8.1 Ansoff's Matrix

• A strategic planning model that can be used to help a business decide its strategic direction in terms of its product portfolio and target markets
• Ansoff's matrix consists of 4 cells that provide a company with a range of options or strategic choices, each with a different element of risk attached
• Existing product, Existing market

  • market penetration strategy
• Existing product, New market

  • Market development strategy
• New product, Existing market

  • product development strategy
• New product, New market

  • diversification strategy
• Market Penetration

  • developing strategies to boost sales of existing products in existing markets
  • aiming to boost market share
  • might involve increasing promotional activity or changing its pricing strategy in order to sell more
  • relatively little risk
  • mature market w little potential for growth - would focus on this
• Market Development

  • involves offering existing products but targeting new market segments within them
  • could be a new market e.g. geographical or economic customer groups
  • this strategy increases the level of risk involved, as entering new market segment can be dangerous as existing businesses might try to protect their sales
• Product Development

  • involves developing new products for existing customers
  • maybe responding to changes in customer requirements or anticipating future change
  • involves risk, as developing new products can be costly
  • first apple watch
  • might want to use this strategy where sales of existing products are declining
• Diversification

  • involves developing new products for new customers
  • high levels of risk and uncertainty
  • tony and guy hairdressers making pasta sauce
  • can help spread risk if business has a wide product portfolio in different markets as they are less vulnerable to changes in one of their markets