Introduction
The Ansoff Growth matrix is a tool
that helps businesses decide their product and market growth strategy.
Ansoff’s product/market growth
matrix suggests that a business’ attempts to grow depend on whether it markets new
or existing products in new or existing markets.
The output from the Ansoff product/market matrix is a series of suggested
growth strategies that set the direction for the business strategy. These are
described below:
Market penetration
Market penetration is the name given
to a growth strategy where the business focuses on selling existing products
into existing markets.
Market penetration seeks to achieve
four main objectives:
• Maintain or increase the market
share of current products – this can be achieved by a combination of
competitive pricing strategies, advertising, sales promotion and perhaps more
resources dedicated to personal selling
• Secure dominance of growth markets
• Restructure a mature market by
driving out competitors; this would require a much more aggressive promotional
campaign, supported by a pricing strategy designed to make the market
unattractive for competitors
• Increase usage by existing
customers – for example by introducing loyalty schemes
A market penetration marketing strategy is very much about “business as usual”.
The business is focusing on markets and products it knows well. It is likely to
have good information on competitors and on customer needs. It is unlikely,
therefore, that this strategy will require much investment in new market
research.
Market development
Market development is the name given
to a growth strategy where the business seeks to sell its existing products
into new markets.
There are many possible ways of
approaching this strategy, including:
• New geographical markets; for
example exporting the product to a new country
• New product dimensions or
packaging: for example
• New distribution channels
• Different pricing policies to
attract different customers or create new market segments
Product development
Product development is the name
given to a growth strategy where a business aims to introduce new products into
existing markets. This strategy may require the development of new competencies
and requires the business to develop modified products which can appeal to
existing markets.
Diversification
Diversification is the name given to
the growth strategy where a business markets new products in new markets.
This is an inherently more risk
strategy because the business is moving into markets in which it has little or
no experience.
For a business to adopt a
diversification strategy, therefore, it must have a clear idea about what it
expects to gain from the strategy and an honest assessment of the risks.
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