Ansoff Matrix

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Introduction
Ansoff Matrix was introduced by Igor Ansoff, a Russian-born pioneer of strategic management and corporate planning. He was also the strategist who first identified the fact that competitive advantage in the market was vital in the element of planning process . Ansoff matrix helps to define two vital factors for marketing : what is sold and who it is sold to

 Therefore, it pertains on the products and markets and

enables to give the four alternative courses of actions when considering marketing objectives: Selling existing products to existing markets (market penetration) Extending existing products to new markets (product development); Developing new products for existing markets (market development); and Developing new products for new market (diversification)

Background
Long-term business strategy is dependant on

planning for their introduction Ansoff Matrix represents the different options open to a marketing manager when considering new opportunities for sales growth

Variables in the matrix in Strategic marketing Two variables

Decisions:
The market in which the firm was going to

operate The product intended for sale

In terms of the market, managers had two options:

Remain in the existing market Enter new ones

In terms of the product, the two options are:

selling existing products developing new ones

Existing New Existing

PRODUCTS

INCREASING MARKET RISK PRODUCT PENETRATIO DEVELOPMEN N T Sell more in existing Markets MARKET EXTENSION Achieve higher sales/market share of Sell new products in existing DIVERSIFICATI markets ON Sell new products in new markets

INCREASING RISK

MARK ETS

New

Existing New Existing

PRODUCTS INCREASING RISK

MARKET PENETRATIO N Sell more in existing Markets

INCREASING RISK

MARK ETS

New

MARKET PENETRATION
This is the objective of higher market share in

existing markets

E.g. In 2000, Mitsubishi announced a 10%

reduction in prices in the UK in order to encourage purchases

Existing New Existing

PRODUCTS INCREASING RISK

MARKET PENETRATIO N Sell more in existing Markets

INCREASING RISK

MARK ETS

MARKET EXTENSION Achieve higher sales/market share of existing

New

MARKET EXTENSION
This is the strategy of selling an existing

product to new markets. This could involve selling to an overseas market, or a new market segment
Nintendo are making hand held games consoles

(e.g. DS) appeal to the adult/grey market by introducing games such as Brain Train

Existing New Existing

PRODUCTS

INCREASING MARKET RISK PRODUCT PENETRATIO DEVELOPMEN N T Sell more in existing Markets MARKET EXTENSION Achieve higher sales/market share of Sell new products in existing markets

INCREASING RISK

MARK ETS

New

PRODUCT DEVELOPMENT
Least risky of all four strategies This involves taking an existing product and

developing it in existing markets

E.g. Coca-Cola. This has been developed to

have vanilla, lime, cherry and diet varieties (amongst others) in the SOFT DRINKS market

Existing New Existing

PRODUCTS

INCREASING MARKET RISK PRODUCT PENETRATIO DEVELOPMEN N T Sell more in existing Markets MARKET EXTENSION Achieve higher sales/market share of Sell new products in existing DIVERSIFICATI markets ON Sell new products in new markets

INCREASING RISK

MARK ETS

New

DIVERSIFICATION
This is the process of selling different,

unrelated goods or services in unrelated markets This is the most risky of all four strategies
E.g. the Virgin group

Points to be noted by the Managers

Risks involved differ substantially The matrix identifies different strategic areas

in which a business could expand Managers need to then assess the costs, potential gains and risks associated with the other options

Ansoff Matrix :Practical usage in subtitle current Click to edit Master the style market world

Certain Examples Of Ansoffs Matrix

q ANSOFF MATRIX OF AIRTEL-

The company should follow all four strategies depending on the demand and product as indicated in the matrix. The company perhaps needs to focus more on the comparatively neglected area of diversification. MARKET PENETRATION: Airtel entered in broadband and fixed phone line market. PRODUCT DEVELOPMENT: IPLC products MARKET DEVELOPMENT: Airtel is now looking for overseas market. Company has already make his presence in Nigeria and Seychelles

 DIVERSIFICATION : Airtel is outsourcing some of its services

like customer services with IBM

Using Coca Cola to explain the Ansoff matrix Market Penetration: Coca Cola Share Size Coca Cola
Share Size is still the same Coca-cola targeted to existing Coca-cola customers, just in a larger packaging. Hence, as the market and product have not changed, this falls under Market Penetration. Coca-cola Share Size can be seen as attempt by Coca Cola to increase its market share by increasing the amount of Coca-cola consumption in the market.
Product Development: Coca Cola Vanilla, Diet Coke, Fanta

Icy Lemon ( New products introduced in the Indian Subcontinent market) Market Development: Coca-cola expanding to China. The strategy is only used when there is little or no growth in current markets and many opportunities in foreign markets. However, this strategy poses some risk as markets differ from one another in culture and customer

 Diversification:the company sells new

products to new markets. However, the main difference is that in related diversification, the product has some commonality with existing products. One example will be Coca-cola diversifying into juice, a new product but still within the confines of the beverages industry. Example: Winnie the Pooh Roo Juice, Powerade

Unrelated diversification is when a

company ventures into products and markets that are completely new like, say, Coca-cola selling sportswear.

Ansoff Matrix of Virgin Groups, Kelloggs , McDonalds and eBays

Market Penetration : e-Bay is one of the

most successful e-commerce website in the world wide web. The strategic direction of the company is market penetration. The main aim of a market penetration strategy is to increase the market share by using the current products within the existing markets. In the case of e-Bay, the company focuses on improving the quality of their service in order to improve the reputation

 Product Development: Product development mainly

focuses on the development of new products for the existing and current markets. The intention of this strategic direction is to attract new customers, retain existing ones and increase the market share This is used by McDonalds, because the company is dealing with the needs of the customers of which it has some experience because the company has been operating in the market for a long period of time. Thus, the objectives of the company focus on the growing interests of the public in wholesome and healthy foods, together with the different premium products in different part of the world.
Market Development: As this strategy mainly focuses

on developing new products for existing markets. The best suited example is of Kelloggs in the Indian market.

Diversification: For Virgin Groups, diversification is used in

its strategic development. It is business growth through new products and new market. It is considered as appropriate option when the current markets are saturated or when the products are already reaching the end of its lifecycle because it can help in order to produce vital synergies and can also help in order to spread the risk by broadening the product and market portfolio. Unrelated diversification or conglomerate diversification was applied by the company. Virgin Group of UK was mainly associated with music and recording, however, the company ventured into new products and new markets including Virgin Cola, Virgin Megastores, Virgin Airlines and Virgin Telecommunications. As a result, the Virgin Group had been able to have a result of higher gains from higher risk strategic direction.

 Conclusion of the Case:

Virgin Group, McDonalds , Kellogg's and e-Bay have different growth strategic directions. However, based on the current performance of these two companies, it can be seen that the application of their respective strategies have enabled them to be successful and leader in their respective market. Based on this, it can be said that different companies must focus on the particular growth strategic directions that are matched with their current performance, strengthens and weaknesses in order to ensure success.

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