What Is The Ansoff Matrix?: Growth

What is the Ansoff Matrix?
The Ansoff Matrix, also called the Product/Market Expansion Grid, is a

tool used by firms to analyze and plan their strategies for growth. The
matrix shows four strategies that can be used to help a firm grow and
also analyzes the risk associated with each strategy.
Understanding the Ansoff Matrix
The matrix was developed by applied mathematician and business

manager H. Igor Ansoff and was published in the Harvard Business
Review in 1957. The Ansoff Matrix’s helped many marketers and
leaders understand the risks of growing their business.
The four strategies of the Ansoff Matrix are:
1. Market Penetration: It focuses on increasing sales of existing

products to an existing market.
2. Product Development: It focuses on introducing new products to
an existing market.
3. Market Development: Its strategy focuses on entering a new
market using existing products.
4. Diversification: It focuses on entering a new market with the
introduction of new products.
Of the four strategies, market penetration is the least risky while

diversification is the riskiest.

The Ansoff Matrix: Market Penetration
In a market penetration strategy, the firm uses its products in the

existing market. In other words, a firm is aiming to increase its market
share with a market penetration strategy.
The market penetration strategy can be done in a number of ways:
1. Decreasing prices to attract existing or new customers

2. Increasing promotion and distribution efforts
3. Acquiring a competitor in the same marketplace
For example, telecommunication companies all cater to the same

market and employ a market penetration strategy by offering
introductory prices and increasing their promotion and distribution
efforts.
The Ansoff Matrix: Product Development
In a product development strategy, the firm develops a new product to

cater to the existing market. The move typically involves extensive
research and development and expansion of the product range. The
product strategy development strategy is employed when firms have a
strong understanding of their current market and are able to provide
innovative solutions to meet the needs of the existing market.
The product development strategy can be done in a number of ways:
1. Investing in R&D to develop new products to cater to the existing

market
2. Acquiring a competitor’s product and merging resources to create
a new product that better meets the need of the existing market
3. Strategic partnerships with other firms to gain access to each
partner’s distribution channels or brand
For example, automotive companies are creating electric cars to meet

the changing needs of their existing market. Current market consumers
in the automobile market are becoming more environmentally
conscious.
The Ansoff Matrix: Market Development
In a market development strategy, the firm enters a new market with

their existing product(s). In this context, expanding into new markets
may mean expanding into new geographies, customer segments,
regions, etc. The market development strategy is most successful if (1)
the firm owns proprietary technology that it can leverage into new
markets, (2) consumers in the new market are profitable (i.e., they
possess disposable income), and (3) consumer behavior in the new
markets does not deviate too far from the existing markets.
The market development strategy can be done in a number of ways:
1. Catering to a different customer segment

2. Entering into a new domestic market (expanding regionally)
3. Entering into a foreign market (expanding internationally)
For example, sporting companies such as Nike and Adidas recently

entered the Chinese market for expansion. The two firms are offering
the same products to a new demographic.

The Ansoff Matrix: Diversification

In a diversification strategy, the firm enters a new market with a new
product. Although such a strategy is the riskiest, as market and product
development is required, the risk can be mitigated through related
diversification.
There are two types of diversification a firm can employ:
1. Related diversification: There are potential synergies to be realized

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.
2. 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.

What Is The Ansoff Matrix?: Growth

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What is the Ansoff Matrix?

The Ansoff Matrix, also called the Product/Market Expansion Grid, is a

Understanding the Ansoff Matrix

The matrix was developed by applied mathematician and business

The four strategies of the Ansoff Matrix are:

1. Market Penetration: It focuses on increasing sales of existing

Of the four strategies, market penetration is the least risky while

In a market penetration strategy, the firm uses its products in the

The market penetration strategy can be done in a number of ways:

1. Decreasing prices to attract existing or new customers

For example, telecommunication companies all cater to the same

The Ansoff Matrix: Product Development

In a product development strategy, the firm develops a new product to

The product development strategy can be done in a number of ways:

1. Investing in R&D to develop new products to cater to the existing

For example, automotive companies are creating electric cars to meet

The Ansoff Matrix: Market Development

In a market development strategy, the firm enters a new market with

The market development strategy can be done in a number of ways:

1. Catering to a different customer segment

For example, sporting companies such as Nike and Adidas recently

The Ansoff Matrix: Diversification

There are two types of diversification a firm can employ:

1. Related diversification: There are potential synergies to be realized

For example, a leather shoe producer that starts a line of leather

2. Unrelated diversification: There are no potential synergies to be

For example, a leather shoe producer that starts manufacturing phones

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