, let’s suppose that our Chewing Yum market research tells us that our product packaging would be more likely to generate sales if we gave it a fresh look, and we’ve decided to do that in conjunction with changing the name of an existing product (where we’ll have a bold new marketing campaign associated with those changes). And that product re-launch in turn might lead to an idea for a brand new product.

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On the more ambitious end of the spectrum, let’s say that we’re looking closely at our competitors, and that we’re seeing an opportunity to increase our market share via some form of acquisition. For example, we might decide to:

• Acquire a competitor and thereby increase our product portfolio
• Obtain the rights to make and distribute a different company’s product
• Jointly develop a new product with another company

Market development

Market development takes us into the upper left side of the Ansoff matrix, where we seek to find new settings in which we can sell our existing products. Also known as market extension, market development offers a number of approaches that we could potentially consider.

At Chewing Yum, we might very well have found via research that we have a significant growth opportunity if we explore selling our products outside of normal retail outlets, where we can reach more health-conscious people by partnering with health clubs or health spas to sell our products into several large, well-established partners in that space. We might also have found that we can significantly expand our market share by moving into online sales, to enhance our more traditional distribution channels.

And looking further afield, let’s suppose that we see a particularly promising opportunity in the English-speaking European market, where we can potentially dramatically increase our reach without making changes to product packaging or branding. We might even catch a break because a prominent health guru has mentioned our product on a television show or a podcast, which opens the door to one or more additional potential markets.

Product/market diversification

The fourth and final quadrant of the Ansoff matrix is the upper right quadrant. It is here where we can potentially explore opportunities that may come with the largest possible payoff, but these often are accompanied with the largest potential risk.

Given that the potential for surprises is the greatest when exploring diversification, it’s especially important for our market research to be particularly robust. Indeed, we might decide that we are not yet ready to explore diversification until we invest in further research and data collection.

The good news is that at Chewing Yum, we’ve done our homework. Thanks to our research, we envision a phased approach, where we envision introducing new products, and also entering new markets. It can be helpful when thinking about diversification to break it down into a couple of sub-categories. Let’s call these categories:

Parallel diversification

Orthogonal diversification.

In parallel diversification, the changes that we’re contemplating with respect to new products and new markets are largely in alignment with our existing branding and product offerings.

At Chewing Yum, we’ve decided the first part of our diversification strategy will be to augment our market share by introducing a new product line focusing on a younger audience. And as part of the launch of the new product line, we plan to expand into the English-speaking component of the Canadian market, because we see less competition in that space than we do in some other markets for our new product offering.

In orthogonal diversification, we’re going in a significantly new direction for our company. At Chewing Yum, we’ve discovered that there is a growing market for chewables for pets (dogs in particular). To expand into this market, we’re going to offer a new product line that acts as a dietary supplement and also cleans the dogs’ teeth and gums. As part of this product launch, we’re going to initially sell into existing markets, and also explore the possibility of exploring into new markets.

Note : There are additional ways to articulate forms of diversification, which we won’t delve into here. For instance, some practitioners distinguish between horizontal diversification (similar to what I’m calling parallel diversification) and vertical diversification. In vertical diversification, a company might choose to increase how much it is involved in different parts of the value chain. For instance, a company might choose to focus its diversification activities more on the top of the funnel, or it might choose to diversify in areas such as procurement and manufacturing.

Advantages and disadvantages of using the Ansoff matrix

Let’s now turn to advantages and drawbacks associated with the use of an Ansoff Matrix. Advantages include:

• Simplicity — It’s an easy technique to master, with little introduction required
• Portability — It’s straightforward to use in a variety of settings, whether virtual, in-person, or hybrid
• Transparency — It offers visibility into the decision-making process

As is the case with any decision-making tool, it’s important to recognize the strengths, and also the weaknesses, inherent in the approach. Examples of disadvantages associated with Ansoff matrix usage include:

• It’s not a stand-alone artifact . Depending on the level of rigor of the work that preceded usage of the Ansoff matrix, along with how well-understood the competitive landscape is, it’s important to see its usage as just one tool in the decision-making toolbox, and not rely on it alone for making key decisions
• It’s not a remedy for lack of alignment . If decision-makers do not have the same understanding of foundational terms and business dynamics, the Ansoff matrix alone cannot by itself address that gap

Complementary techniques to the Ansoff matrix

Given both the advantages and the disadvantages associated with usage of an Ansoff matrix, it is common to use it in conjunction with other techniques. To name a few examples:

• SWOT analysis — The thought process when considering strengths, weaknesses, opportunities, and threats works well in conjunction with an Ansoff matrix. For instance, by conducting a SWOT analysis before using an Ansoff matrix might best inform which quadrant of the Ansoff matrix to focus on
• PESTLE analysis — Because PESTLE (political, economic, sociocultural, technological, legal, and environmental) helps with taking a big-picture view, completing an Ansoff matrix might point to which aspect(s) of PESTLE is/are most important to focus on
• Porter’s Five Forces — This model can provide additional perspective, since it helps organizations better understand the risks in their business context, such as the bargaining power of buyers and suppliers, and the threat of potential competing goods and services or competing market players

Based on the preceding examples, using our fictitious Chewing Yum company, we have seen some of the most common ways in which organizations can use an Ansoff matrix. As such, it most often serves as a decision-making tool, enabling people in various parts of an organization to explore their growth options. Due in large part to its simplicity, and to its visual nature, it’s an excellent tool to include in any organization’s decision-making toolbox.

Because of its structure, an Ansoff matrix also serves as a reminder about certain realities in any organizational context. That is, it illustrates how business growth is possible without product or market development. And it also shows what options might exist in the middle ground, by expanding either products or markets, without relying on more risky diversification strategies.

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Ansoff Matrix

Ansoff matrix: overview, business strategies and practical examples.

