ANSOFF’S MATRIX

The Ansoff Growth matrix is a tool that helps businesses decides their product and market growth strategy.

Ansoff’s 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:

1. 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
2. Secure dominance of growth markets
3. 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
4. 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:
1. New geographical markets; for example exporting the product to a new country
2. New product dimensions or packaging: for example
3. New distribution channels
4. 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.