Describe the Ansoff product / market matrix as a strategic planning tool

The Ansoff Growth matrix is a tool that helps businesses to decide on their product and market growth strategy.
It suggests that a business’ attempts to grow depending on whether it markets new or existing products in new or existing markets. The output from the matrix is a series of suggested growth
strategies that set the direction for the business strategy. These are described below:
1. Market penetration
Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets. Market penetration seeks to achieve four main objectives:
- Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling
- Secure dominance of growth markets
- Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors
- Increase usage by existing customers – for example by introducing loyalty schemes A market penetration marketing strategy is very much about “business as usual”. Here the business focuses on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.
2. Market development
Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets. There are many possible ways of approaching this strategy, including:
- New geographical markets; for example exporting the product to a new country • New product dimensions or packaging
- New distribution channels
- Different pricing policies to attract different customers or create new market segments
3. Product development
Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets.
4. Diversification
Diversification is the name given to the growth strategy where a business markets new products in new markets. This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience. For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks. Diversification can be done in four ways:
- Horizontal diversification. This occurs when the company acquires or develops new products that could appeal to its current customer groups even though those new products may be technologically unrelated to the existing product lines.
- Vertical diversification. The company moves into the business of its suppliers or into the business of its customers.
- Concentric diversification. This results in new product lines or services that have technological and/or marketing synergies with existing product lines, even though the products may appeal to a new customer group.
- Conglomerate diversification. This occurs when there is neither technological nor marketing synergy and this requires reaching new customer groups.

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Titany answered the question on September 20, 2021 at 08:16