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The Ansoff Matrix

The Ansoff Matrix provides companies with four growth strategies: market penetration, product development, market development, and diversification. Each strategy presents different levels of risk, with diversification posing the greatest risk as it involves entering new markets with new products. The matrix is a tool used by companies to facilitate strategic decision making around market and product growth.

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181 views2 pages

The Ansoff Matrix

The Ansoff Matrix provides companies with four growth strategies: market penetration, product development, market development, and diversification. Each strategy presents different levels of risk, with diversification posing the greatest risk as it involves entering new markets with new products. The matrix is a tool used by companies to facilitate strategic decision making around market and product growth.

Uploaded by

Bhodza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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The Ansoff Matrix, designed by Igor Ansoff, classifies and explains different growth

strategies for a company. This matrix is used by companies which have a growth target
or a strategy of specialization.
This tool, crossing products and markets of a company, facilitates decision making.
The Ansoff matrix offers four strategies to achieve the objectives.
Penetration of the market ;
Extension of the market ;
New products ;
Diversification.
Golden rules
Opportunity = the matrix provides not only the opportunity to expand on an existing
market but one can also explore the possibility to withdraw from the market or find new
markets.
Risk = each strategy will have a different risk level. This risk increases proportionally
with the level of change. Diversifying is more risky than increasing the penetration of a
product on an existing market.

Structure of the Ansoff Matrix
Penetration of the market
The company is trying to expand its sales in the existing market. Existing products are
sold to existing customers. The product is not modified but the firm is seeking to
increase its revenues by means of promoting or repositioning its products. One has to
convince potential clients and divert competitors.
Extension of the market
The company is trying to increase its sales by introducing its products into new markets.
A range of existing products is introduced into new markets. Again the product is not
modified, it will just be sold to a new target (e.g. through export). By taking into account
cultural differences, the products may undergo minor changes.
New products
The company is increasing its sales by introducing new or modified products on the
market. There will be several versions of the product (different styles, sizes, ). The
new products are sold to the customers through existing distribution channels.
Diversification
In this case the company will launch new products for new customers. There are
several diversification strategies:
Horizontal Diversification: The company is developing a new product or activity
capable of satisfying the same clientele, even if the new products are technologically
independent of the existing products.
Vertical Diversification: The company starts to make the work of its suppliers and/or
customers.
Concentric Diversification: The company develops new products/activities with a
complementary technology to existing products/activities. These products may attract a
new group of customers and there will be a transfer of key skills.
Diversification by conglomerate: the company has different products/activities for
various markets. The firm now settles on a market where it has no previous experience
nor industry but it could attract new groups of customers.

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