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Ansoff

Ansoff

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Published by Ahtesham Ansari

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Published by: Ahtesham Ansari on Mar 21, 2012
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05/13/2014

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Ansoff's Matrix - Planning for Growth.

Product - Market Growth Matrix As part of the overall strategy formulation process the company needs to decide on what direction it intends to take with regard to products and markets It should be noted that this is an environment led process which sees the company's market situation as a leading feature. It may not be suitable in a situation of a contracting market. This well known marketing tool was first published in the Harvard Business Review (1957) in an article called 'Strategies for Diversification'. It is used by marketers who have objectives for growth. Ansoff's matrix offers strategic choices to achieve the objectives. The Ansoff Growth matrix is a tool that helps businesses decide their product and market growth strategy. Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets. As part of the overall strategy formulation process the company needs to decide on what direction it intends to take with regard to products and markets. It should be noted that this is an environment led process which sees the company's market situation as a leading feature. It may not be suitable in a situation of a contracting market. The matrix shows the major choices that a company faces in its quest for growth - should it target new or existing markets with new or existing products. The matrix shows the major choices that a company faces in its quest for growth - should it target new or existing markets with new or existing products. The results - in the boxes - are suggested routes for the company's growth strategy. The results - in the boxes - are suggested routes for the company's growth strategy.

Market penetration
Here we market our existing products to our existing customers. This means increasing our revenue by, for example, promoting the product, repositioning the brand, and so on. A market penetration strategy means that the company will aim to sell its existing products within markets that it already serves but in greater numbers. This will entail a greater effort in sales and marketing to achieve higher product sales, the aim is for a greater market share. This could also be achieved through improving the products quality and/ or by productivity gains leading to cost reductions. In a growth market it may be entirely appropriate to seek to develop existing products and intensify marketing activity. If the market is growing many companies are able to increase sales without increasing overall market share. In contrast, market penetration in a static or declining market will be much more difficult and require considerably more effort. In general as the company is dealing with products and markets that it already knows this is a low risk strategy as all of the parameters are known to some extent. As a result of this it is also likely to be a

relatively low cost strategy. It is very much a business-as-usual strategy and as such it may be perceived as lacking vision but staff members.

Product Development
This is a new product to be marketed to our existing customers. Here we develop and innovate new product offerings to replace existing ones. Such products are then marketed to our existing customers. This often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers. A product development strategy entails developing new products for sale in existing markets. In most companies this is a process which will be ongoing as no company can last for long selling only its current range of products. Taking this route enables the company to utilise its existing knowledge and skills to develop new products for a market that it understands. Although there is some risk in any new product development it is far less than developing products for new markets Many retail companies follow this route, as they constantly refresh their product lines, to reflect changing consumer tastes. Marketing in general and market knowledge in particular are key skills for this strategy. It is not all plain sailing however as the recent (mis)-fortunes of Marks and Spencer have indicated. M & S, which are well known for their high quality products, recently lost their way and filled their shops with products that did not appeal to their core customers and sales plummeted. After some drastic surgery at the management level and some hard thinking the company produced a far more appealing range of clothes and customers returned and sales increased dramatically. This scenario illustrates one of the most important marketing nostrums don't lose contact with your core customers!

Market Development

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