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processes to determine business growth opportunities. The product/market grid has two dimensions: products and markets. The Ansoff matrix provides the basis for an organization's objective setting process and sets the foundation of directional policy for its future (Bennett, 1994). The Ansoff matrix is used as a model for setting objectives along with other models like Porter matrix, BCG, DPM matrix and Gap analysis etc. The Ansoff matrix entails four possible product/market combinations: Market penetration, product development, market development and diversification.
Ansoff s Product-Market Expansion Grid Market penetration strategy: The first strategy company is looking to adapt for increasing their sales and profits. Marketing efforts of the company to offer their existing products in the current markets is called market penetration strategy. The best way to do this to attract competitors customer and looking for potential customer for the existing products. For example, Pakistan State Oil penetrate in Pakistan market from 40% to 65% in the duration of 4 years by developing new retail outlets. Market development Strategy: Developing a new market for the existing company product is
called market development strategy. This is the process of finding new market for the new customer to increase company performance by increasing sales and profits. Companies can develop market on geographical such as city, country, region, state etc and demographical such as age, sex, gender, class etc. For example, Chinese products developed new market for their product worldwide. Product Development Strategy: Developing or modifying new products and offering to the existing
market is called product development strategy. This strategy takes time and money for developing a new product. Marketing Manager must conduct a detailed survey whether it is feasible to introduce new product in the current market. For example, Google developed a new browser Chrome for the existing Internet user.
In a growing market. entails certain risks also. customers of the brand favored Classic Coke over the new product. McDonald's had to make changes in the ingredients of its burgers in order to cater to the market. However. uncertain business environment and have pursued multiple and high-risk growth strategies. Market penetration may prove to be a wise strategy only when the overall market is growing. Both companies chose product development as the second most preferred strategic option. In fact. Product development strategy can in some cases be risky. Glaxo has been able to develop new markets for its anti-ulcer drugs by developing and marketing a lowerstrength version of the drug in many countries that can be sold without prescription as a stomach remedy. Competency of a firm becomes crucial in case of the market development strategy. The differences in strategic choices in this case were due to the differences in the type of markets in which both companies operate. . For example. it is generally and its also very interesting entering a promising business outside of the scope of the existing business unit. innovation serves as the most important reason as it may present an opportunity to take market share from competitors or a threat to an existing product line. Amazon focused more on the diversification strategy while E*Trade focused on market development. At the corporate level. For example. Due to the nature of the company's products. Companies with low market share in a growing market can make gains by attacking a competitor head on. which shows commitment to innovation in products and services. No one strategic option for growth is appropriate for all types of companies at all times. it is more difficult to reap benefits of market penetration strategy in a declining market. The product development strategy is often a part of the natural growth of organizations. most big businesses today pursue multiple strategies for growth at the same time in order to achieve their strategic objectives. the two Internet incumbents of Amazon and E*Trade are both operating in a fast evolving. Diversification strategy is adopted by the company if the current market is saturated due to which revenues and profits are lower. like other strategic options. Walt Disney moved from producing animated movies to theme parks and vacation properties.Diversification Strategy: Diversification Strategy is the development of new products in the new market. Effectiveness of Ansoff Analysis in different situation: It is important for analysts to acknowledge that different strategic options are suitable for companies operating in different types of industries and markets. Overall. For example. which include market development. Notably Amazon operates in a wider retail setup while E*Trade operates in a narrower are of financial services retailing. It is imperative for analysts who are trying to identify the growth strategies or are formulating proposals for such strategies for a particular firm. that firms in today's fiercely competitive business environment often pursue multiple strategies. While customers liked the taste of the New Coke in the taste tests conducted by Coca Cola. companies are often able to increase sales to existing and some new customers without increasing their relative market share. Market development strategy. In many cases. McDonald's entered a number of new markets in the wake of globalization with its existing products. as was the case of the New Coke. product development and diversification strategies. market penetration strategy is a low risk strategy as the business parameters of product and market more or less remain the same. Burger King (relatively low market share) to an extent has been successful at attacking McDonald's sales (relatively high market share). For example.
is deemed as a high risk growth strategy as it involves moving simultaneously into new products and new markets. and does not essentially identify marketing options. For example with a complex business decision they would be used to quickly understand the potential for 1 of 4 scenarios. the use of Ansoff matrix as a marketing tool may not be really useful as the matrix is critical for analysing the strategic path that the brand may be following. though not an exhaustive. Diversification remains a popular strategic option for firms in today's competitive business arena. The Ansoff matrix is a useful. It is useful to identify high level strategies. Their main advantage is that they take very complex scenarios and allow for a rapid and easy assessment. 2000). Market penetration is generally considered as a low risk strategy while diversification. Lastly. it is imperative to note that judgement plays a crucial role in making critical strategic choices that may change the future of the firm (Macmillan et al. significant improvements in profitability can be experienced. according to changes in the business environment. especially wihtin a business context. trade publications and magazines are useful sources of information to identify growth strategies.Where to find information for Ansoff Analysis: For conducting Ansoff analysis. Recommendations made on the basis on only one of the models are not concrete and lack in depth. . Strategic options relating to which products or services an organization may offer in which markets are critical to the success of companies. framework for an organization's objective setting process and marketing audits. Journal articles. There are risks associated with all of the four strategic options entailed in the Ansoff matrix. Conclusion Ansoff matrix is one of the most well known frameworks for deciding upon growth strategies of an organization. The advantages are firstly that an ansoff matrix is a simply graphical toll that allows a business or individual to weigh up a complex situation or decision. Up to three years of annual reports of the company can be analysed to see how the company has changed its business focus. While the role of analysis in making strategic choices cannot be undermined. and if the diversification strategy is consistent and well though-out. possible sources of information include company and competitor websites as they would highlight the portfolio of products and services and how the company may have diversified over time. Changes in business environment play a crucial role in the strategic options that an organization may pursue over its life stages. on the other hand. Limitations of Ansoff Analysis: The matrix can tell one part of the strategy story but it is imperative to look at other strategic models like SWOT analysis and PESTLE. However a disadvantage is that the ansoff's matrix is highly simplistic and does not factor in the external environment. Press releases are also a useful source for evaluating the growth strategy that a firm is pursuing or should pursue. The differences in strategic choices of organizations can often be attributed to the type of market in which the company operates.
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