Ansoff's Matrix (development of corporate strategy) Flashcards
Ansoff’s matrix
It is a tool used by firms to plan and analyze their strategies for growth.
Market Penetration
Purpose: achieve growth in existing markets with existing products
Aim: to achieve growth and increase/maximise market share
Methods:
Increase brand loyalty- avoid customers using substitutes
Decreasing prices- attract more customers
Increasing promotion- builds reputation and draws customers and potential investors , also sets business apart from competition
Acquiring or taking over competitors- to reduce competition
Opening new locations
Product Development
Purpose: introduce new products to an existing market
Aim: to develop new products to cater to the existing market
Used where: product life cycle is short or trends change quickly
Methods:
Investing in research & development
Product innovation
Merging with competitor- able to share resources to come up with new products
Forming strategic partnerships (joint venture) with other firms to gain access to each partner’s distribution channels or brand
Market development
Purpose: enter a new market using existing products
Aim: to expand into new markets/geographical regions/customer segments with sa
Methods:
Catering to a different customer
Invest in research to understand local tastes, habits and needs
Entering into a new domestic market (expanding regionally)
Entering into a foreign market (expanding internationally)
Diversification
Purpose: enter a new market with the introduction of new products
Aim: to increase revenue, since an entirely new revenue stream opens up
Methods:
Related diversification: There are potential synergies to be realised between the existing business and the new product/market. For example, a leather shoe producer that starts a line of leather wallets or accessories is pursuing a related diversification strategy.
Unrelated diversification: There are no potential synergies to be realized between the existing business and the new product/market. For example, a leather shoe producer that starts manufacturing phones is pursuing an unrelated diversification strategy.
Weakness
The weaknesses of Ansoff’s Matrix include its inability to factor in things like competitor activity and consumer opinion.
Strengths
Its strengths include its ability to weigh up various options and examine the risks associated with each option.