The Ansoff matrix or Market Product development matrix, or market product matrix was developed by a famous researcher – Igor Ansoff in 1975. Until now, The Ansoff matrix has been used as a strategic planning tool for revenue growth at firms’ different market segments; thereby facilitating strategic managers in making decisions.

Four growth strategies from Ansoff matrix

Ansoff, in his 1957 paper, provided a definition for product-market strategy as “ a joint statement of a product line and the corresponding set of missions which the products are designed to fulfil ”. He describes four growth alternatives for growing an organization in existing or new markets, with existing or new products.

Ansoff matrix is built through three steps, namely: (i) identifying current products and markets of enterprise, (ii) identifying new and potential products and markets of enterprise; since then (iii) developing a matrix to determine enterprise’s position and strategic directions of market product pairs. The two criteria of (existing and new) product and (existing and new) market form the two axes of the Ansoff matrix, and shape the four corporate strategy frameworks as shown in the following figure. Each alternative pose differing levels of risk for the firm.

Market penetration strategy or market consolidation strategy

This strategy is applied when enterprises want to expand their business in the current market by using existing products to sell to their existing customers. Specifically, enterprises boost their sales of current products through sustainable marketing efforts in current market, such as discount campaigns, expanding distribution points in the current market, sales, promotions … The four main methods are: increasing purchase frequency, increasing purchase number of existing customers, selling to competitors’ customers, and selling to new customers. For example, Coca-Cola and Pepsi, when penetrating the Vietnamese market in the early 2000s, conducted their marketing campaigns and aggressive promotions to dominate the market, in which Coca-Cola focused on the North and Pepsi in the South.

Market development strategy

This strategy includes the activities to promote sales of current products in new markets, such as new areas or new countries. New markets can also be interpreted as new market shares with products that have been adapted or new distribution channels.

The difference between market development strategy and market penetration strategy is the expansion in overall market size of enterprises. For example, Coca-Cola brings its products to Russia for sale, which means it has expanded its markets and increased its potential market.

However, market development strategy has certain risks due to the lack of knowledge about the needs and tastes of new customers. For example, a US supermarket brand decides to use the market development strategy in Japan by building large supermarkets, which are very successful models in the US. However, this is a mistake because Japanese consumers do not like American style shopping. Thus, this brand does not really understand the shopping culture of the Japanese people, although they have very extensive knowledge of industrial management methods.

Product development strategy

This is a strategy to increase revenue by launching new products to the current market. New products can be changed in style, design, new version, … and sold to customers through existing distribution channels. As market penetration strategy, market development strategy can cause risks such as leaving original brand, or original brand removal with new brand appearance.

There are three main ways to implement this strategy depending on whether enterprise wants a new brand name for this product. They are: products with new features, quality and technology but no new brand names; or expanding brand with a new brand name; and finally, new brand name with its own identity. For example, Coca-Cola has removed calories in its beverage component to create Diet Coke, and adds vanilla flavor to create Vanilla Coke.

Diversification strategy

For this strategy, enterprises try to introduce and develop their new products in new markets. This is considered a campaign with many risks because enterprises must develop both new markets and new products at the same time. The risk that enterprises can face is that their new brand can lose the meaning of the original brand, or manipulate the original brand. Or sometimes, the lack of knowledge about consumers’ tastes and habits makes this strategy fail.

Product diversification strategy is only implemented when enterprises recognize potential needs in addition to their current products. This strategy can develop vertical activities, which make the most of existing management technology devices, such as selling sales software, then hardware devices such as printers, computer, … Or, it is also possible to develop a horizontal strategy for satisfying customers in other field or with other technologies, for example, selling sales software and repairing printers, assembling computers, ….

Analyzing some practical examples

Ansoff matrix of coca-cola..

Coca-Cola is a freshwater brand registered in 1893 in the United States. According to the history of development, Ansoff matrix can be applied to analyze the business development strategy of Coca-Cola as follows:

Concerning the Market penetration strategy, with its traditional products developed since 1886, Coca-Cola had penetrated deep into the market, its targeting customers are large buyers and multinational business organizations.

Concerning the Market development strategy, after achieving great success in the US, Coca-Cola decided to expand its market to the UK with vanilla flavored products. Previously, Coca-Cola conducted a survey about Russian customers’ tastes as well as products with the same flavor in this market for launching completely distinctive products but still bearing its style.

Concerning Product development strategy: Coca-Cola has constantly changed and developed its products. So far, this company has launched many new products to the market, such as diet drinks (Diet Coke), Vanilla Coke with vanilla flavor, or changing the design and size of Coca-Cola bottles to suitable for more customer groups.

Concerning the Diversification strategy: Coca-Cola has produced energy drinks for sports players. In addition, the company has produced snacks served with its beverages.

Ansoff matrix of Vinamilk – a Vietnamese milk company

Vinamilk has penetrated deeply into the existing markets by expanding the distribution system of existing products such as condensed milk, liquid milk, powdered milk and yogurt … in all provinces with 220 distributors and 125,000 points of sales. In addition, the company has exported its products to foreign markets such as Australia, Cambodia, the Philippines, the US, …

Vinamilk’s new product and service development strategy has aimed at new product lines, such as weight-loss milk powder, milk-flavored juice and pasteurized milk with various flavors such as strawberry, chocolate, sugar, rich in calcium, …

Vinamilk has developed the market by adding new products to the existing markets, such as soymilk, juice, bottled water, ice cream, … for diversifying customers and market segment.

Also, for developing existing markets and products, Vinamilk has expanded its business activities to look for its business development opportunities. Currently, Vinamilk has participated in real estate, securities investment, production and sales of plastic products and goods transportation by car, cargo handling …

Ansoff Matrix is one of the first and effective tools to support strategic managers for clearly defining strategic position of their enterprises, thereby establishing future directions and objectives. At the same time, Ansoff Matrix shows risks of each strategy in the decision-making process. However, this model is rather simple because it does not integrate with external environment elements. Moreover, the model focuses on potential market rather than necessary resources to support the chosen strategy. In addition, there is no guarantee of success when enterprises follow a specific strategy, so it is recommended to combine this model with other models or in-depth studies to properly assess their current situation. Since then, enterprises can choose the most suitable direction in the future.

