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IGOR ANSOFF’s MATRIX
•Increase sales to existing market •Penetrate existing market more deeply
•Existing products sold to new markets
NEW PRODUCT DEVELOPMENT
•New products developed for existing markets
•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 .
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 .
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 .
expand distribution or increase promotional activities When ? When market is growing What to look out for ? Competitive reaction.Market-Penetration Strategy Why ? How ? To dominate market To increase usage or get new customers. reduce price. cost of conversion Example: Airlines used reduced fares & promotion various family travel packages to penetrate market .
(new offering-) development strategy dictates that an organization create new offerings existing markets. .PRODUCT-MARKET STRATEGIES A product.
etc. Product Line Extension Adding different features.PRODUCT-DEVELOPMENT STRATEGY This strategy involves: Product Innovation Developing totally new offerings. to broaden the existing line. Product Augmentation Enhancing the value to customers of existing offerings. . sizes.
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 capacity of the organization to deliver the offerings to the market(s). . The impact of the new product on the sales of existing offerings (cannibalization). The magnitude and timing of competitors’ responses.
Product-Development Strategy To satisfy buyer’s 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 .
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). .
promotional strategy . segments with existing products Gaining new customers. new markets Requires changes in marketing strategy. distribution. pricing policy.Market Development Strategy Selling the same product to different market Entering new markets. new segments.
Use market development when Untapped market is beckoning The firm has excess capacity Attractive channels to access new markets .
such as: • Modifying the basic product offering • Using different distribution outlets • Changing the sales effort or advertising Analyzing competitors’ strengths. . weaknesses.MARKET-DEVELOPMENT STRATEGY This strategy involves: Adjusting the marketing mix. and potential for retaliation.
Determining the organization’s ability to adapt to new markets to evaluate success. motivation.MARKET-DEVELOPMENT STRATEGY This strategy involves (continued): Identifying the number. and buying patterns of new buyers. .
MARKET-DEVELOPMENT STRATEGY Internationally. this strategy has four forms: Exporting Licensing Joint Venture/ Strategic Alliance Direct Investment .
Is the most risky and requires the most commitment. The two forms share ownership. and profits of the entity. Licensing Is a contract where one firm (licensee) is given the rights to patents. trademarks. etc. Involves investing in a manufacturing and/or assembly facility in a foreign market. control.MARKET-DEVELOPMENT STRATEGY Exporting Involves marketing the same offering in another country through sales offices or intermediaries. Joint Venture/ Strategic Alliance Direct Investment . 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.
Market-Development Strategy Sell existing products in new markets. use different advertising/sales strategy Why ? How ? To venture into new markets When ? Present market is saturated What to look out for ? Competitive reaction. use different distribution. modify product. understand new buyers. adaptability .
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 .
resources required. fit with distinctive competencies .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. need to understand new markets.
Uses of Ansoff’s 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 .
Strategy Selection .
STRATEGY SELECTION Product-market strategies are evaluated based on: The organization’s business definition. Market capacity and behavior. and capabilities. Competitive activities. Environmental forces. . mission.
The product itself. and opportunity costs.STRATEGY SELECTION Product-market strategies are chosen based on: Costs and benefits of a strategy. market dynamics. Analysis of competitive structure. Probabilities of success for a strategy. .