The Ansoff Matrix - Tool for Growth Strategy

The Ansoff Matrix was developed by H Igor Ansoff and was first published in Harvard Business Review in 1957 with the title, “Strategies for Diversification”. Since then it is one of the key tools used by companies to analyze and plan their strategies for growth. This matrix is also called product – market expansion matrix. When any company wants to grow revenue that can either be done by developing new products for the existing markets or to go to new markets with the existing products. Keeping products and markets on one axis each gives us a 2x2 matrix. By using this tool we can analyze the four available options to grow sales, do the risk assessment of all the four options and then choose one or more.

Here are the initiatives you can go for and adopt the different strategies:

  >> Market Penetration (existing market with existing products): Increase the store opening hours, start free home delivery, reduce order processing time, showcase the entire product portfolio, acquiring a competitor in the same market, offering limited time discounts to attract more sales. This strategy is least risky as this utilizes the existing resources and capabilities and doesn’t require any major capital expenditures.

  >> Market Development (new markets with existing products): Open new stores in new areas, start serving to new and more pin codes with your delivery services, tie up and collaborate with other players in the same field or different field to share the resources. This indeed has relatively more risk than the Market Penetration Strategy. It can be domestic expansion as well international expansion.

  >>Product Development/Enhancement/Upgradation (existing market with new products): Reduce cost, improve quality, modify packaging, launch new version, make combos with other products. This needs considerable effort and investments and is definitely more risky than the earlier two i.e. Market Penetration and Market Development.

  >>Diversification (new market with new products):  Into related products or new products, upstream integration with suppliers or downstream integration with the intermediaries. This strategy is the most risky as going for this means new products and new markets. This choice may become a hit or this can also be a very dangerous step.  

In today’s fast changing business scenario the leaders can’t afford to stick to the business as usual instead it’s imperative for companies to look for new ways to increase sales and grow the top line as well as bottom line in the balance sheet. To do the same Ansoff Matrix analysis at least once in a year and see how can the expansion be embraced?