This article explains the Ansoff matrix by Igor Ansoff in a practical way. After reading you will understand the basics of this powerful strategy tool.
“Stagnation means decline.” This is a significant starting principle for both profit and non-profit organizations.
When an organization wants to grow, it is important to take the right steps.
Based on the factors product/ service and markets there are four different growth strategies that need to be developed and which have been set out in a matrix by Igor Ansoff, the Ansoff matrix.
What is the Ansoff Matrix?
The Ansoff matrix was developed by strategy professor Igor Ansoff in the 1960s.
The idea behind the Ansoff matrix is simple; a company or organization gains a clear insight into the possible growth strategies based on the combination of existing and new products and existing and new markets.
These could also be services instead of products. The term market is aimed at concrete markets as well as various target groups. In addition, the Ansoff matrix should always be considered from the perspective of the organization.
How to use the Ansoff matrix
The Ansoff matrix (or product market matrix or growth matrix) can be divided into four strategies.
Igor Ansoff indicated that growth takes place step by step. He said that diversification can only be opted for after you have gone through the market penetration, product development and market development steps.
A brief explanation:
Sell the existing product to an existing market; open a new branch and/or target the customers of the competition.
Sell a new product to an existing market; renew and improve the product range to attract more customers.
Sell a an existing product to a new market, present own product range in a different manner, for example on the internet, abroad or through a franchise of another company.
What are the risks
As the growth strategy shifts from existing products and markets within the Ansoff matrix to new products and markets, the risks will be increased for the organization.
A new market needs to be explored and it takes time before new target groups have familiarized themselves with the products of a new provider.
Igor Ansoff pointed out that diversification therefore stands apart from the other three strategies.
It’s Your Turn
What do you think? Is the Ansoff matrix applicable in today’s modern economy and marketing? Do you recognize the practical explanation or do you have more suggestions? What are your success factors for the good Ansoff matrix set up?
Share your experience and knowledge in the comments box below.
- Ansoff, H. I. (1965). Corporate strategy: business policy for growth and expansion. McGraw-Hill.
- Ansoff, H. I. (1980). Strategic issue management. Strategic Management Journal, 1(2), 131-148.
- Green, P. E. (1977). A new approach to market segmentation. Business Horizons, 20(1), 61-73.
- Webster Jr, F. E. (1988). The rediscovery of the marketing concept. Business horizons, 31(3), 29-39.
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