Source: Ansoff Igor (1957), “Strategies for Diversification”, Harvard Business Review , Vol. 35 Issue 5, pp. 113-124.

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The Ansoff Matrix: origins and examples

The idea of sustained company growth is the holy grail that most managers and executive leaders chase throughout their careers. Making one successful product is definitely an achievement, but the climb rarely stops at this singular business milestone. Often when a business hits a certain level of maturity in any given industry, they need to begin looking at new avenues of growth.

Take Google, which was already flourishing in the late 2000s with its search engine technologies and other products concerning its services. By then, Google knew that they needed to diversify their offerings to gain entry into possibly large growth in the online video streaming market. They ended up paying $1.65b for YouTube in their acquisition of the platform. This is but a fraction now of the value they brought in, totalling $28.8b in revenue this past 2021 .

The question, then, is how did Google know which direction to take their company? Of all the things that Google could have done, acquiring a user-content-focused platform was likely not in the minds of those in the market. In this article, we will look at the Ansoff Matrix , a useful strategic planning tool, and how this framework can help us understand the decisions behind Google’s behemoth of an acquisition. 

What is the Ansoff Matrix?

The Ansoff Matrix is what is known to managers as a strategic planning tool , essentially an easy-to-understand and sometimes visually represented framework that allows you to plot different variables and data points relevant to your context to achieve a potential better analysis of the situation.

The Ansoff Matrix is concerned with the prospects of product and market development, analyzing different factors in a business to better understand the proper growth strategy to undertake.

Ansoff Matrix vs Other Strategic Planning Tools

The Ansoff Matrix can be better understood as a hybrid model that focuses more on the internal capabilities and direction of a company, with some influence based on the external market status being observed.

This differs from other strategic planning tools such as Porter’s 5 Forces , which focuses directly on the industry’s different dimensions of competitiveness. This tool falls more in line with other frameworks like the Resource-Based-View , which better identifies the different resources available to the firm and analyzes their capacity for competitive advantage.

Using the Ansoff Matrix should be done with the consideration that it will likely not capture the full picture but rather play a role in developing a more informed decision when used in parallel with other strategic planning tools.

History of the Ansoff Matrix

The Ansoff Matrix was actually first developed by applied mathematician and business strategist Igor Ansoff, whose work was introduced to the wider business environment through an article shared by HBR called “The Firm of the Future” .

His simple two-by-two matrix is focused on “ a joint statement of a product line and the corresponding set of missions which the products are designed to fulfill ”. The Ansoff Matrix was meant to utilize the dimensions of products and markets to better guide business leaders on the proper strategy implementation, given specific information regarding these two dimensions.

The Different Parts of the Ansoff Matrix

Something you’ll see a lot when it comes to strategic planning tools is how strategic experts seem to enjoy using the two-by-two matrix. This standard has been seen in the famous BCG matrix as well as different visual representations of the generic strategy model.

As such, the Ansoff Matrix utilizes the same two-by-two matrix for its ease in showing the relationship between two variables. In this case, the variables in question are the products and markets relevant to the firm’s strategic discussion. Depending on the overarching goals of a company, these two dimensions can be measured as either “ Existing ” or “ New ”. Different combinations of existing or new products and markets provide a specific output strategy in response, falling into one of four quadrants: Market Development, Diversification, Market Penetration, and Product Development.

1 - Market Development

The first quadrant deals with strategies relating to a certain company’s existing products being introduced to new markets. This essentially means that the company is looking to enter some sort of new market in a specific capacity, either through new geographies, demographics, or behavioral target groups.

Utilizing this tactic requires insight based on your product’s uses as well as its ability to be integrated into a new audience. This commonly occurs in companies achieving a specific level of growth that indicates they can have the potential in reaching international audiences. Coca-cola, for example, is a leader in market development with its ability to tailor its marketing and product for uses in specific countries and demographics. The company itself notes on their company website that its international expansion was key to Coca-cola being the “ global brand it is today ”.

Of course, it’s only natural that a company like Coca-cola would seek expansion towards new countries once they realized the strength of their business domestically. Recognizing the goal of market development helped Coca-cola focus its efforts on establishing the proper organizational structures to support this growth through the “ foreign department ” in New York during the 1920s. They then established rigorous guidelines on how and where their product was made and distributed, signing bottling agreements and even utilizing “traveling labs” to ensure quality wherever they set up shop.

The exact steps of the market development will vary from company to company, industry to industry. Look for the key establishing requirements to set a foothold within a specific target audience as well as insights that can help you understand consumer behavior in relation to your products or services.

2 - Diversification

Diversification is one of the many buzzwords thrown around business spaces that unfortunately get greatly misunderstood most of the time. While the overarching meaning of diversification is to spread out your portfolio to include distinct assets, its practice varies greatly given the context in which it is applied. For the purposes of our analysis using an Ansoff Matrix, we will look towards what Diversification means in terms of organizational growth, the riskiest out of the four quadrants .

As our matrix shows, diversification occurs when your organization looks towards developing both new products and new audiences completely different from the current portfolio that the company currently manages. It can be difficult to identify a specific product that can reliably diversify your company’s offerings, as many products and services in today’s market can be considered complementary or substitutes of one another. Our earlier example regarding Google is a great example of diversification, as it dealt with an acquisition of a platform that was keenly distinct from its current portfolio of products.

A useful tool to use here can be borrowed from the school of economics, where you can study cross-price elasticity (the relationship between one’s price regarding another). If the price of one good remains static despite changes in the price of another, then you can verifiably consider the product to be distinct and diverse from the current product used as a comparison.

There are also three critical tests you can utilize to better assess whether the diversification will be beneficial to your business. First is the attractiveness test , which has to do with the overall market potential that the prospective product operates. You can analyze the attractiveness of this new industry you’re looking to enter through Porter’s 5 Forces analysis, one of the earlier strategic tools we mentioned that could further enrich your analysis.

