ANSOFF

MATRIX
TEAM MATES
• JAYASHRI R (20BME1094)
• RAKESH K (20BEE1177)
• RAGHAV SHARMA (20BAI1084)

2
DEFINITION
• ‘Product market expansion grid also called Ansoff
matrix can help the company to identify the market
opportunities in respective markets and products’
• It is a tool used to develop business growth
strategies by examining the relationship between
new and existing products, new and existing
markets, and the risk associated with each
possible relationship.
• First published by mathematician ‘Igor Ansoff’ in
1957

3
• Ansoff matrix concentrates on main two areas
a. PRODUCTS
b. MARKETS
Each have two subcategories
i. Existing and New
• Structure of the model
Four growth strategy: Market penetration
Product development
Market development
Diversification 4
 01

Ansoff’s 2x2 matrix

 ANSOFF Matrix
PRODUCTS
Existing New

LOW MEDIUM
RISK RISK
Focuses on increasing sales of existing
products to an existing market
Existing

MARKET PRODUCT
PENETRATION DEVELOPMENT
MARKETS

Focuses on entering new market using

existing products

MEDIUM HIGH
RISK RISK
Focuses on entering new market using
MARKET existing products
New

DIVERSIFICATION
DEVELOPMENT

Focuses on entering a new market with the

introduction of new market
 MARKET PENETRATION
•  A strategy for company growth by
PRODUCTS increasing the sale of existing product in
Existing New existing market segment.
LOW
RISK • These are low risk strategies.
Existing

MARKET
PENETRATION • The aim is to “Increase Market Share” More
aggressive marketing ; Reach out existing
MARKETS

customers ; Royalty rewards

• Strategy:
New

• Decreasing prices to attract existing or new

customers

• Increasing promotion & distribution efforts

• Acquiring a competitor in the same

marketplace, increase its production
capacity 7
EXAMPLE

8
 PRODUCT DEVELOPMENT
• Focus on developing new products or
PRODUCTS services for your existing markets
Existing New

MEDIUM • Medium risk strategy

RISK
Existing

PRODUCT • Come up with new products by

DEVELOPMENT

R&D ; Insights into customer needs;

Sell to an existing customer base

• Strategy:
New

• Investing in R&D to develop new

products to cater to the existing market

• Acquiring a competitor’s product &

merging resources to create a new
product that better meets the need of
the existing market 9
EXAMPLE

NETFLI
X

10
 MARKET DEVELOPMENT
PRODUCTS • A business growth strategy that focuses
Existing New on introducing existing products to
new markets

• Medium risk strategy

Existing

• Expanding into new markets may

MARKETS

mean expanding into new geographics,

customer segments, regions, etc.

MARKET
• Strategy:
New

DEVELOPMENT
• Catering to a different customer
segment.

• Entering into a new domestic market

• Entering into a foreign market

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EXAMPLE
 DIVERSIFICATION
• It is the most aggressive and riskiest
PRODUCTS compared to the other three
Existing New strategies.

• The first risk concerns the

uncertainty about the acceptance of
Existing

a new product. Consumers may be

MARKETS

unwilling to try new products, for

example, because they have no
HIGH previous experience.
RISK

• The second risk is about new

New

DIVERSIFICATION
markets. The company may not have
experience with new markets.
Therefore, they need in-depth
research to provide deeper insights
into new markets. Analyzing the
market as in a market development
strategy is one crucial step.
13
 WHY DO COMPANIES
DIVERSIFY?
• First and foremost, companies diversify to
achieve greater profitability.

• Diversification is used by businesses to help

them expand into markets and industries that
they haven’t currently explored. This is
achieved by adding new products, services, or
features that will appeal to the customers in
these new markets.

• Diversification can be used as a defense. By

diversifying products or services, a company
can protect itself from competing companies.

• By expanding their reach and appeal,

businesses are able to explore new avenues for
sales, and in turn, have the potential to vastly
increase their profits.

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 DIVERSIFICATION TYPES
There are two types of diversification
techniques:
• Related diversification
• Unrelated diversification

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 RELATED DIVERSIFICATION
• Related diversification occurs when a firm moves into a new industry that has important
similarities with the firm’s existing industry or industries.

• Diversifying into business lines in the same industry.

• Honda Motor Company provides a good example of leveraging a core competency through
related diversification. Although Honda is best known for its cars and trucks, the company
actually started out in the motorcycle business.

• Through competing in this business, Honda developed a unique ability to build small and
reliable engines. When executives decided to diversify into the automobile industry, Honda
was successful in part because it leveraged this ability within its new business. Honda also
applied its engine-building skills in the all-terrain vehicle, lawn mower, and boat motor
industries.

