ANSOFFS MATRIX

IGOR ANSOFFs MATRIX

Market

Produ ct
EXIST

EXISTING

NEW

MARKET PENETRATION
Increase sales to existing market Penetrate existing market more deeply

MARKET DEVELOPMENT
Existing products sold to new markets

NEW

NEW PRODUCT DEVELOPMENT

New products developed for existing markets

DIVERSIFICATION
New Products sold to new markets

IGOR ANSOFF MATRIX

MKT

PROD UCT
EXIST

EXISTING

NEW

MARKET PENETRATION

Little risk

MARKET DEVELOPMENT

Moderate Risk
DIVERSIFICATION

NEW

NEW PRODUCT DEVELOPMENT

Moderate Risk

High Risk

IGOR ANSOFF MATRIX Growth of TESCO

MKT

PROD UCT

EXISTING

NEW

EXIST MARKET PENETRATION

Increase in share of grocery business at the expense of Sainsbury

MARKET DEVELOPMENT Move into convenience store market Expansion abroad

NEW

NEW PRODUCT DEVELOPMENT DIVERSIFICATION Expansion into Petrol Sales High Risk Development of financial services

Market Penetration

Maintain increase market share in current market with current products Selling more of the same to the same people In saturated market - Difficult In stagnant market grab market share from others intense competition

Market Penetration

Increase usage by existing customers Encourage increase in frequency of use Attract customers away from rivals / Gain market share at expense of rivals Devise and encourage new applications Encourage non-users to buy

Market Penetration

Use Market Penetration when

When the market is not saturated When there is potential of growth When competitors share is falling When increase in volume leads to economies of scale When there is scope to sell more to existing users

Market-Penetration Strategy

Why ? How ?

To dominate market

To increase usage or get new customers; reduce price; expand distribution or increase promotional activities

When ? When market is growing What to look out for ? Competitive reaction;
cost of conversion

Example: Airlines used reduced fares &

promotion various family travel packages to penetrate market

PRODUCT-MARKET STRATEGIES

A product- (new offering-) development strategy dictates that an organization create new offerings existing markets.

PRODUCT-DEVELOPMENT STRATEGY This strategy involves:

Product Innovation Developing totally new offerings.

Product Augmentation

Enhancing the value to customers of existing offerings.

Product Line Extension

Adding different features, sizes, etc. to broaden the existing line.

Product Development Strategy

New product to replace old product New innovative products Product improvements Product line-extensions New products to complement existing Products at a different quality level from existing product

PRODUCT-DEVELOPMENT STRATEGY
Factors to consider when adopting this strategy:
The market size and volume needed for profitability. The magnitude and timing of competitors responses. The impact of the new product on the sales of existing offerings (cannibalization). The capacity of the organization to deliver the offerings to the market(s).

Product-Development Strategy

To satisfy buyers need New or improved product; innovate or augment product When ? Customer has a need or a problem

Why ? How ?

What to look out for ?

Market size/volume competitor reaction effect on existing products resources to deliver new products

IGOR ANSOFF MATRIX

MKT

PROD UCT
EXIST

EXISTING

NEW

MARKET PENETRATION

Little risk

MARKET DEVELOPMENT

Moderate Risk
DIVERSIFICATION

NEW

PRODUCT DEVELOPMENT

Moderate Risk

High Risk

PRODUCT-MARKET STRATEGIES

A market-development strategy dictates that an organization introduce its existing offerings to markets other than those it is currently serving (existing offerings new markets).

Market Development Strategy

Selling the same product to different market Entering new markets, segments with existing products Gaining new customers, new segments, new markets Requires changes in marketing strategy, distribution, pricing policy, promotional strategy

Use market development when

Untapped market is beckoning The firm has excess capacity Attractive channels to access new markets

MARKET-DEVELOPMENT STRATEGY This strategy involves:

Adjusting the marketing mix, such as:
Modifying the basic product offering Using different distribution outlets Changing the sales effort or advertising

Analyzing competitors strengths, weaknesses, and potential for retaliation.

MARKET-DEVELOPMENT STRATEGY This strategy involves (continued):

Identifying the number, motivation, and buying patterns of new buyers. Determining the organizations ability to adapt to new markets to evaluate success.

MARKET-DEVELOPMENT STRATEGY
Internationally, this strategy has four forms:

Exporting

Licensing

Joint Venture/ Strategic Alliance

Direct Investment

MARKET-DEVELOPMENT STRATEGY
Exporting

Involves marketing the same offering in another country through sales offices or intermediaries.

Licensing

Is a contract where one firm (licensee) is given the rights to patents, trademarks, etc. by the owner (licensor) in turn for a royalty or fee. Involves investment by both a foreign firm and a local company to create a new entity in the host country. The two forms share ownership, control, and profits of the entity. Involves investing in a manufacturing and/or assembly facility in a foreign market. Is the most risky and requires the most commitment.

Joint Venture/ Strategic Alliance

Direct Investment

Market-Development Strategy

Sell existing products in new markets; modify product; use different distribution; use different advertising/sales strategy

Why ? How ?