Next is the cost-benefit analysis , which deals with value creation versus the prospective costs that the product will incur. Different industries evaluate businesses to different standards, though profitability ratios based on the product’s financial performance can help analyze whether the cost of acquiring the product is worth its potential value. Last is the better-off test, which focuses on the possible competitive advantage that your company stands to gain from this diversification, either through tangible or intangible means.

3 - Market Penetration

If you have both an existing product and are looking to improve our performance in your current commercial market, then your focus based on the Ansoff Matrix should be on Market Penetration. Often business leaders looking at their products at this stage will argue whether retention of their current customers or acquisitions of new ones within the market will better serve them. While some may lean towards retention as a “ cheaper ” method of improving market performance, it’s market penetration via customer acquisition that ends up better developing a brand’s growth within an existing market.

Ehrenberg-Bass, a marketing research firm based in South Australia, is a key proponent of market penetration as a way to develop a brand in relation to others competing for the same space. Additional research indicates that the focus on strategies relating to market penetration has indirect benefits to customer retention as well, solving two existing marketing strategies in one.

Costco is a good example of a company that utilizes strong customer acquisition strategies that in turn translate to customer retention programs. Their membership card requirement for store entry is fairly affordable at a low annual fee and allows them to continue leveraging the same members with promotional events and targeted advertisements.

4 - Product Development

Lastly, the fourth and final quadrant on the Ansoff Matrix deals with product development This is the most novel approach to growth that a company can endeavor towards as it’s essentially building an entirely distinct product from the ground up while simultaneously looking towards growth opportunities

Here, innovation frameworks might be useful in developing a product idea and creating systematic plans to achieve it. One framework that might be useful here is the double diamond method , which utilizes different stages of divergent and convergent thinking to better generate lateral thinking around a particular opportunity point.

Netflix is a disruptor in the current media market now thanks to a product development strategy they managed through their online video streaming platform. Streaming was already present in the market but was largely used in different ways by a distinct consumer audience. Netflix developed one of the first scalable systems to allow seamless video streaming to a movie and entertainment-inclined audience at a fixed monthly rate, where it was an innovation in an existing market.

Product development will require material insights from your intended target audience market while finding opportune moments in the same industry that provides the best alignment of available technologies and resources.

Benefits and Drawbacks of the Ansoff Matrix

The Ansoff Matrix remains a relatively simple but focused tool in getting your organization geared towards a specific strategy based on future growth plans. Important here then is the eventual mission and future state that the organization sees itself in, as well as respective timelines to better get a sense of the feasibility of a given strategy.

This is where the Ansoff Matrix reaches the limit of its capabilities, as it doesn’t take into account other factors that affect product and market interactions. Competitor movements are largely static in this model, so a separate analysis of the competitive landscape is necessary to avoid being affected in unforeseen ways. Moreover, it lacks a comprehensive review of the resources available to the firm, and only considers a top-line analysis of the current product portfolio and how the general market environment. As such, the Ansoff Matrix will provide much more benefit when used in conjunction with other frameworks that can better round out a strategic approach for your company.

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Ansoff matrix: what it is, and how to use it

April 1, 2021 by MindManager Blog

By: Emily Finlay

Growth is the primary concern for most businesses. This development can take many forms, but eventual financial gain is typically the most important result.

To achieve sustainable growth, however, businesses have to determine the best ways to expand. Leading the company to a successful future requires careful strategizing. Should you expand your product line? Maybe it’s better to find new markets. Or should you find a completely new product and market entirely?

An Ansoff Matrix is a tool that can help you determine the best path for your company’s growth. With this simple diagram, you can discover the most beneficial direction to take your business and team.

What is an Ansoff Matrix?

The Ansoff Matrix definition is: a strategic planning tool that shows four different ways companies can grow through product or market expansion. By using the matrix, businesses can better understand the risks and challenges presented by each strategy.

The diagram, also known as the Product/Market Expansion Grid, was created by an applied mathematician and business manager named H. Igor Ansoff. He published the matrix, included in an article called “ Strategies for Diversification ,” in the Harvard Business Review in 1957. Over 60 years later, his work remains a powerful tool for businesses looking to expand and grow.

How to use an Ansoff Matrix

When using an Ansoff Matrix, you and your team will consider questions, risks, and opportunities that follow under four categories. These include:

Market Penetration

Market development, product development, diversification.

As you can see in the example, these categories make up the four quadrants in the matrix. Moving into a new section, either vertically or horizontally, increases the risks of the actions you’re considering. Market penetration is the option with the least risks, while diversification holds the highest risks.

Let’s look into these quadrants a bit deeper.

This option is the most simple and, as mentioned above, least risky. Rather than trying to develop a new idea, you would find new ways to make your existing product more appealing and successful within the market you already use.

Since you’ve already found some success in that arena, the challenge would be increasing sales by changing your marketing strategies instead of the product. You might accomplish this by running promotions, lowering your prices, or changing your distribution strategy. Whatever will attract new buyers and increase your sales, that’s the direction you need to go.

For example, a local bakery could expand by offering a loyalty program that rewards returning customers with free baked goods. They could also send a voucher for a free meal to anyone who signs up for their newsletter. Even though the business and product remain the same, these new strategies bring in fresh business.

When market penetration doesn’t offer enough potential, it’s time to consider moving your products into a new market . This can include opening stores in new locations, targeting a new audience, or moving your products into international markets.

These moves give your successful products new exposure. Since you already know that there’s a need for your items, this is a great way to find more interest.

A silly sock company that caters only to adults can also begin offering a line for kids. Though the focus is different, the basic concept and materials are exactly the same. By targeting this new customer segment, they can sell more pairs than ever before.

Conversely, product development involves creating new products for an existing customer base. These new offerings generate renewed interest in the company, retaining customers that might otherwise choose competitors with more products.

