ANSOFF MATRIX (~ ¥> Objectives - eae Uke Sem aac ~ ri = , [eel oul ei lel Boo) ‘ jPoce LTO a @ Examine the Ansoff matrix for different growth strategies of a given organizationKey Terms Ansoff matrix: Strategic management tool, used to devise product and market growth strategies for an organization. Diversification: Growth strategy in Ansoff's matrix that involves the business moving into new markets with new products. Market development Growth strategy in Ansoff's matrix that involves a business selling existing products in new or unexplored markets. Market penetration: Growth strategy in Ansoff’s matrix that focuses on developing existing markets with existing products in order to increase sales revenue and market share. Product development: Growth strategy in Ansoff’s matrix that involves a business introducing new products to its existing customers.Ansoff Matrix PRODUCTS é EXISTING NEW Designed by Igor Ansoff in 1957 The matrix can be used with both e internal and external growth strategies. MARKETS Ansoff grouped the different options for growth into FOUR categories, based upon combinations of two criteria: Products and Markets. fication Mie NEWInvolves selling more of the same products and services to the same customers, or at least the same types of customers. Usually considered the least risky growth strategy - Focus on increase revenues Does not allow the organization to grow and develop as fast as it would like. It may be that most potential customers cannot be persuaded to buy more Use competitive pricing, introducing customer loyalty, widening distribution channels or more effective promotional campaign Market Penetration EXISTING PRODUCTS EXISTING sic a enProduct Development Involves selling new products within the organization's existing market, often to e customers. Usually involves some risk because it requires more investment in time and resources. Often involves a developing modified product — Extension strategy Efforts may distract the owner from the core business Efforts to sell new products may fail if managers do not understand customers’ needs and expectations. Depending on how loyal the customers are to the original products MARKETS EXISTING NEWMarket Development Involves selling existing products to new customers ~ New market segments Is considered riskier than a market penetration strategy. This is because the organisation may not understand the needs of the new customers, so its offerings might not be adapted to the new market Often involve a new geographic market, cultural clash Can also involve selling the existing product to a new demographic group or target market Change the model of business B2B to B2C MARKETS PRODUCTS EXISTING Lisi ae aaa Nay a> Diversification Involves selling new products in a new market. = Ss = Za i => = on - The riskiest growth strategy, as the business is involved in activities where it may have little knowledge. Diversification There is a chance of making costly mistakes. Strategy Unrelated diversification NEW MARKETS Engaging in diversification that is unrelated to the original business is, in most cases, the riskiest growth strategy of all. ec] TiterSummary Ansoff Matrix Product Development Market Development iversification ‘Same products for ing customers, New products for existing customers New customers for ing products New products for new customers Familiar markets roduct extension strategies and product development Familiar products Spreading of risk Minimal risk Moderate risk Moderate risk High risk Seek to maintain or raise market share Innovation to replace existing products Entering overseas markets Spreading of risk Intense competition Product improvements New distribution channels Use of subsidiaries and strategic business units Changing marketing mix Brand extension strategies Changing marketing mix Less focus on core markets and competenciesQuestion 45.1 - Growth strategies Use the Ansoff Matrix to explain the growth strategies in the following cases: (a) Cadbury, the chocolate manufacturer, launches new products under the names of Créme Eggs, Flake, Crunchie and Heroes to compete with existing rival brands. [4 marks] {b) Toyota, the world’s largest car manufacturer, launches a new line of upmarket cars under the Lexus brand to cater for wealthier customers. (4 marks} (¢)_ Tesco,oneofthe world’s largest supermarket chains, expands by providing petrol and financial servicestoits customers. [4 marks} (d) McDonald's introduces wedding services under the McWedding brand name. [4 marks}Question 45.2 - Adidas According to its corporate website, Adidas strives “to be the best sports brand in the world” This mission statement is supported by the companys growth strategy of market development across the world, in its attempt to be the global leader in the sporting goods industry with brands built on a passion for sports and a sporting lifestyle. The COVID-19 pandemic caused sales revenues at Adidas to fall by 16% in 2020 to €19.84bn ($22.44bn). This caused the company to change its growth strategy to develop new distribution channels, with a shift from selling its goods in retail outlets to using e-commerce and mail order. The company's growth strategy includes plans to double its e-commerce business to €9bn ($10.2bn) by 2025. Source: https//wwwadidas-group.com/en/about/profie/ {a)_ Define the term market development. [2 marks} {b) Define the term distribution channels. [2 marks} (©) Explain one advantage and one disadvantage of Adidas’s market development strategy. [4 marks)