Ansoff's Matrix

Overview

Developed by Igor Ansoff in 1957.
Strategic model showing options for business growth and competition.
Two main axes: products and markets.
- Each axis has: new and existing segments.
Results in four quadrants/strategies.

Existing products in existing markets.
Least risky strategy.
Focus on increasing market share.
- Tactics: sales promotions (competitions, coupons, BOGOF), advertising, extension strategies.
Challenges:
- Market saturation and high competition.
- Best for markets at the growth or early maturity stages.
Can be used for divestment or retrenchment strategies.

New products in existing markets.
Medium risk level.
Focus on leveraging brand loyalty.
- Requires research and development (R&D) and potentially high cash flow.
- Success factors: efficient R&D team, first-to-market strategy, lean design, price skimming.
Use of extension strategies such as rebranding and adding new features.
Potential need for market research to align with consumer trends.

Existing products in new markets.
Medium risk level.
Focus on geographic or demographic expansion.
- Examples: targeting new countries or different customer segments.
Requires significant market research.
- Market research does not guarantee sales.
Additional considerations:
- Cultural issues when expanding internationally.
- Essential to understand your product thoroughly (core competencies).
- Use advertising and multi-channel distribution, especially e-commerce.
- Strategy to counter domestic market recession.

New products in new markets.
Most risky strategy.
Requires heavy investment in market research and R&D.
- No prior experience in the new markets or with new products.
Often pursued by businesses needing a significant change.
- e.g., Saturated market, product lifecycle in decline phase.
Examples of success:
- Amazon diversifying with AWS (cloud computing).
High risk can bring high rewards.

Moving from existing to new in either axis increases risk.
Diversification, while risky, can lead to significant long-term benefits. For instance, AWS potentially increasing Amazon's value.

Good review of each quadrant's strategies, risks, and applications.