Understand the Risks through Ansoff Matrix

Ansoff Matrix

Introduction

The successful businesspersons can create strategies on how to increase the profits. They can have different ideas about the new product development or opening up new marketing channels. They can also be involved in launching the marketing campaigns. Similarly, all the employees in the workplace may have different ideas but the options are required to be reduced and the best plan is to be selected. The Ansoff matrix can prepare the strategic approach for deciding the best plan.

Basic Concept of Ansoff Matrix

First published in the Harvard Business Review in the year 1957, the Ansoff Matrix is the quick and simple method of planning for the growth of the business. Sometimes the matrix is called as the Product /market expansion grid and can be beneficial for the people to think over all the options where risks are associated. In the matrix there are clearly four quadrants situated in horizontal or vertical ways. Every time you move to a new quadrant either horizontally or vertically, you will increase the risks with each strategy. The different types of the Ansoff matrix can be as follows.

Corporate Ansoff Matrix

From the business point of view, low risks are associated with your existing products. You are well aware of the products and how did it worked in the market previously. So it can be a much less surprising for you. But when you are moving to a completely new market, or developing a new product within the existing market. The new market may have completely different needs and requirements and the product may not be turn to be commercially successful as you have expected. And if you move to the two quadrants simultaneously, like a new product in a new market you are actually escalating your risks to another level!!

Personal Ansoff Matrix

From the personal point of view, just remaining where you are can be the low risk option. Changing the role in the same industry or switching the job to a new industry can obtain great risks. And moving to a new industry, with a complete new role can be even more risky!

How the Ansoff Matrix Tool can be used?

The Ansoff Matrix can be used in various strategies like this:

Market Penetration

This is basically the growth strategy where the business can focus on selling the existing products. The different objectives that can be fulfilled are

  • The market share of the current products can be maintained or increased. Activities like the advertising, sales promotion, personal selling and the competitive pricing strategies can be combined to increase the market share.
  • The growth market’s dominance are required to be secured
  • A mature market restructuring can be done by erasing out the competitors with aggressive campaigns with the help of attractive pricing strategies.
  • The usage of the existing customers can be increased by introducing the loyalty schemes.

The penetration strategies may focus on the products as well as markets properly. The proper information about the competitors and the requirements of the customers should be taken.

Market Development

This is basically the growth strategy where the business can focus on selling the existing products. The different objectives that can be fulfilled are

  • The market share of the current products can be maintained or increased. Activities like the advertising, sales promotion, personal selling and the competitive pricing strategies can be combined to increase the market share.
  • The growth market’s dominance are required to be secured
  • A mature market restructuring can be done by erasing out the competitors with aggressive campaigns with the help of attractive pricing strategies.
  • The usage of the existing customers can be increased by introducing the loyalty schemes.

The penetration strategies may focus on the products as well as markets properly. The proper information about the competitors and the requirements of the customers should be taken.

Market Development

The existing products can be penetrated into the new markets. Different methods can be applied for approaching to this strategy.

  • New markets can be selected in the new geographical location. For example; exporting a product to a new country.
  • New packaging or changing the product dimensions
  • New distribution channels can be discovered ; for example converting the retail store into the ecommerce store and the mail orders
  • Pricing policies can be differentiated to attract different customers from different market segments.

As new market is targeted in this stage, the development can be riskier than the market penetration.

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Product Development

Product development is a process where new products can be introduced in the existing market. The features and the functionalities of the products can be improved. This strategy may need different competencies to make the product unique from the others. The successful product development strategy makes the market to be focused on

  • In-depth analysis of what the customer wants and how their tastes change
  • The research , development and the innovation process
  • Being the first in the market where the competitors are behind

Diversification

This strategy refers to where the new products are introduced in the new market. This is the most risky strategy where the business is moving with little or no strategy at all. If the business wants to gain through the diversification strategy, it must be clear enough with what it can expect and maintain a proper balance between the risks and the rewards.

Now, how can you access the tool?

  • Step 1: You can download the free version of either the Corporate Ansoff Or The personal Ansoff Matrix. Then you will have to sketch all the approaches in the matrix.
  • Step 2: The risks can be managed in an appropriate manner. You should research and move towards the matrix. Build all the capabilities for moving strongly through the quadrants. You must have enough resources for making up the lean period.

    Some marketers feel comfortable in creating a nine box grid with more in depth analysis. Limited and partial diversification is allowed in the matrix. Product extension and the new product development have a thin line of difference which can also be observed in the nine box matrix.

    So, the Ansoff Matrix can exhibit different growth strategies in different ways. Some experts think the matrix to be overuse of analysis. Excessive planning may sometimes destroy your free will of instinct and your prediction about the business growth. Even Ansoff himself introduced the phrase ‘paralysis by analysis.

Conclusion

From the article we can comprehend that,

  • The basic concept of Ansoff matrix
  • Purpose of using the matrix
  • How the matrix can be applied in the business planning
  • The steps of assessing the Ansoff matrix tool

Though the matrix may have some criticism, it can be widely used to plan the business growth of the firm and look out for alternate marketing strategies.

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