There are a couple of ways businesses can approach product development, such as:

• Creating a new product that appeals to your current audience.
• Developing a service related to your existing products.
• Partnering with businesses to offer a package deal that includes your product.
• Acquiring a competitor and using their value to increase your own.

Expanding your product line is risky and expensive, so this avenue requires in-depth research and development. You should only use this option if you have a strong grasp of your audience and a firm place within your existing market

One of the most prevalent examples of product development today can be found within streaming services. Though these companies, such as Disney and NBC, may have already reached every available viewer in their main market (creating entertainment), developing a streaming platform keeps these customers invested in the company. Along with a new stream of revenue, it also provides the opportunity to offer exclusive items only to subscribers and further solidify their market share.

When the other three strategies are exhausted, it’s time to consider diversification . This quadrant is the most risky option for a reason. Diversifying involves creating a new product for a new market. Rather than relying on an existing customer base or product, this strategy starts from scratch.

That said, businesses can use related diversification to make things somewhat easier. Rather than creating a line of products that has nothing to do with your existing offerings ( unrelated diversification ), you can develop items that are similar. This allows you to use the knowledge and experience you’ve gained to direct your new venture.

When Apple began selling smartphones alongside their computers, tablets along with their smartphones, and watches with their tablets, for instance, these were examples of related diversification. The introduction of the Apple credit card and AppleTV, however, are reflections of unrelated diversification strategies.

How to create an Ansoff Matrix

You can create an Ansoff Matrix by making a four-quadrant grid that includes Market Penetration, Market Development, Product Development, and Diversification. The matrix should also show the overlap of new markets, existing markets, new products, and existing products for the quadrants.

You can create either virtual or physical versions with any medium you prefer, such as on paper, whiteboards, slideshows, and more. Using mapping software, such as MindManager , is also a great option. These tools offer options such as Ansoff Matrix templates and editing capabilities that further simplify creating and using your matrix.

To create your diagram, follow these steps:

1. Create your matrix

Using the tool of your choice, design your grid with each category, as described above. Templates are the best and easiest option, allowing you to save time and energy. This step, while important, should not take long to complete.

2. Consider your options

Next, plot the potential strategies you can pursue in each quadrant. Consider the practical ways you can grow the company. While you should be realistic about the viability of each idea, don’t limit your brainstorming. Think big and bold.

3. Run a risk assessment

Understanding the risks is the main point of the Ansoff Matrix. Use a Risk/Reward Matrix template to identify the ways you are putting your business in danger and the potential challenges involved. You can also use a risk impact/probability chart to order them by importance.

4. Plan for your risks

Now that you know what you might face, create contingency plans that address these risks. Focus on the risks with the highest probability and level of impact.

5. Select your approach

After walking through these steps, you will hopefully know which growth strategy is the best option to pursue. Take this direction and start planning how you’ll implement it!

Example of a Ansoff Matrix

When using this tool to develop growth strategies, use the Ansoff Matrix example below as a guide for your own diagram.

Ansoff Matrix use cases

Now that you know all about the Ansoff Matrix, we want to talk about the specific ways you can use it within your own business. Below, we’ve outlined some of the situations you may face and the best strategy to use.

Plateaued sales

If you have a good product that meets the needs of the people in your market, but you are struggling to attract new customers, consider market penetration. Offer rewards for referrals or a limited-time sale on your top-selling products. Give people a reason to learn about your brand.

Market saturation

When you’ve reached the limits of your current market, it’s time to branch out with market development. If you’re not already, start selling your products online. This can give you national and even global reach. You can also open a new location in a new city, bringing your products to a brand new crowd.

Questions about new products

If customers keep asking when you’re going to offer something, you should consider selling it. Product development increases your revenue and generates fresh interest in your brand. Just do your homework to make sure this is a sustainable option.

Needs that your products can’t solve

Are you seeing an unmet need? Do you have the ability to fill it? Even if it’s outside your sphere, this can be a life-changing opportunity to expand. Just remember, diversification is a risky move. Make sure you’re completely prepared and able to execute this shift before taking the jump.

Downloadable Ansoff matrix templates from MindManager

Click the images below to access the Ansoff matrix example shared above, and a blank template created using MindManager. Click “Menu” in the bottom left corner of your browser window, and then click “Download” to get a copy of the template. Open the template in MindManager to start working.

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Ansoff Matrix Case Studies

Here we explore real-world case studies of companies that have successfully implemented each of the four strategies outlined in the Ansoff Matrix, illustrating the versatility and effectiveness of this tool in practical business planning and execution.

Market Penetration: Coca-Cola’s “Share a Coke” Campaign

One of the quintessential examples of market penetration is the “Share a Coke” campaign launched by Coca-Cola. In the face of stagnating sales and increasing competition, Coca-Cola sought to increase its market share within the existing market by encouraging more frequent use of its product. The campaign involved personalizing coke bottles with popular names, inviting consumers to find bottles with names that held personal significance to them or as gifts for friends and family.

This creative approach not only revitalized interest in purchasing Coke products but also leveraged social media as customers shared photos and stories about their personalized Coke bottles. The “Share a Coke” campaign led to a significant increase in sales, illustrating the power of innovative marketing techniques in executing a market penetration strategy.

Product Development: Apple’s iPhone Evolution

An iconic example of product development is seen in Apple’s continuous evolution of its iPhone product line. Apple has consistently innovated its offerings by introducing new features, improved technology, and design enhancements to meet the changing preferences and demands of its consumer base. Each new version of the iPhone is designed with enhanced capabilities, such as better cameras, faster processors, and new software functionalities, ensuring that Apple’s product offerings remain at the forefront of the technology and telecommunications market.

This approach fosters brand loyalty and encourages existing customers to upgrade to the latest models, thus driving sales growth through new product offerings to the same market.

