ANSOFFS MATRIX

IGOR ANSOFFs MATRIX

Market

Produ ct
EXIST

EXISTING

NEW

MARKET PENETRATION
Increase sales to existing market Penetrate existing market more deeply

MARKET DEVELOPMENT
Existing products sold to new markets

NEW

NEW PRODUCT DEVELOPMENT

New products developed for existing markets

DIVERSIFICATION
New Products sold to new markets

IGOR ANSOFF MATRIX

MKT

PROD UCT
EXIST

EXISTING

NEW

MARKET PENETRATION

Little risk

MARKET DEVELOPMENT

Moderate Risk
DIVERSIFICATION

NEW

NEW PRODUCT DEVELOPMENT

Moderate Risk

High Risk

Market Penetration

Maintain increase market share in current market with current products Selling more of the same to the same people In saturated market - Difficult In stagnant market grab market share from others intense competition

Market Penetration

Increase usage by existing customers Encourage increase in frequency of use Attract customers away from rivals / Gain market share at expense of rivals Devise and encourage new applications Encourage non-users to buy

Use Market Penetration when

When the market is not saturated When there is potential of growth When competitors share is falling When increase in volume leads to economies of scale When there is scope to sell more to existing users

Market-Penetration Strategy

Why ? How ?

To dominate market

To increase usage or get new customers; reduce price; expand distribution or increase promotional activities

When ? When market is growing What to look out for ? Competitive reaction;
cost of conversion

Example: Airlines used reduced fares &

promotion various family travel packages to penetrate market

PRODUCT-MARKET STRATEGIES

A product- (new offering-) development strategy dictates that an organization create new offerings existing markets.

PRODUCT-DEVELOPMENT STRATEGY This strategy involves:

Product Innovation Developing totally new offerings.

Product Augmentation

Enhancing the value to customers of existing offerings.

Product Line Extension

Adding different features, sizes, etc. to broaden the existing line.

Product Development Strategy

New product to replace old product New innovative products Product improvements Product line-extensions New products to complement existing Products at a different quality level from existing product

PRODUCT-DEVELOPMENT STRATEGY
Factors to consider when adopting this strategy:
The market size and volume needed for profitability. The magnitude and timing of competitors responses. The impact of the new product on the sales of existing offerings (cannibalization). The capacity of the organization to deliver the offerings to the market(s).

Product-Development Strategy

To satisfy buyers need New or improved product; innovate or augment product When ? Customer has a need or a problem

Why ? How ?

What to look out for ?

Market size/volume competitor reaction effect on existing products resources to deliver new products

PRODUCT-MARKET STRATEGIES

A market-development strategy dictates that an organization introduce its existing offerings to markets other than those it is currently serving (existing offerings new markets).

Market Development Strategy

Selling the same product to different market Entering new markets, segments with existing products Gaining new customers, new segments, new markets Requires changes in marketing strategy, distribution, pricing policy, promotional strategy

Use market development when

Untapped market is beckoning The firm has excess capacity Attractive channels to access new markets

MARKET-DEVELOPMENT STRATEGY This strategy involves:

Adjusting the marketing mix, such as:
Modifying the basic product offering Using different distribution outlets Changing the sales effort or advertising

Analyzing competitors strengths, weaknesses, and potential for retaliation.

MARKET-DEVELOPMENT STRATEGY This strategy involves (continued):

Identifying the number, motivation, and buying patterns of new buyers. Determining the organizations ability to adapt to new markets to evaluate success.

MARKET-DEVELOPMENT STRATEGY
Internationally, this strategy has four forms:

Exporting

Licensing

Joint Venture/ Strategic Alliance

Direct Investment

MARKET-DEVELOPMENT STRATEGY
Exporting

Involves marketing the same offering in another country through sales offices or intermediaries.

Licensing

Is a contract where one firm (licensee) is given the rights to patents, trademarks, etc. by the owner (licensor) in turn for a royalty or fee. Involves investment by both a foreign firm and a local company to create a new entity in the host country. The two forms share ownership, control, and profits of the entity. Involves investing in a manufacturing and/or assembly facility in a foreign market. Is the most risky and requires the most commitment.

Joint Venture/ Strategic Alliance

Direct Investment

Market-Development Strategy

Sell existing products in new markets; modify product; use different distribution; use different advertising/sales strategy

Why ? How ?

To venture into new markets

When ? Present market is saturated What to look out for ? Competitive reaction;
understand new buyers; adaptability

Diversification

New products sold to new markets New products sold to new customers Select based on growth prospects which the two new variables offer that the present product-market does not

Diversification Strategy

Why ?
business

Growth opportunities outside current

How ? New products for new markets When ? Distinctive competencies available What to look out for ? High risks, resources
required, need to understand new markets, fit with distinctive competencies

Uses of Ansoffs Matrix

A framework to explore directions for strategic growth Most commonly used model for strategic growth Identify and analyze growth opportunities Considers expected returns and risks

Strategy Selection

STRATEGY SELECTION

Product-market strategies are evaluated based on:

The organizations business definition, mission, and capabilities. Market capacity and behavior.

Environmental forces.
Competitive activities.

STRATEGY SELECTION

Product-market strategies are chosen based on:

Costs and benefits of a strategy. Probabilities of success for a strategy. Analysis of competitive structure, market dynamics, and opportunity costs. The product itself.