Ansoff Matrix Flashcards
What is the Ansoff Matrix
The Ansoff matrix is a planning tool used by businesses to asses the risk of the 4 different marketing growth strategy based on products and markets.
Draw the Ansoff Matrix
Check notebook
Market penetration
Market penetration is when a business sells products it already makes, to customers the business already sell too.
Advantages of market penetration
It increases market share Little risk No need for serious research and development. Widens existing product range Loyal customers will buy more already.
Market penetration Disadvantages
Won’t improve market share as much as other strategies, little risk little reward.
Dependency on a small range of products, if the demand for these products falls then the business will fail
Product Development
Developing and improving an existing product or adding a new product range and selling them in the same market. E.g Dyson
Advantages of product development
Improves/attracts customer loyalties if you improve a new feature first out of all of your competitors.
Still an established business within the market
Existing customer base is exploited well.
Disadvantages of product development
If you do not do it first then your competitors will seem like the better country
Have to invest in R and D
Still dependent on the one market.
Market development
A business strategy of selling the same products into new markets, can be geographically or newer distribution channels. E.g Starbucks expansion into China.
Advantages of Market Development
Broader customer base
New distribution channels
Access to more finance to further expand
Different pricing
Limitations of Market development
Riskier than product development, as there are different needs and wants.
Needs may not exist in the new market
No customer loyalties or knowledge about the business
Diversification
Diversification is selling new products into new markets. E.g alphabet owns parts of google. Samsung and their electronics and phones.
Advantages of Diversification
Enter a new market
Improves R+D department
If successful, overall spreads the risk of business failure because you have more products to depend on.
Disadvantages of diversification
Initially few economies of scale
Riskier - No direct experience in market
Costly - R+D will cost a lot plus setting up all new facilities.
Benefits of using The Ansoff Matrix
Allows the business to evaluate the risk of different strategies and which favours the most
Easy to understand
Does not cost the business anything.
