Ansoff growth matrix

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What is Ansoff growth matrix?

Ansoff growth matrix is an important planning tool that helps organisations determine their growth strategies. There are a number of growth strategies an organisation may pursue and Ansoff has outlined four of them i.e. market penetration, market development, product development and diversification.

Who is Ansoff?

Harry Igor Ansoff was born in 1918 and passed away in 2002. He was a Russian American mathematician. He is one of the greatest thinkers in strategic management. Many would argue that he is the father of strategic management.

Ansoff growth strategies

Ansoff developed the Matrix in 1957. As stated above, the model outlines four possible growth strategies available for an organisation. However, it is worth mentioning that each of these options come up with some risks of varying degrees as well.

Market Penetration

It refers to selling existing products to existing markets (BPP Learning Media, 2010). It is a low growth strategy; however, it is also the safest of the four options proposed by Aansoff. This is a growth strategy which is used by virtually all organisations regardless of their sizes.

Market Development

It is the ‘process by which the firm seeks new markets for its current products’ (BPP Learning Media, 2010, p.161). In other words, selling existing products to new markets is by definition market development. Organisations can implement this strategy by different ways e.g. identifying new geographical areas, providing different package sizes etc. Wal-Mart deciding to get into Indian market is an example of market development. This is a risky strategy as the new market has not been tested before. However, the risk is moderate due to existing products.

Product Development

It refers to the ‘launch of new products to existing markets’ (BPP Learning Media, 2010, p.162). Apple developed new products such as iPhone, iPad, Apple Watch etc to sell to existing markets. It is a risky strategy as new products fail very often. However, the risk is moderate as the new products are to be sold to the existing markets.

Diversification

Diversification ‘occurs when a company decides to make new products for new markets’ (BPP Learning Media, 2010, p.162). It is of two categories i.e. related diversification and unrelated diversification. It is a very swift growth strategy, and many companies have successfully implemented it e.g. Easy Jet, Virgin, ASDA, and Tesco to name but a few. However, it is also the most risky option as neither the products nor the markets have been explored before.

Conclusion

Understanding Ansoff growth matrix is very important for strategic planners. The model offers them a very useful and simple way to think about their growth options. It also helps them understand their products and markets very well which is in fact very important for strategic planning.

We hope this article on Ansoff growth matrix has been useful. You may also like reading Understanding Ansoff matrix – an example of Coca-Cola. If you liked this article, feel free share it by clicking on the icons below.

The article publication date: 13 January 2017

Further reading/references

BPP Learning Media (2010) Business Strategy, London: BPP Learning Media

Johnson, G., Scholes, K. and Whittington, R. (2006) Exploring Corporate Strategy: Text and Cases, 7th Edition, UK: Prentice Hall

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Author: M Rahman

M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He is a graduate of Leeds Metropolitan University and London South Bank University.