Market Development: Netflix’s Global Expansion

Netflix’s transformation from a DVD rental service to a global streaming giant is a successful example of a market development strategy. By expanding its services internationally, Netflix entered new geographical markets without significantly altering its primary service or product offerings. The company adapted its content to cater to regional tastes and preferences, investing in local original content, and making strategic partnerships to make its service available worldwide.

This expansion tapped into new customer segments and significantly increased Netflix’s subscriber base and revenue, demonstrating the potential of a well-planned market development strategy.

Diversification: Amazon’s Foray into Cloud Computing with AWS

Amazon’s introduction of Amazon Web Services (AWS) is an exemplary case of diversification. Starting as an online bookstore, Amazon diversified its business model by venturing into cloud computing services, which was unrelated to its original core business. AWS offered a broad set of global cloud-based products including computing power, storage options, and AI capabilities, addressing a whole new market of developers and companies needing scalable, reliable cloud infrastructure.

This strategic move not only opened Amazon to new revenue streams but also positioned it as a leader in the cloud services industry, illustrating the potential of diversification to drive growth and mitigate risks associated with depending on a single market or product line.

What is an Ansoff Matrix?

The Ansoff Matrix refers to a business analysis technique that is intended to provide a framework for the identification of growth opportunities. The Ansoff Matrix, also referred to as the Ansoff Box, can help you take into consideration the implications of using new or existing products to grow business in new or existing markets. Each of the options for growth depend on both internal and external investigations, influences, and analysis. These are then used for alternative strategies.

The purpose of the SWOT analysis is the identification of the strengths and weaknesses of the organization, as well as the opportunities and external threats to it. Once the strengths and weaknesses have been identified, the Ansoff Matrix can be used for the investigation of the implications of the current strategy of the organization. The Ansoff Matrix can be used to investigate the changes that the SWOT analysis suggests.

How beneficial the Ansoff Matrix and the SWOT analysis are depends on the accuracy and the quality of the market intelligence on which they are based. It is ideal if working managers supply the information because they are most able to offer up-to-date and accurate information for everything ranging from competitor activities to customer feedback.

The desire for this information indicates that you may be need to involve yourself in strategy meetings. It is also a good idea to become familiar with business analysis jargon and techniques so that it is easier to make a valuable contribution by relying on your own expertise.

Expert Igor Ansoff, who is an American planning expert, created the Ansoff Matrix. The Ansoff Matrix is a marketing strategy that links an organization with its general strategic direction. It offers four growth strategies in the format of a 2×2 matrix or table.

One aspect of the matrix takes existing and new products into consideration. The other dimension takes existing and new markets into consideration.

Importance Of the Ansoff Matrix

Two major advantages of the Ansoff Matrix are the focused approach and growth potential. In terms of the focused approach, the Ansoff Matrix allows team leaders, owners, and managers to maintain a focused approach. The purpose of this is to help develop strategies that may work. A company can focus on just four major elements to fuel growth, drive sales, and boost the viability of running a business. This gives the company a far greater chance of creating profits and surviving. Diversification, market penetration, product development, and market development are not novel ideas. These ideas existed five or six decades ago. However, the Ansoff Matrix combines the four key elements and makes it important to strategize them.

The purpose of the Ansoff Matrix is to fuel growth. Companies are able to expand their business and enter into uncharted territories thanks to astute strategizing. There is a disciplined or stringent approach. There are presentable plans and hard facts to use. There are also analyses that help companies identify areas of opportunities and growth that a company is forfeiting.

Some criticisms of the Ansoff Matrix include isolation challenges and logical consistency challenges. The Ansoff Matrix used on its own can be misleading. The Ansoff Matrix does not take into consideration the activities of competitors nor does it take into consideration the ability for competitors to counter moves into different industries. The Ansoff Matrix does not take into consideration the risks and challenges of changes to business activities. An organization that is interested in moving into various markets or creating new products must think about whether they possess the necessary resources.

Ansoff Matrix Templates

In general, it is much easier to start with an  Ansoff Matrix template  and build on that instead of starting from scratch. If you want to begin using the Ansoff Matrix, a template is generally an excellent place to start. Some key elements that you should consider when evaluating templates include the following:

The Ansoff Matrix template allows you to keep track of the implications of using one of the strategies. The matrix allows you to use the SWOT analysis findings and assess the strategic implications.

A company’s marketing direction is one of the main facets of ensuring the long-term and short-term success of the company. If you are a manager, it is important that you have a good understanding of the marketing strategy as a whole. You want to select a template that will help you do this. Fortunately, there are many Ansoff Matrix templates available on the Internet. The templates differ in terms of style and color. Some Ansoff Matrix templates have more information on them while others have less.

We’ve developed a  free Ansoff Matrix Google Slides template  to get you started.

Ansoff Matrix Real Life Examples

Market penetration is more than just expanding existing products to existing markets. A company can grow their customer base in a market that exists by cutting prices, improving the distribution network, increasing existing production capacity, and investing more in marketing. Brands like Heineken and Coca-Cola are well-known for spending a significant amount on marketing for the penetration of markets. Also, these brands are well-known for maximizing their use of distribution channels to make deals more attractive with many distributors like football stadiums, supermarkets, bars, and restaurants.

Product development refers to developing and selling new products in markets that already exist. For example, companies can make some changes to already existing products to increase the value or launch entirely new products. One example of product development is how Apple launches a new iPhone every year or so. Other examples include pharmaceutical companies that invest in Research and Development to release new drugs.

Market development involves selling more of the existing products of the company to new markets. The strategy involves international expansion to new geographic areas and reaching new customer segments. If the product of a company is performing well in a market, it may be a good idea to enter a new market with those products. An example of market development is IKEA, which has managed to become one of the largest furniture retailers. IKEA began by expanding to markets that are similar in terms of culture to Sweden, which is IKEA’s home country. Eventually, IKEA branched out to targeting China and the Middle East, which are far more different culturally.

