Ansoff's product / market matrix

Introduction The Ansoff Growth matrix is a tool that helps businesses decide their product and market growth strategy. Ansoffs product/market growth matrix suggests that a business attempts to grow depend on whether it markets new or existing products in new or existing markets.

The output from the Ansoff product/market matrix is a series of suggested growth strategies that set the direction for the business strategy. These are described below: Market penetration Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets. Market penetration seeks to achieve four main objectives: Maintain or increase the market share of current products this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling

 Secure dominance of growth markets Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors Increase usage by existing customers for example by introducing loyalty schemes A market penetration marketing strategy is very much about business as usual. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research. Market development Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets. There are many possible ways of approaching this strategy, including: New geographical markets; for example exporting the product to a new country New product dimensions or packaging: for example New distribution channels Different pricing policies to attract different customers or create new market segments Product development Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets. Diversification Diversification is the name given to the growth strategy where a business markets new products in new markets. This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience. For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks.

global business - introduction

Introduction to international business International business is not new businesses and nations have conducted trade across national boundaries for centuries. Lured by the prospects of large markets and/or sources of raw materials, businesses have traded with other parts of the world. But as we will see later global business and global industry is different. Overseas trade and Ansoffs matrix

Thinking about international business in the context of Ansoffs matrix:

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Entry into overseas markets represents market development. Existing products are sold in new markets. It is appealing because: - market penetration is difficult in saturated markets. - product development is costly. - diversification is risky

Why enter overseas markets? The reasons for entering overseas markets can be categorised into push and pull factors: Push factors

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Saturation in domestic markets Economic difficulty in domestic markets Near the end of the product life cycle at home Excess capacity Risk diversification

Pull factors
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The attraction of overseas markets Increase sales Enjoy greater economies of scale Extend the product life cycle Exploit a competitive advantage Personal ambition

Factors in the choice of which overseas market(s) to enter:

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Size of the market (population, income) Economic factors (state of the economy) Cultural linguistic factors (e.g. preference for countries with similar cultural background) Political stability (there is usually a preference for stable areas) Technological factors (these affect demand and the ease of trading)

Constraints and difficulties in entering overseas markets:

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Resources Time Market uncertainty Marketing costs Cultural differences Linguistic differences Trade barriers Regulations and administrative procedures. Political uncertainties Exchange rates (transactions costs & risks) Problems of financing Working capital problems Cost of insurance Distribution networks

Exporting is only one method of doing business internationally

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We normally think of overseas trade in terms of exporting and importing goods and services This involves transporting goods and selling them across national boundaries.

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Direct exporting implies that the domestic firm is actively involved in selling the goods abroad Indirect exporting means that the marketing of goods is delegated to export agents and the UK manufacturer concentrates on production But exporting involving the movement of goods is only one method of engaging in international business

Other methods of market entry

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Overseas product an/or assembly (producing goods abroad) International alliances and joint ventures (working with foreign companies) International M&A (mergers and acquisitions across frontiers) International franchising and licensing allowing foreign based firms to produce, market and distribute goods in specified areas abroad)