After a series of
Michael Porter’s theories on strategy generations, this article focuses on Igor
Ansoff’s ‘Ansoff Matrix’.
Ansoff Matrix – Igor Ansoff
This is also known as ‘Product-Market
Matrix’ due to the fact that this theory focuses on the development of
strategies based on products and the markets. The matrix focuses on existing
products and markets and new products and markets and how strategies should be
developed to face each situation appropriately.
Market Penetration
This is the strategy
that should be adopted by a business when an existing product is introduced to
an existing market. The market is already occupied with the same product and
hence the business will have to adopt some pricing strategy to penetrate the
market, preferably a cost leader approach.
Diversification
This strategy should be
adopted when a business enters into a new market with a new product. A new
product naturally signifies ‘differentiation’ from the existing products.
However diversification is a broader concept.
Two major aspects of
diversification are horizontal diversification and vertical diversification.
Horizontal Diversification signifies entering into different businesses that
are related or close to the products of the current business (Eg: A soap
company entering into shampoo industry). Vertical Diversification signifies a
business entering into the different levels of the supply chain of the same
business. (Eg: A cereal producing company purchasing a corn field – Upward Integration
or the same cereal company purchasing a cereal distribution company – Downward Integration).
Product Development
This strategy deals
with a business introducing a new product to the existing market. Hence strategies
to develop the ‘product’ have to be initiated. Marketing, advertising, product
promotions, discounts are a few strategies to be adopted.
Market Development
This is where a
business introduces an existing product to a new market. So strategies to
develop the market have to be adopted. Having a proper distribution channel,
having convenient outlets to facilitate easy access for customers are some
strategies that could be adopted.
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