Ansoff matrix is a growth matrix tool which is used by businesses to check the growth and risks associated with growth. Business needs to expand – either their product line or customer base and in both cases, they have to take risks.
These risks are calculated with the help of Ansoff Matrix. The results which are obtained from Ansoff Matrix suggest the strategies for growth in the direction that a business can take. Following are the four quadrants of Ansoff Matrix:
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Ansoff Matrix Worksheet
1. Market penetration
It is a growth strategy when the company focuses on selling existing products to existing customers. The businesses know the customer and the geography as well as their products.
They find ways to increase the sales of existing products with existing customers by combination with different strategies. Reducing prices is a strategy that has a very high success rate. Even mature markets can be penetrated with the help of a market penetration strategy.
2. Product development
product development is the growth strategy in which businesses introduce new products in the existing market. The customers are already known to the business and they are either sold higher value products or a combination of new products.
New variants of the same product can also be sold as a new product to the existing customers in the product development strategy.
3. Market Development
It is the growth strategy in which the businesses sell existing products in the new market. It is considered as one of the growth strategies which most of the multinational companies use. When a company moves from one location to another but sells the same products then it can be categorized under market development.
It can be a new geographical market like a new country or it can be the same country but the different areas where the product has not been sold previously. When the company uses new forms of distribution channel or even starts exporting a product to a new country then that can be considered as market development as well.
4. Diversification
Diversification is the growth strategy in which the business explores new markets with new products. This is considered as one of the riskiest business strategies.
The reason behind this is because companies have little or no experience in the area and sometimes about the product as well. The business is expected to have a crystal clear idea of what is it that they want to gain from diversification since the risk level is very high in diversification.
Representation of Ansoff Matrix
Ansoff matrix is represented in a graph form with 4 quadrants. 4 Quadrants represent 4 stages of business growth. As you move from top to bottom and / or from left to right, the risk factor increases.
There are 4 variables that affect the business growth namely product – new or existing and Market – New or existing. A combination of either of those gives every quadrant of Ansoff Matrix with different risk levels.
Pinky is an MBA in Marketing from the University of Mumbai. She loves helping people out in learning Marketing and sharing latest ideas and tactics for growing businesses.