📊 What is the Ansoff matrix?
Big Idea: The Ansoff matrix is a 2×2 grid that helps businesses decide how to grow. It maps out four growth strategies based on two questions: Are we selling to existing or new markets? Are we selling existing or new products? 🗺️
Think of it as a sat-nav for growth — it shows the different routes a business can take, each with different levels of risk.
🔲 The four growth strategies
1. Market penetration (existing product + existing market)
- Sell MORE of what you already sell to the customers you already have
- Lowest risk — you know the product and the market
- Methods: increase advertising, lower prices, loyalty schemes
- Aim: increase market share
2. Market development (existing product + new market)
- Take your existing product to NEW customers or locations
- Medium risk — same product, but unfamiliar market
- Methods: expand abroad, target a new age group, sell online
- Aim: find new customers
3. Product development (new product + existing market)
- Create a NEW product for your existing customers
- Medium risk — you know the market, but the product is untested
- Methods: innovate, upgrade, add new features, launch new lines
- Aim: keep existing customers buying more
4. Diversification (new product + new market)
- Launch a completely NEW product in a completely NEW market
- Highest risk — everything is unfamiliar
- Can be very rewarding if successful, but many diversifications fail
- Aim: spread risk across different markets
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⚠️ Risk levels
- Market penetration → LOWEST risk (familiar product + familiar market)
- Market development → MEDIUM risk (familiar product + new market)
- Product development → MEDIUM risk (new product + familiar market)
- Diversification → HIGHEST risk (new product + new market)
Risk increases as you move away from what you know! The further you go from your existing products and markets, the more uncertain the outcome. ↗️📈
🤝 Ansoff and takeovers
When a business takes over another company, the Ansoff matrix helps explain the strategy behind it.
- Buying a competitor in the same market = market penetration
- Buying a company in a new country = market development
- Buying a company that makes different products for your customers = product development
- Buying a company in a totally different industry = diversification
Exam tip: If asked to 'explain using the Ansoff matrix' how a takeover fits, identify which quadrant it falls into and explain WHY.