Nike Ansoff Matrix Case Study

The competitive advantage of Nike over other brands in the apparel and athletic footwear industry is shown through the differentiation strategy. The purpose of the differentiation strategy is to incorporate uniqueness and value in all products. Two major aspects of the strategy are product innovation and brand recognition. Nike boasts the most global brand recognition out of all the brands in the world. Nike’s slogan “Just Do It” and the swoosh have made Nike the most recognizable brand in the industry. Nike is well-known for using professional athletes in its advertisements.

A firm uses a market penetration strategy when a firm already has a product and hopes to attain a growth strategy for a market that already exists. A simple example of the strategy is that Nike is able to remain competitive against Adidas and other competitors. Nike creates advertisements that feature famous athletes in both television and print commercials. The advertisements are intended to take a portion of the market share from its rivals. Therefore, Nike’s strategy is an attempt to get a greater portion of the same market.

Nike is constantly developing products for a market. This includes new types of trainers. As Nike develops new products, the company also gains new customers. Therefore, if Nike wants to remain competitive, new product development is a crucial development strategy. Also, Nike is constantly launching its products in new countries. This is an example of market development. Overall, any example of the expansion of a product from a current market to another market where the product is not in existence is an example of market development.

In conclusion, the Ansoff Matrix is an excellent framework for the structuring of the options a company has to grow. Market penetration is the most common and least risky of the four options. The most risky is diversification because a company is able to enter a new and unfamiliar market completely with a new and unfamiliar product. However, if the company is successful in terms of its ability to enter unrelated markets, it has the advantage of boosting a product portfolio that is well-balanced. This decreases the total level of risk.

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How to Use Ansoff Matrix For Successful Business Strategies

The Ansoff Matrix is a strategic planning framework to help businesses develop and decide upon strategies for growth. This guide will teach you how to use it.

Table of Contents

This guide will teach you how to use The Ansoff Matrix to help you make decisions and determine a strategy for your business.

Igor Ansoff developed a matrix over 50 years ago that is still commonly used today by businesses and education institutes to help make decisions and pick a strategy. That’s obviously a good matrix!

What is the Ansoff Matrix?

The Ansoff Matrix (sometimes referred to as the Strategic Opportunity Matrix) is a strategic planning framework to help businesses develop and decide upon strategies for their growth. It’s designed to effectively provide four strategic options and highlight the levels of risk associated to those for the business.

It works as a 2×2, housing four generic strategies that can be applied to your business, highlighting a default risk level for each one. It’s also known as the Product/Marketing Expansion Grid.

This quick video guide will tell you everything you need to know to about the framework – what it is, why it’s so useful, how to use it and what to do with the ideas and insights it will give you.

What are its advantages?

There are a number of advantages including:

• An easy way to guide discussion of options
• Helpful to classify your strategic choices and evaluate risk
• It can be used as a company tool or individual departments, such as Marketing
• It’s quick and simple to understand
• It has a growth mindset and is designed to help businesses focus and develop
• Highlights risk and ensures it’s discussed

What are its limitations?

As with every framework, there are some limitations to Ansoff Matrix such as:

• It’s very simple to the extent that a lot of extra thought is required
• It doesn’t capture some of the detail of your market research or position, eg competitors
• While risk is measured, reward is not factored into the tool
• Can’t be used on it’s own to decide your strategic direction

What are the four strategies of an Ansoff Matrix?

The four strategies are:

• Market Penetration: Selling more of your existing business to existing customers or existing markets
• Product Development: Developing your existing product and/or service
• Market Development: Entering new markets
• Diversification: Entering new markets with new products and/or services

What is Market Penetration?

The Market Penetration strategy is about focusing on your existing business, your current product or service, and your current segmentation. If you’re picking this strategy then you’re objective is market share growth.

Some considerations may include:

• What’s your current market share and can it sustain growth?
• How will you continue growth? Price decrease? Partnerships?
• Are there competitors that you can acquire or work with?
• Are other plays in the market moving or focusing, how well are they doing?

This approach sometimes is viewed as just doing “more of the same”, which is perhaps unfair. If you’ve got a successful niche and there’s significant growth in your market, then it’s a sensible decision to continue to focus and reap the rewards.

Read more about the Market Penetration Strategy .

What is Market Development?

The Market Development strategy is taking your existing products or services into new marketplaces, both geographic or customers. For example, you might want to move from the UK and begin selling to the US, or you might decide that your product or service would be fantastic for a completely different type of customer.

The market growth potential of this strategy is significant, but it requires you to pick the right market to enter and history is littered with examples of companies not getting it right.

Some considerations include:

• Can you rapidly scale your product or service?
• Is your industry similar across countries?
• What is the competitive landscape like in your new market?
• What is your current segment of customers and who is similar?
• How will it impact your internal teams (e.g. Marketing)?
• What’s the new market size?

If you’re exploring a new market, one tool to consider using is Porter’s Five Forces. Here’s an introduction to Porter’s Five Forces and a guide on how to complete your own Five Forces .

What is Product Development?

The Product Development strategy is the one often associated with Innovation, even though Innovation can sit in many places in your strategy – see 4Ps of Innovation . It’s where a business decides to develop new products or services targeting the existing customer market.

This strategy has a mix of growth alternatives by new business and growth by upselling existing customers, and the advantage that if done successfully means cross selling can occur between the products. A good example of this is SalesForce with their CRM and then their sister product FinancialForce.

Considerations:

• How will you sustain innovation without derailing your existing business?
• Are there obvious gaps in products or services that competitors offer?
• What do your customers tell you? Is there demand for a particular service or product?
• How can your current product be altered within the 4Ps of Innovation?
• Can you acquire a product or white label a product with your brand?
• Can you partner with businesses to provide services or become a channel partner?
• How can you open your innovation ideas up to the whole company – it could be informal hack days, a formal stage gate approach, or a mix.

What is Diversification?

Arguably the trickiest of all four is the diversification strategy – this is where a business moves into a new market and creates a new product or service, at the same time! There’s more to get right with this strategy but many examples of success. Wrigley started off selling soap, only moving into chewing gum when a free promotion proved gum was more popular than soap.

