Ansoff Matrix
The Ansoff Matrix is a strategic planning tool that assists organizations in formulating business strategies and guiding product and market growth. Developed by H. Igor Ansoff, a prominent figure in strategic management, the matrix is typically represented as a two-by-two chart that categorizes strategies based on existing and new products and markets. The four key strategies identified in the matrix are market penetration, product development, market development, and diversification.
Market penetration focuses on increasing sales of current products within existing markets, typically seen as a low-risk approach. Product development, on the other hand, involves creating new or enhanced products for existing markets, presenting a medium level of risk. Market development entails introducing existing products into new markets, which also carries medium risk. Lastly, diversification involves launching new products in new markets and is considered a high-risk strategy due to the unfamiliarity of both the products and the markets. By utilizing the Ansoff Matrix, businesses can better navigate their growth options and make informed decisions about expansion.
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Ansoff Matrix
The Ansoff Matrix is a tool used by organizations to help develop business strategies and map the growth of products and markets. The Matrix is most commonly represented as a chart of factors relating to established and new products within existing and potential markets. Managers and marketers generally consult the Ansoff Matrix when making plans to expand a business by creating new offerings or making offerings available in new or different ways.
Development and Design
This strategic planning tool was developed by a mathematician named H. Igor Ansoff, a Russian-American who studied and proposed new theories about business strategy. Ansoff is recognized today as one of the founders of strategic management in modern business. The Ansoff Matrix is his most enduring contribution to the field because it has helped change the way businesses are managed and analyzed.
The most common form of the Ansoff Matrix comprises four boxes arranged in a two-by-two square. Each box represents one marketing strategy. Clockwise from top left, the boxes represent market penetration, product development, diversification, and market development. The vertical axis of the chart pertains to present and new markets, while the horizontal axis pertains to present and new products. Some versions of the Ansoff Matrix also include information about the risk levels associated with each factor.
Components
On the Ansoff Matrix, market penetration refers to increasing the amount or availability of a business offering. This factor generally deals with products and markets that already exist. Implementing this strategy might mean finding new ways to attract customers to an existing product, or building interest in an existing product among new demographics of customers within an existing market setup. Because the products and markets are already familiar, market penetration is usually considered a low-risk business strategy.
Product development refers to the introduction of new products into existing markets. These new products may be entirely new, or improved or otherwise modified versions of existing products. Businesspeople working in product development try to create new offerings that will better meet the needs and wants of consumers. Because the markets are familiar to consumers but the products are unfamiliar, product development is often considered to have a medium level of risk.
Market development involves an organization offering existing products in new markets in the hope of attracting new customers. The products may be offered with new forms of pricing or packaging, in previously unexploited geographic locations, or through different channels of advertising or sales. In this case, the products are familiar but the markets are unfamiliar, which means market development carries a medium level of risk for businesses.
Diversification involves the offering of new products to new markets. The products and markets may be related or unrelated to the organization's previous field of focus. Either way, diversification is considered a high-risk business strategy because neither the markets nor the products are familiar. Organizations looking to diversify must proceed with great care and caution, researching the products and markets to best ensure that consumers will be willing to buy.
Bibliography
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