Ansoff strategy model
Strategy model created by H.I. Ansoff is used by companies to choose the best market for its products. It describes four possible business development strategies for the two decision variables: product and market. Both for the product and for the market, managers consider two situations: current and new (projected) status. Ansoff strategy model if presented in form of Ansoff matrix (product/market matrix) or so called product market expansion grid.
|Current||Market penetration strategies (increase sales of existing products in existing markets)||Strategies for product development (creating new products and putting them on existing markets)|
|New||Market development strategies (finding new markets for sales of existing products)||Diversification strategies (selling new products in new markets)|
Fig. 1. Ansoff growth Matrix
Applications of Ansoff matrix
Ansoff matrix is a tool to choose directions of intensive development of the company. First managers check if the company can base on the currently manufactured products, and thrive in markets not yet supported (market penetration). This strategy is based on intensive actions in the field of sales, by for example: increasing density of distribution networks, strengthening promotion, increasing packaging options, etc., as well as an increase in market share or increase it the scope of use of the product.
Then managers examine the possibility of finding and developing new markets for currently marketed products (market development). The use of this strategy means both geographical expansion, as well as generating new market segments for an existing product.
Subsequently, manager examines the possibility of the preparation of new products that could potentially be added to current markets (product development). The company uses this strategy by:
- extension of the characteristics of the product,
- creating new opportunities for the application of the product,
- better adaptation of a product to different market segments,
- improving product features.
Finally, managers of the company consider the possibility of developing new products and offer them to new markets (diversification). Diversification can be made by purchasing licenses, know-how, and finally by the acquisition of other companies, or mergers with them. Diversification can be carried out in three directions: vertical diversification, concentric diversification and horizontal diversification.
- Ansoff, H. I. (1970). Corporate strategy: An analytic approach to business policy for growth and expansion. Penguin books.
- Chaffee, E. E. (1985). Three models of strategy. Academy of management review, 10(1), 89-98.