Ansoff Matrix (DP IB Business Management)

Development of Corporate Strategy

• Ansoff’s Matrix is a tool for businesses who want to grow quickly and have a growth objective

• It is used to identify an appropriate corporate strategy and identify the level of risk associated with the chosen strategy

• The model considers four elements, which are broken down into two categories

  • The market - existing and new markets

  • The product - existing and new products

Diagram: Ansoff's matrix

Market penetration

• The least risky strategy to achieve growth is to pursue a strategy of market penetration 

  • This involves selling more products to existing customers by encouraging

    • More regular use of the product

    • Increased usage of the product

    • Brand loyalty of customers

• Market development involves finding and exploiting new market opportunities for existing products by

  • Entering new markets abroad

  • Repositioning the product by selling to different customer profiles (selling to other businesses as well as direct to consumers)

  • Seeking complementary locations

    • E.g. M&S Food has achieved significant growth since teaming up with fuel retailers such as BP and Applegreen and providing express retail outlets 

Product development

• Product Development involves selling new or improved products to existing customers by

  • Developing new versions or upgrades of existing successful products

  • Redesigning packaging and aesthetic features

  • Relaunching heritage products at commercially convenient intervals

    • E.g. Lindt relaunches Christmas-themed products each year, often with a subtle design change, to recapture the interest of customers 

Diversification 

• Diversification is the most risky growth strategy as it involves targeting new customers with entirely new or redeveloped products

  • Examples of diversification include

    • UK supermarket Tesco launching a range of financial products including current accounts and credit cards

    • Café chain Greggs launching a range of themed clothing products