Ansoff's matrix is a very useful tool for identifying and classifying the range of strategic options available to a firm and thus is used in the " strategic choice " part of the strategic planning process. Ansoff's matrix classifies strategies according to whether they involve new or existing products and new or existing markets :.
Generally, risk increases from quadrant A to quadrant D risk in quadrants B and C probably about equal. This is a strategy by which a company seeks to increase the sales of its present products in its existing markets. It is aimed at increased usage by methods such as recipes on tins and packets, attracting customers by offers and price reductions and by attracting new users.
The ease with which a business can pursue a policy of market penetration will depend on the nature of the market and the position of competitors. When the overall market is growing it may be easier for companies with a small market share to improve quality or productivity and increase market activity rather than in static markets, where it can be much more difficult to achieve.
The lessons of the experience curve stress the difficulty of market penetration in mature markets where the cost structure of the market leaders should prevent the entry of competitors with lower market share. Opportunities for improving business performance within the existing pattern of trading will generally fall under the following headings.
Even though market penetration is seen as the least risky of Ansoff's options, it should not be assumed that risk is always low. When Yamaha attempted to gain share over Honda, it provoked a retaliation that left Yamaha in a worse position than before.
The example should serve to remind us that Ansoff's strategies still require a competitive advantage to be effective a point Ansoff made many times, but one that is frequently forgotten. This strategy has the aim of increasing sales by developing products for a company's existing market. For our purposes, new- product development is a generic term that encompasses the development of innovative new products and the modification and improvement of existing products.
By adopting this strategy the company could:. A company might show a preference for product development strategy for the following reasons:. However, product development strategy does have its downside and there are strong reasons why it might not be appropriate for a company. For example, the process of creating a broad product line is expensive and potentially unprofitable, and it carries considerable investment risk. There are reasons why new- product development is becoming increasingly difficult to achieve:.
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Ansoff Matrix. Unlike some of the other analytical tools used in marketing, the matrix is not diagnostic; rather it is a method for structuring thinking or means of classifying objectives. The Ansoff matrix is a simple planning tool that can help with strategy development. This matrix recognizes that in order to grow, a business has to consider both its markets and products. The combination of existing and new products and markets provides different marketing opportunities.
It provides a simple framework which sum up all the strategic directions an organization can adopt in one analytical tool. It is based on the need for business organizations to do opportunity searching and identifies four possible strategic directions. The product will be either an existing offering or a product which is new to the organization.
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This is a strategy by which a company seeks to increase the sales of its present products in its existing markets. It is aimed at increased. Ansoff's Matrix works by identifying current market issues. The Product Market Expansion Grid offers four main suggested strategies: Market Penetration. The Ansoff Matrix is the base to compare the relationship between General. In the Ansoff Matrix, four growth strategies are identified.