Ansoff's Matrix

• Market penetration: Existing products for existing markets- this involves the business aiming to increase sales within its present market, including attracting customers, attacking competitor's sales, increasing consumption by offering promotions
• Market development: Develop markets for existing products.
• There are two broad strategies:

  Identifying users in different markets with similar needs to existing customers- the market could be a different country. Can be risky as different countries have different tastes and needs- product may have to be adapted
• Identifying new customers who would use a product in a different way: looking at different distribution channels
• Product development: New products for existing markets- business will attempt to increase profitability and growth by introducing new products targeted at the existing customer base- involves creation and development of new products
• Diversification: develop new products for new markets- may be attempted if a business sees a new opportunity and has investment funds available. However, this carries the greatest level of risk
• Diversification can also spread risk for a business as it allows a business to reduce its reliance on existing markets and products
• Benefits of the Ansoff Matrix:

  • Easy to understand
  • Helps businesses to make informed decisions
  • Minimises any investment risk
  • Facilitates strategic planning
• Disadvantages:

  • Does not take into account competitor's actions
  • Lack of cost benefit analysis
  • Difficult to predict the future