Ansoff Matrix in Amazon (Amazon’s Growth Strategy)
This article examines the use of Ansoff Matrix in Amazon. It looks at how Amazon uses four growth strategies suggested by Ansoff in his popular growth matrix called ‘Ansoff Matrix’. Ansoff recommends four growth strategies for businesses i.e. market penetration, market development, product development, and diversification.
Market penetration strategies of Amazon
Market penetration encourages organisations to sell their existing products to their existing markets. Amazon has been using this strategy since its inception. In fact, it uses it very aggressively by employing a number of marketing techniques such as advertising on multi-media, and sales promotions. The strategy is working so well that the company generated $263.5 billion in net sales in the USA alone in 2020 (Coppola, 2021).
Market development strategies of Amazon
Market development is about exploring new markets to sell the current products. Amazon has developed a massive number of new markets over the years. Its products are shipped to over 100 countries and territories outside of the United States (Delfino, 2020). Its biggest markets are the USA (home market), the UK, Germany, and Japan (Coppola, 2021).
However, Amazon failed in one of its promising markets, China. It entered the country in 2004 and started doing very well. However, it announced shutting down its business in 2019 as it was struggling to fend off competitors such as Alibaba, and JD (Kharpal, 2019).
Product development strategies of Amazon
Product development is the next strategy to be analysed in the Ansoff Matrix in Amazon. Amazon started as an online bookstore in 1997. Since then, it has been adding new products in its portfolio aggressively. In fact, it now sells virtually everything on its site.
Amazon develop its own new products and services regularly. For instance, it announced three new Alexa-enabled products i.e. a smart sticky note printer, nutrition scale and cuckoo clock in early 2021 (Kelly, 2021). However, some of its products and services failed badly in the past causing it billions of dollars. Amazon Spark, Amazon Storywriter, and Dash buttons are some of the examples in this regard.
Diversification strategies of Amazon
Diversification is a very risky strategy as it involves developing new products to sell to new markets that were never catered for. Amazon understands the challenge and has invested billions of dollars to implement its diversification efforts. For instance, it has been working on developing a fully driverless vehicle for quite some time.
However, some of Amazon’s diversification efforts did not work out well. For example, Whole Foods 365-brandded stores, and Amazon Restaurants can be considered here. It is worth stating the Amazon is a risk-taking company and very committed to experimenting new things as Jeff Bezos once said: ‘companies that don’t continue to experiment,…………..they eventually get in a desperate position’ (Green, 2019).
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Last update: 05 March 2021
Coppola, D. (2021) Annual net sales of Amazon in selected leading markets from 2014 to 2020, available at: https://www.statista.com/statistics/672782/net-sales-of-amazon-leading-markets/ (accessed 04 March 2021)
Delfino, D. (2020) Does Amazon ship internationally?’: Yes, it does — here’s how to navigate and use Amazon international shipping, available at: https://www.businessinsider.com/does-amazon-ship-internationally?r=US&IR=T (accessed 04 March 2021)
Green, D. (2019) Jeff Bezos has said that Amazon has had failures worth billions of dollars — here are some of the biggest ones, available at: https://www.businessinsider.com/amazon-products-services-failed-discontinued-2019-3?r=US&IR=T (accessed 01 February 2021)
Kelly, S. (2021) Amazon just teased 3 new products. They may never hit the market, available at: https://edition.cnn.com/2021/02/17/tech/amazon-build-it/index.html (accessed 04 March 2021)
Kharpal, A. (2019) Amazon is shutting down its China marketplace business. Here’s why it has struggled, available at: https://www.cnbc.com/2019/04/18/amazon-china-marketplace-closing-down-heres-why.html (accessed 04 March 2021)
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 holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.