Ansoff Matrix

Definition: The Ansoff Matrix is a strategic planning tool that provides

a framework to help executives, senior managers, and marketers devise
strategies for future growth.

What is an Ansoff Matrix?

An Ansoff Matrix (sometimes referred to as Ansoff Growth Matrix or
Ansoff's Matrix) has its roots in a paper written in 1957 by Igor Ansoff. In
the paper he proposed that product marketing strategy was a joint work of
four growth areas: market penetration, market development, product
development, and diversification. When displayed visually, these four areas
create the Ansoff Growth Matrix.
How to Use an Ansoff Matrix:
As part of a larger strategic planning initiative, an Ansoff matrix is a
communication tool which helps you see the possible growth strategies for
your organization. The hard work is in selecting one of the four Ansoff
growth strategies.
Market Penetration. The first quadrant in the Ansoff matrix is market
penetration. It is often adopted as a strategy when the organization has an
existing product with a known market and needs a growth strategy within that
market. The best example of such a scenario is the telecom industry. Most
telecom products exist in the market. In such cases competition is intense.
Market Development. Market development is the second market growth
strategy in the Ansoff matrix. This strategy is used when the firm targets a
new market with existing products. There are several examples. These
include leading footwear firms like Adidas, Nike and Reebok, which have
entered international markets for expansion. These companies continue to
expand their brands across new global markets. That's the perfect example of
market development.
Product Development. Product development in the Ansoff matrix refers to
firms which have a good market share in an existing market and therefore
might need to introduce new products for expansion. Product development is
needed when the company has a good customer base and knows that the
market for its existing product has reached saturation. In this case, the market
penetration strategy is no longer practical
Diversification. The diversification strategy in the Ansoff matrix applies
when the product is completely new and is being introduced into a new
market. An example of diversification is Samsung. It began as a trading
company, later expanding into insurance, securities, and retail. Today, it is
mostly known for its electronics division. One product - a black-and-white
television set. It entered the telecom market in 1980 developing telephone
switchboards, then later into telephones, fax machines, and mobile phones.
 ADVANTAGES
 It forces market planners and
management to think about the
expected risks of moving in a
certain direction
It lays out possible strategies
for growth
 Discipline: it focuses the
business
 Sets out aims and objectives
 Presentable to stakeholders
 
 Assessment of alternatives-
shows opportunity cost
 Creates a risk aware culture
 Indicates level of risk and
relevant risk
DISADVANTAGES
 Fails to show that market
development and
diversification strategies
require a change to every day
running of the
 Only a theoretical model
 Does not take into account the
activities of external
competitors
 Paralysis by analysis
 Plans too optimistic e.g.
transferrable skills business
Accurate predictions are
difficult- unforeseen events
 Conflicting objectives of
stakeholders