Three ideas on the table: Station Road opened in September 2026, and Lena's Bakery Ltd now has four shops. Lena and Marco want to choose the next way to grow.
Three good ideas, one budget. Which one?
- Lena wants a gluten-free range.
- Marco would rather push the bread the shops already sell.
- Harvest Lane Foods is still asking for the crackers for its 80 delis and farm shops.
The first step is the one you met in 6.2.1: put each idea in its box of the Ansoff matrix. Ask two questions. Is the product one the bakery already sells, or a new one? Are the customers ones it already has, or new ones?
| Idea | Product | Customers | Box | Starting risk |
|---|---|---|---|---|
| A: a bake of the week and longer hours | Existing: the same loaves | Existing: people who already shop there | Market penetration | Low |
| B: gluten-free loaves | New | Mostly existing: the four shops' customers | Product development | Medium |
| C: crackers to Harvest Lane's delis | Existing: the same crackers | New: deli shoppers across the region | Market development | Medium |
The Ansoff matrix from 6.2.1. Find the box for each of the bakery's three ideas: risk rises as the product, the customers, or both are new.
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The box is where the thinking starts: Naming the box tells you how much is new, so it gives a first idea of the risk. It does not tell you which idea to choose.
Market penetration is the safest box, but it may also be the one that earns least. To choose, you judge each idea on the facts of this business.
Five questions to ask of every option
How risky is it?
Start from the box, then adjust for the case. A new market with a buyer already waiting is less risky than one where nobody has been asked.
What does it cost, and what does it earn?
Use the figures: the money needed to start, the forecast gain, how long it takes to earn the start cost back.
Who else is there?
A rival already in the market, like Goldcrust with its gluten-free loaves, makes every forecast less certain.
Can the business do it?
Skills, time and space. Priti's bakers know sourdough; they have never baked gluten-free.
Does it serve the aim?
Growth for what? More profit, less reliance on one product, protecting the brand. The best option is the one that serves the aim the case gives.
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Marco puts the three ideas side by side, with his forecasts. This is exactly the kind of table a case gives you, and the answer is built from it.
| A: bake of the week | B: gluten-free loaves | C: crackers to delis | |
|---|---|---|---|
| What it is | $2 off one loaf a week and open until 7 p.m. at the four shops, pushed through the loyalty app | A gluten-free range in the four shops, baked in a sealed corner at Mill Lane | The crackers sold through Harvest Lane Foods to 80 delis and farm shops |
| Ansoff box | Market penetration | Product development | Market development |
| Cost to start | $5,000 | $28,000: the corner and training for Priti's six bakers | $20,000: a second cutting machine |
| Extra profit a year (forecast) | $12,000 | $30,000 | $36,000: 4,000 packets a month at $0.75 each |
| Competition | High: Goldcrust and Crumbline are close by | Medium: Goldcrust sells gluten-free loaves two streets from Market Square | Medium: national cracker brands on the same shelves |
| Key risk | Rivals copy the offer; regulars buy the cheap loaf instead of a full-price one | Food-safety rules, and a team that has never baked gluten-free | One buyer takes a lot of packets, at 70% of the café price |
How long to earn the money back: Divide the cost to start by the extra profit a year, and times 12 for months.
| Option | Working | Back in |
|---|---|---|
| A | $5,000 ÷ $12,000 × 12 | 5 months |
| B | $28,000 ÷ $30,000 × 12 | about 11 months |
| C | $20,000 ÷ $36,000 × 12 | about 7 months |
Soonest is not best: A is back soonest, but it earns the least. C earns the most and is back in well under a year.
