The Ansoff Matrix

Aims

• To maintain or increase share of the current market with current products.
• Secure dominance of a growth market or restructure a mature market by driving out competition.

Strategies

• Increase usage by existing customers.
• Attract customers away from rivals.
• Gain market share at rivals' expense.
• Devise and encourage new applications.
• Encourage non buyers.

Notes

• Difficult to achieve growth through increased penetration if market is saturated. In a stagnating market it is only possible to take market share from rivals.
• Risks are LOW but prospects of success are low unless there is strong growth in the market.
• Requires realignment of the marketing mix.

Involves:

• Selling the same product to different people.
• Entering new markets or segments with existing products.
• Gaining new customers, new segments, new markets.
• Entering overseas markets.

Market development will require changes to marketing strategy e.g. new distribution channels, different pricing policy, new promotional stategy to attract different types of customers. It is used when:

• Untapped markets are beckoning.
• The firm has excess capacity.
• There are attractive channels to access new markets.

It involves MODERATE RISK, as there is a lack of familiarity with customers but the product is familiar.

Product development is the development of new products for the existing market. New products come in the form of:

• New products to replace current products
• New innovative products
• Product improvements
• Product line extensions
• New products to complement existing products
• Products at a different level of quality to existing products

Product development is used when:

• The firm has strong R&D capabilities
• The market is growing
• There is rapid change
• The firm can build on existing brands

However new product development is costly and there are MODERATErisks associated with this strategy.

• New products are sold to new markets.
• New products are sold for new customers.

Diversification has HIGH RISK because it involves two unknowns.

• Therefore new products and markets should be selected which offer the prospect for growth which the existing product market mix does not.
• One problem is to identify real life examples of firms developing new products for genuinely new groups of customers.
• Diversification can be sub-divided into related and unrelated.

Related diversification

• Development beyond present product market but still within the broad confines of the industry.
• Markets and products share some commonality with existing products.
• Therefore it builds on assets or activities which the firm has developed.

Features of unrelated diversification are:

• Growth in products and markets that are completely new.
• Development beyond present industry into products and markets which bear little relation to present product market mix.

There is no commonality with existing products and markets.

Unrelated diversification is also known as conglomerate diversification: When completely new, technologically unrelated products are introduced into new markets.

This represents a departure from existing products and markets, therefore representing CONSIDERABLE RISK.