Ansoff's matrix

Question 1

What kind of tool is Ansoff’s matrix?

Answer 1

It is a decision making tool.

Question 2

Explain the nature and purpose of Ansoff’s matrix

Answer 2

It is a strategic tool used to help a business that wishes to grow - it helps businesses identify their competitive advantage in existing and new markets.

• It is a marketing planning model that helps a business determine its product and market growth strategy and looks at the risks involved.
• It determines the right growth strategies in terms of products it sells and markets it looks to compete in.
• Makes it possible for the business to identify how it wants its market to grow and to formulate a strategy.

Question 3

What are the four possible strategies for growth?

Answer 3

1) Market penetration
2) Market development
3) Product development
4) Diversification

Question 4

How will the strategies for growth use the marketing mix?

Answer 4

• Each of the strategies will require the use of different elements of the marketing mix, together with market research.

Question 5

What is market penetration? and how could this be achieved?

Answer 5

Situation where the firm tries to sell more of its existing product in its existing market.

• The aim is to increase market share by selling more existing products to the same target customers.
• This could be achieved by the business using a more aggressive promotion, or it may need to price its product more competitively.

Question 6

Evaluate market penetration.

Answer 6

• Business focuses on markets + products it knows well.
• Business can exploit insight on what customers want (and competitors)
• Unlikely to need significant new market research.

Question 7

What is product development? and how could this be achieved?

Answer 7

• A growth strategy where a business aims to introduce new products into existing markets.
• Changes could are made to the existing product, for example new packaging, flavours or formulation of the product.

Question 8

What is market development? and how could this be achieved?

Answer 8

• A growth strategy where the business seeks to sell its existing products into new markets.
• Careful research will be required in the first instance to identify possible markets.
• The business then needs to ensure that it prices and promotes the product with the new market in mind.

Question 9

What are some example of approaches to market development?

Answer 9

• Expanding into new geographical markets, e.g. exporting to emerging markets.
• New distribution channels e.g. using e-commerce or mail order.
• Different pricing polices to attract new customers in different segments.

Question 10

Evaluate market development.

Answer 10

• Logical strategy where existing markets are saturated or in decline.
• Often more risky than product development - particularly expansion into international markets.
• Existing products may not suit new markets: depends on the needs of the customer.

Question 11

What is diversification? and how could this be achieved?

Answer 11

• The growth strategy where a business markets and sells new products in new markets.
• Thorough market research will be needed so that the firm is aware of any threats that might exist, particularly in the form of competition.

Question 12

What are some example of approaches to diversification?

Answer 12

• Innovation and R&D - develop new solutions
• Acquire an existing business in the market
• Extend an existing brand into the new market

Question 13

Evaluate diversification.

Answer 13

• It is a high risk strategy.
• No direct experience of the product or market
• Few economies of scale (initially)
• However, if successful, the overall risk of the business is spread