A: market penetration
- For: the lowest risk. Same bread, same customers, and the loyalty app already reaches them
- For: only $5,000 to start, back in 5 months
- Against: the smallest gain, $12,000 a year
- Against: Goldcrust and Crumbline can copy a price offer within a week
B: product development
- For: new sales from customers who already trust the bakery
- For: answers Goldcrust, whose gluten-free loaves sell two streets away
- Against: the dearest start, $28,000, and the slowest payback
- Against: new food-safety rules, and a team that has never baked gluten-free
C: market development
- For: a proven product. The crackers already sell 18,000 packets a year
- For: the largest gain, $36,000 a year, and a buyer already waiting
- Against: one buyer controls a big slice of sales, at 70% of the café price
- Against: rival cracker brands sit on the same deli shelves
Notice the pattern. Every option has a reason for and a reason against, and each reason uses something from the case: a price, a name, a figure. That is what turns a list of facts into an argument.
Risk and reward travel together: The safest option, A, earns least. The options with more that is new, B and C, earn more but can go wrong in more ways.
The real question: So the question is never just 'which is safest?' It is 'which gives the best return for a risk this business can carry?' Marco, who is more careful than Lena, and Lena may answer that differently.
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Choosing, then saying what could change the choice: A recommendation names one option, gives the reason it beats the others, and says what would have to be true for it to work.
For the bakery: choose C
- It earns the most.
- It is back in about seven months.
- The crackers are already proven.
It works only if
- Harvest Lane signs for at least a year, so the $20,000 machine is paid for.
- The cafés are not undercut by the same crackers sold cheaper in the delis.
What the information leaves out
- The forecasts are Marco's guesses. Nobody has asked customers whether they would buy gluten-free bread.
- No contract length. Harvest Lane could stop ordering after three months.
- Profit, not only sales. The gain for B has no cost per gluten-free loaf behind it.
- What rivals will do. Goldcrust could cut its gluten-free price the week Lena's starts.
Saying what is missing is not a weakness in your answer. It shows you know how far the figures can be trusted, and it tells Lena and Marco what to find out before they spend the money.
The limits of the Ansoff matrix itself
The boxes blur
Gluten-free loaves are a new product, but they may also bring in people who never came to the bakery before, so part of B is market development too. Real options rarely sit in one box.
Risk differs inside a box
Selling to Harvest Lane's delis and opening a shop in a town sixty kilometres away are both market development. One has a buyer waiting; the other starts from nothing.
It leaves out money, rivals and skills
The matrix only asks what is new. It says nothing about the $28,000, about Goldcrust, or about whether Priti's team can bake gluten-free.
It works best with other tools
A SWOT analysis (6.1) adds what the matrix leaves out: the bakery's strengths and weaknesses, and the opportunities and threats around it.
The four moves of a strong answer: Place each option in its box. Give each one a reason for and a reason against, with figures from the case.
Choose one and say why it beats the others. Say what the case leaves out, and what that means for your choice.
How this comes up: The Ansoff matrix is tested as a long answer on a case, for ten marks.
How it is asked
- Discuss. Whether a business should enter a new market, or which of two offers it should accept.
- Recommend a growth strategy. Using the Ansoff matrix, sometimes 'other than' one the business has already chosen.
- With a table of options. Using the table and the case, recommend whether the business should choose Option 1, 2 or 3.
The pattern, for every option the question gives
- Name the box. Market penetration, product development, market development or diversification, and the risk that comes with it.
- One reason for, with evidence. A figure, a name or a fact from the case, and what it means for the business.
- One reason against, with evidence. The same: a figure or a fact, and what it means.
- Choose. One option, why it beats the others, and the condition it depends on.
- Say what is missing. The facts the case does not give, and how they could change the choice.
Three ways to lose the top marks
- One option only. When the question gives three, weigh all three; a strong answer on one of them stays well short of the top.
- The table and nothing else. Use the rest of the case too: the people, the rivals, the history.
- No choice, or no limits. Sitting on the fence is not a recommendation, and a choice that never says what the case leaves out cannot reach the highest marks.
Using the table and the information above, recommend which option Lena's Bakery Ltd should choose as its next growth strategy.
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