20 June 2006

Ansoff Matrix

The Ansoff Product-Growth Matrix is a marketing tool created by Igor Ansoff in order to portray alternative corporate growth strategies, focusing on the firm's present and potential products and markets (customers). By considering ways to grow via existing products and new products, and in existing markets and new markets, there are four possible product-market combinations.

Ansoff's matrix provides four different growth strategies:
  • Market Penetration - the firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share.
  • Market Development - the firm seeks growth by targeting its existing products to new market segments.
  • Product Development - the firms develops new products targeted to its existing market segments.
  • Diversification - the firm grows by diversifying into new businesses by developing new products for new markets.
For more information on this matrix, click here and here.

5 comments:

Anonymous said...

When I use the Ansoff Matrix for market growth I find it rather dooming to categorise the growth strategy in to the four boxes. I know the theory and its clear to me but, I think the main problem lies at recognising what the "Current Market" is. I will give example's to clarify where I find difficult:
1) Accor company starting with Novitel mid-range hotels and expanding to Sofitel (luxury) and F1(Budget) hotels. Here, Accor has extended to new segments of the market (this says that its market development). The product too is modified to appeal to each new market (product development). This is clearly not diversification or penetration. So how do I categorise this growth between the product development and market development strategies? Which one is it? It seems to be both.

According to Ansoff matrix, new product and new market means diversification. But this does not look like diversification at all. Please explain, I am confused about Ansoff's Matrix.

Ahsan Kaleem said...

If taking Accor as an example, the company has moved into different segments of the same market. When you enter a new market or into new sections of the same market, you obviously provide the customers with a different range of products/services.

Therefore 2 options are left for you: Market Development or Diversification.

According to Risk Management, this can be seen as Diversification as you've entered a new section of a market and are offering different set of products/services.

But according to Ansoff matrix the answer is Market Development as the products and services you are offering are very similar the company is still operating in the Hotel Industry providing its customers with very similar products/services.

Hope this helps.

Kerron said...

Hi,

I'm doing an assignment at uni on Ansoff. Came across your blog and just want to say thanks for the info and links.

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Simon Kinsella said...

The examples above where a hotel company moves from the mid-range to the budget / luxury market can be described as concentric diversification. It carries the risks of both product and market development but involves the firm leveraging its existing capabilities within the industry to gain some advantage and to reduce the risk of this strategy. The risk is therefore considerably lower than a conglomerate diversification stratgy and probably lower than any vertical or horizontal integration strategies.