the ansoff matrix

Question 1

what is the ansoff matrix ?

Answer 1

a matrix that considers a firms strategy in terms of the products it offers and the markets in which it operates

the matrix illustrates that as a business moves away from what they know

Question 2

what did ansoff use the matrix for ?

Answer 2

ansoff used the matrix to assess the potential risks and rewards associated with each possible strategy

Question 3

what are the four growth strategies in the ansoff matrix ?

Answer 3

market penetration, new product development, market development, diversification

Question 4

what are the risk levels of each growth strategies ?

Answer 4

market penetration - lowest risk

new product development - medium risk

market development - medium risk

diversification - highest risk

Question 5

what is market penetration ?

Answer 5

selling the same product to the same customer

Question 6

what is new product development ?

Answer 6

selling a new product to an existing market

Question 7

what is market development ?

Answer 7

selling the existing product to new markets

Question 8

what is diversification ?

Answer 8

selling a new product to a market

Question 9

what does the market penetration growth strategy include ?

Answer 9

focuses upon how a business can increase sales within their existing market with their current products

Question 10

how can market penetration be done ?

Answer 10

• attracting customers who have not yet become regular users, but are occasional users, by increasing brand loyalty
• persuading existing customers to increase usage perhaps by reducing the price or offering promotions
• taking customers from competitors (aggressive pricing)
• encourage new users of your products
• target competitor sales
• increase usage amongst existing customers

Question 11

benefits of market penetration ?

Answer 11

low risk strategies, enhanced brand loyalty, competitive advantage, market expansion, economies of scale, increased sales and revenue

Question 12

negatives of market penetration ?

Answer 12

existing market might already be saturated, limited opportunities for further sales growth, increased competition, short term focus, resource allocation, risk of overextension

Question 13

what does the market development growth strategy include ?

Answer 13

involves identifying new markets for a firms existing products

Question 14

how can market development be done ?

Answer 14

• finding new customers and uses for existing products
• identifying new geographical markets
• identifying new customers who would use a product in a different way : repackaging and resizing the product may open a new market
• product may have to be adapted and new distribution channels may have to be used

Question 15

benefits of market development

Answer 15

brand growth, increased revenue, economies of scale, extended product life cycle, learning and innovation

Question 16

negatives of market development

Answer 16

high costs, cultural differences, regulatory challenges, resources strain, market research uncertainty, brand dilution, logistical issues

Question 17

what does the product development growth strategy include ?

Answer 17

focuses upon the development of new products which are targeted at existing customers

• market research is essential

Question 18

how can product development be done ?

Answer 18

• involves developing product extension strategies to extend the life cycle of goods
• improve or relaunch the product into existing markets by changing an existing product
• developing new products
• requires businesses to innovate and look at new ways of extending the product life cycle of their existing products

Question 19

benefits of product development ?

Answer 19

market expansion, customer retention, revenue growth, competitive advantage, adaptability, profit margins, brand strength, research and development utilization

Question 20

negatives of product development ?

Answer 20

high costs, market risk, time consuming, resource allocation, competitive pressure, regulatory challenges, uncertainty

Question 21

what does the diversification growth strategy include ?

Answer 21

this involves new products being targeted at new markets

Question 22

how can diversification be done ?

Answer 22

• it involves offering a new product in a different area
• developing new products for new markets involves changes to both a businesses product and market
• diversification carries the greatest level of risk
• diversification spreads risk for a business as it allows a business to reduce its reliance on existing markets and products

Question 23

benefits of diversification ?

Answer 23

risk reduction, revenue growth, market opportunities, competitive edge, resource optimization, economic cycles, brand strength, innovation

Question 24

negatives of diversification ?

Answer 24

increased complexity, dilution of focus, resource strain, management challenges, potential for underperformance, higher risk of failure, integration issues

Question 25

benefits of the ansoff matrix ?

Answer 25

• strategic clarity : see their growth opportunities
• risk assessment : aids in understanding what is the safest option
• focus on growth : matrix encourages businesses
• simplification of complex decisions : breaks down complex decisions into manageable options
• competitive advantage : businesses can find innovative ways to meet market demands

Question 26

negatives of the ansoff matrix ?

Answer 26

• simplistic view : matrix may oversimplify reality
• lack of flexibility : doesnt account for the dynamic nature of the market and the business environment
• risk underestimation : may not fully capture all potential risks
• focus on growth : may neglect other important aspects
• limited guidance : doesnt provide detailed guidance on how to implement each strategy
• assumption of market knowledge : matrix assumes that the business has enough market knowledge