To venture into new markets

When ? Present market is saturated What to look out for ? Competitive reaction;
understand new buyers; adaptability

IGOR ANSOFF MATRIX

MKT

PROD UCT
EXIST

EXISTING

NEW

MARKET PENETRATION

Little risk

MARKET DEVELOPMENT

Moderate Risk
DIVERSIFICATION

NEW

PRODUCT DEVELOPMENT

Moderate Risk

High Risk

Diversification

New products sold to new markets New products sold to new customers Select based on growth prospects which the two new variables offer that the present product-market does not

Diversification Types

Related Beyond present product market, but within present industry Synergistic diversification Lesser risk

Unrelated Entirely new product and market Conglomerate diversification

Related Diversification

Horizontal new products introduced to current markets (new product development) Vertical when an organization moves into its suppliers or customers business Concentric when new products closely related to existing products are introduced in new markets

Diversification Strategy (contd)

Three types of diversification

Concentric,

horizontal and conglomerate

Three essential tests of success

Attractiveness Cost-of-entry Better-off

Vertical Integration

Why?
To gain operating economies i.e. to lower costs To gain access to or control supply demand To enhance technological innovation

How? Integrate backward and forward When? Basic industry is in a growth stage

What to look out for? Problems in managing

very different businesses; increase risk, reduced flexibility; cost of excessive in-growing

Example of Vertical Integration

Airlines integrate backward to in-flight kitchens; forward to travel agencies

Related Diversification

Development beyond present product market mix but within the broad confines of the industry

Diversification Strategy

Why ?
business

Growth opportunities outside current

How ? New products for new markets When ? Distinctive competencies available What to look out for ? High risks, resources
required, need to understand new markets, fit with distinctive competencies

Uses of Ansoffs Matrix

A framework to explore directions for strategic growth Most commonly used model for strategic growth Identify and analyze growth opportunities Considers expected returns and risks

To Summarize

Market Penetration

Advertise - to encourage more people within your existing market to choose your product, or to use more of it Introduce a loyalty scheme Launch a price or other special offer promotions Increase your sales force activities Buy a competitor company (particularly in mature markets)

Product Development

Extend your product by producing different variants, or packaging existing products it in new ways Develop related products or services In a service industry, shorten your time to market, or improve customer service or quality

Market Development

Target different geographical markets at home or abroad Use different sales channels, such as online or direct sales if you are currently selling through the trade Target different groups of people, perhaps with different age, gender or demographic profiles from your normal customers.

Modified Ansoff Matrix 9 Box Grid

Product Market

Existing

Modified

New

Existing

Market Penetration Market Expansion

Product Extension Limited Diversificatio n

Product Development Partial Diversificatio n Diversificatio n

Modified

New

Partial Market Diversificatio Development n

Strategy Selection

STRATEGY SELECTION

Product-market strategies are evaluated based on:

The organizations business definition, mission, and capabilities. Market capacity and behavior.

Environmental forces.
Competitive activities.

STRATEGY SELECTION

Product-market strategies are chosen based on:

Costs and benefits of a strategy. Probabilities of success for a strategy. Analysis of competitive structure, market dynamics, and opportunity costs. The product itself.

EXHIBIT 1.3: DECISION-TREE FORMAT

Action Response Outcome

A1

R1 R2 R1 R2

O1 O2 O3 O4

A2

EXHIBIT 1.4: SAMPLE DECISION-TREE

Action Response Outcome

Marketpenetration strategy

Aggressive competition
Passive competition

Estimated profit of $2 million

Estimated profit of $3 million

Marketdevelopment strategy

Aggressive competition Passive competition

Estimated profit of $1 million Estimated profit of $4 million

THE MARKETING MIX

Communication Aggressive Strategy

competition

Product Strategy

Aggressive competition Passive competition

Price Strategy

Customer

Channel Strategy

THE MARKETING MIX

Product Strategy

Kind of product, service, or idea offered.

Communication Strategy

How the product, service, or idea will be profit Estimated communicated to buyers. Informsof$3 assures and million buyers that the offering will meet their needs. Method for distributing the product or service to buyers. Satisfies buyers shopping patterns and Aggressive purchase requirements. Provides information and competition offering availability. Estimated profit of $4 million Amount buyers will pay for the offering. Represents the value or benefits provided.

Channel Strategy

Price Strategy

FORMULATING THE MARKETING MIX

Depends on the success requirements of the market. Delivers customer value in new interactive capabilities of the Internet.
Aggressive competition Estimated profit marketspace, the of$3 million

Must be consistent with both the needs of the Estimated markets and the organizations capacity. profit of $4 million Is as much art and science.

CHAPTER 1: FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENT

BUDGETING MARKETING, FINANCIAL, AND PRODUCTION RESOURCES

BUDGETING

A budget is a formal, quantitative expression of an organizations planning and strategy initiatives expressed in financial terms.

BUDGETING A master budget consists of:

Operating Budget Focuses on the income statement. Also referred to as a pro forma income statement or profit plan.

Financial Budget

Focuses on the effect the operating budget has on the organizations cash position.

Special Budgets

Focuses on developing advertising, sales, and other budgets that support the master budget.

CHAPTER 1: FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENT

DEVELOPING REFORMULATION AND RECOVERY STRATEGIES

MARKETING AUDIT A marketing audit is a comprehensive, systematic, and periodic examination of a firms or business units marketing environment, objectives, strategies, and activities to determine problem areas and opportunities and recommend a plan of action to improve the firms marketing performance.

MARKETING AUDIT Addresses the following questions:

Strategic

Are we doing the right things? Are we doing things right?

Operational

REFORMULATION AND RECOVERY STRATEGIES

Have the following purposes:
Forces marketing managers to ask What if? questions. Allows for contingency plans, preplanning of reformulation and recovery strategies that lead to faster reaction time in implementing remedial action.

CHAPTER 1: FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENT

DRAFTING A MARKETING PLAN

MARKETING PLAN

A marketing plan is a formal, written document that describes the context and scope of an organizations marketing effort to achieve defined goals or objectives within a specific future time period.

MARKETING PLAN
Consists of:
Business Plan Marketing Plan Product Plan

Each has these time dimensions:

Short-term

Focuses on a 1-year period.

Focuses on a 3- to 5-year period.

Long-term