16
EXAMPLE

17
UNRELATED
DIVERSIFICATION
• Unrelated diversification occurs when a firm enters an industry
that lacks any important similarities with the firm’s existing
industry or industries.

• In short, we can tell that an existing company diversifying into

new industries.

• For example, Amazon entering the grocery store business with its
purchase of Whole Foods.

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EXAMPLE

19
 02

How to use an Ansoff’s 2x2

matrix
 CREATE YOUR MATRIX
• Using the tool of your choice, design your
grid with each category, as discussed in
previous slides.
• Templates are the best and easiest option,
allowing you to save time and energy.
This step, while important, should not
take long to complete.

21
 CONSIDER YOUR OPTIONS
• Plot the potential strategies you
can pursue in each quadrant.
Consider the practical ways you
can grow the company. While
you should be realistic about
the viability of each idea

22
 RUN A RISK ASSESSMENT
• Understanding the risks is the main
point of the Ansoff Matrix.
• Use a Risk/Reward Matrix template
to identify the ways you are putting
your business in danger and the
potential challenges involved.
• You can also use a risk
impact/probability chart to order
them by importance.

23
 PLAN FOR YOUR RISKS
• Now that you know what you
might face, create
contingency plans that
address these risks. Focus on
the risks with the highest
probability and level of
impact.

24
 SELECT YOUR APPROACH
• By now, you might have a sense
of which option is right for you
and your organization.
• But to double-check your findings
use the Decision Matrix Analysis
to weigh up the different factors
you've brainstormed for each
quadrant.

25
 03

Advantages of Ansoff’s matrix

 ADVANTAGES
• An easy way to guide discussion of options.

• Helpful to classify your strategic choices and evaluate risk.

• It can be used as a company tool or individual departments,

such as Marketing.

• It’s quick and simple to understand.

• It has a growth mindset and is designed to help businesses

focus and develop.

• Highlights risk and ensures it’s discussed.

27
EXAMPLES, RISKS OF 2X2 MATRIX
AND INTRO TO 3X3 MATRIX
ANSOFF MATRIX EXAMPLES

• Market Penetration • Product Development

⚬ Coca cola ⚬ Coca Cola
⚬ Heinz ⚬ Walkers

• Diversification
• Market Development
⚬ Related
⚬ Coca Cola
￭ Coca Cola & Aero
⚬ Quorn
⚬ Unrelated
￭ Coca Cola & Virgin
MARKET PENETRATION - COCA COLA
"EXISTING Market, EXISTING Product"

Due to the incredible strength of Coca-Cola’s brand,

the company has been able to utilise market
penetration on an annual basis by creating an association
between Coca-Cola and Christmas, such as through the
infamous Coca-Cola Christmas advert, which has helped
boost sales during the festive period.
HEINZ -MARKET PENETRATION
PRODUCT DEVELOPMENT - COCA COLA
"EXISTING Market, NEW Product"

A prime example of this was the launch of Cherry

Coke in 1985 – Coca-Cola’s first extension beyond
its original recipe – and a strategy prompted by
small-scale competitors who had identified a
profitable opportunity to add cherry-flavored syrup
to Coca-Cola and resell it. The company has since
gone on to successfully launch other flavored
variants including lime, lemon and vanilla.
WALKERS- PRODUCT DEVELOPMENT
MARKET DEVELOPMENT - COCA COLA
"NEW Market, EXISTING Product"

The launch of Coke Zero in 2005 was a classic

example of this – its concept being identical to
Diet Coke; the great taste of Coca-Cola but with
zero sugar and low calories.
QUORN - MARKET DEVELOPMENT
RELATED DIVERSIFICATION - COCA COLA
"NEW Market, NEW Product"

In 2007, Coca-Cola spent $4.1 billion to acquire

Glaceau, including its health drink brand
Vitaminwater. With a year-on-year decline in sales
of carbonated soft drinks like Coca-Cola, the
brand anticipates the drinks market may be
heading less-sugary future – so has jumped on
board the growing health drink sector.
AERO- RELATED DIVERSIFICATION
UNRELATED DIVERSIFICATION - COCA
COLA "NEW Market, NEW Product"

Coca-Cola generally avoids risky adventures into

unknown territories and can instead utilise its
brand strength to continue growing within the
drinks industry. That said, Coca-Cola offers
official merchandise from pens and glasses to
fridges, therefore exploiting its strong brand
advocacy through this strategy.
VIRGIN- UNRELATED DIVERSIFICATION
3X3 MATRIX - ANSOFF MATRIX EXTENSION
THANK
YOU