The Ansoff matrix was invented by Igor Ansoff in 1965 and is used to develop strategic options for businesses. It is one of the most commonly used tools for this type of analysis due to its simplicity and ease of use.
As the diagram demonstrates, the matrix will give managers four possible scenarios, or strategies for future product and market activities.
This strategy focuses on increasing the volume of sales of existing products to the organisation’s existing market.
- How can we defend our market share?
- How can we grow our market?
This strategy focuses on reaching the existing market with new products.
- How can we expand our product portfolio by modifying or creating products?
This strategy focuses on reaching new markets with existing products in the portfolio.
- How can we extend our market?
- Through new market sectors?
- Through new geographical areas?
This strategy focuses on reaching new markets with new products. Diversification can be either related or unrelated.
Related Diversification: The organisation stays within a market they have familiarity with.
Unrelated Diversification: The organisation moves into a market or industry they have no experience with. This is considered a high risk strategy.
So that’s the Ansoff matrix, you can see how it visualises your current strategic position and offers four possible routes to take next.
You should be aware however that it isn’t designed to make the decision for you but to open you up to the different strategies available to you. You should also remember that this framework doesn’t take into account any external factors such as available resources or risk management. So as always we recommend we use this tool as part of a larger marketing tool kit.
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