There are many failures too. Did you know Cosmopolitan (magazine) launched a brand of Yoghurt?

Some considerations to ask yourself on this strategy choice…

• How can you diversify, is there a product or service that is related to your current offering?
• What framework will you use to test the ideas and concepts?
• What level of risk and investment can you tolerate?
• How strong are the competition in your new market?
• What is the overall goal?
• What is the potential return?
• How do your current strengths and weaknesses align to the needs of the new offering?

With all these strategies you need to do some work, but especially this one requires considerations by creating a SWOT and completing Five Forces .

What are the risk levels of each strategy?

The framework suggests the following:

• Diversification High Risk
• Product Development Medium Risk
• Market Development Medium Risk
• Market Penetration Low Risk

Crucially though, the framework doesn’t take into account the detail of your situation. For example, it may be for you Market Development has quick wins with low risk, while your current market may be saturated with little growth.

Ultimately use the risk levels as a guide around generic difficulty, rather than specific risk.

What preparation should be done before using an Ansoff Matrix?

This framework isn’t like SWOT Analysis , PESTLE Analysis , etc – it’s much more a guide to discussion. You don’t complete the framework, you use it to debate potential strategies and list them out. So in that sense, no preparation is required.

However, you’ll get significantly more out of the framework is you circulate it round in advance and have some thoughts about…

• Potential innovation
• Potential marketplaces
• Your current performance
• Your current market share
• Your competitor activity
• Your customer feedback

Who invented the Ansoff Matrix?

It was created by H. Igor Ansoff in 1957 as part of a research paper he published called Strategies for Diversification.

What is the difference between the Ansoff Matrix and the Strategic Opportunity Matrix?

Nothing – they are two names for the same matrix!

How often should a company use the Ansoff Matrix?

Every time a strategy or direction is evaluated, it’s worth keeping this framework in mind as a broad way to classify your behaviour, and a manner to suggest alternatives.

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Aldi’s Generic Competitive Strategy & Growth Strategies

Aldi’s competitive strategy involves cost-based advantages that enable retail business growth strategies. The discount supermarket chain continues to grow internationally despite strong competitors and market saturation. This generic competitive strategy and the intensive growth strategies help bring the goals of Aldi’s vision statement and mission statement to fruition. For example, the company’s competitive advantages and revenue growth strengthen capabilities for reaching strategic goals for retail business success. While Aldi faces competitive challenges, its generic strategy maintains competitive advantages for attracting target customers and ensuring profitable operations despite low selling prices. Aldi’s growth strategies aim for a stronger market presence and higher sales figures based on a larger market share.

Based on Michael E. Porter’s generic strategies for competitive advantage, Aldi focuses on cost as a defining factor in doing business. The company’s brand image and merchandise prices depend on this competitive strategy. Based on Igor Ansoff’s matrix of intensive growth strategies, Aldi focuses on attaining a larger share of its target markets. The company’s expansion depends on these growth strategies for its multinational retail business.

Aldi’s Generic Competitive Strategy

Aldi’s competitive strategy is cost leadership , which translates to low business costs and the ability to offer low and competitive selling prices. In Michael E. Porter’s model, this generic competitive strategy requires that the discount supermarket chain maintain low operating costs. Competitive advantages based on low business costs mean that Aldi’s generic strategy ensures competitiveness against other retailers, including Lidl, Whole Foods , Costco , Walmart , and Amazon ’s e-commerce and brick-and-mortar stores. This competitive strategy also helps deter Home Depot , which is not a direct competitor, from diversifying to offer food products through new business operations similar to Aldi’s.

Aldi’s business model involves low costs that support low prices for private-label products that are alternatives to many mainstream brands that are more expensive. With cost leadership as a generic competitive strategy, cost-effective operations lead to competitive advantages, including the business strengths described in the SWOT analysis of Aldi . These strengths empower the company, especially in competing with big-box retailers that offer low prices. The Five Forces analysis of Aldi depicts a highly competitive market where effective cost leadership as a competitive strategy can support long-term business growth and success. This generic competitive strategy determines cost limits and the productivity and process efficiency targets in Aldi’s operations management.

Aldi’s Growth Strategies

Aldi’s primary growth strategy is market penetration involving additional stores, such as the ones in the United States. In Igor Ansoff’s matrix, this intensive growth strategy has the goal of generating more sales revenues from the same target customers in the company’s current retail markets. For example, adding new grocery stores in the U.S. can increase Aldi’s revenues and grow the business. Also, the company can sell more merchandise to the same customers through enhanced marketing and related strategies. Aldi’s marketing mix (4P) reflects business efforts in implementing this intensive growth strategy. New store locations based on market penetration as a growth strategy can lead to changes in Aldi’s business structure (company structure) , especially geographic divisions for operations in various markets.

Aldi also relies on product development as an intensive growth strategy, although to a limited extent. This strategy aims to grow the retail business through new products for more sales. For example, Aldi introduces private-label products whose close alternatives are difficult to find elsewhere. Through this growth strategy, the company attracts buyers to its stores. External factors, like the ones described in the PESTLE/PESTEL analysis of Aldi , inform decisions about the kinds and characteristics of new products to develop in implementing this intensive growth strategy.

• Aldi History .
• Aldi’s Products .
• America’s Low-Price Leader ALDI Expands Footprint Nationwide with 800 New Stores by the End of 2028 .
• Gupta, A., Pachar, N., Jain, A., Govindan, K., & Jha, P. C. (2023). Resource reallocation strategies for sustainable efficiency improvement of retail chains. Journal of Retailing and Consumer Services, 73 , 103309.
• Leppänen, P., George, G., & Alexy, O. (2023). When do novel business models lead to high performance? A configurational approach to value drivers, competitive strategy, and firm environment. Academy of Management Journal, 66 (1), 164-194.
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