Ansoff Matrix - New Markets
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The document explains the Ansoff Matrix, a tool for organizations to identify growth strategies by analyzing current and potential products in existing and new markets. It outlines four growth strategies: market penetration, market development, product development, and diversification, each with varying levels of risk. Market penetration is the least risky, while diversification is the riskiest, requiring significant investment and market research.
Ansoff Matrix - New Markets
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- 2. Page 1 Description: Igor Ansoff presented a matrix that helps organizations with alternate corporate growth strategies by focusing on its present and potential products and current and future potential market (customers). This matrix is called as Ansoff matrix. According to this matrix, there are four possible ways of combining products and market share by growing through existing products and potential products and in existing market and new market. The matrix can be understood by the following figure: Strategies: According to above figure, Ansoff matrix provides an organization with four different growth strategies based on the product and the market combination. These strategies are: Market Penetration: Here the firm tries to increase its market share. It is achieved by promoting a firm’s existing product into the existing market. Market Development: Here the firm seeks to increase the growth, which is achieved by promoting its existing products into new markets. Product Development: The goal of a firm here is to bring in new products into the existing market. Diversification: It is a big step for a firm, where it tries to explore new markets with new products for its growth. The least risky strategy of the above is the market penetration, since it makes use of the firms existing capabilities and resources. For a firm to achieve growth in a growing market, it simply has to promote its product more. There can be opportunities if the competitors have reached the limit of their capacities. However, being the least risky it has limitation as well. If the product is fully promoted in the market, it may become saturated and thus nothing can be done but to move ahead with a new strategy.
- 3. Page 2 Market development strategy is riskier than the market penetration strategy. The options available to a firm here is either to expand into new geographic region or in new market segment. A firm going for market development would prove to be a good strategy if the firm has relative core competencies with respect to product itself as compared with the market knowledge. Product development is again a risky strategy. This strategy will pay off best in the scenario where the firm has loyal customers as compared to a good product. The loyalty of the customers will make them use different products launched by the firm. Diversification however is the riskiest strategy of all, since it incorporates new products development in a completely new market. It may even be out of the core competencies a firm possesses. To make this strategy a success, a firm must invest quite a lot in researching and getting to know the market better. Also huge capital is required for this strategy to sustain. Reference: http://www.researchomatic.com/Ansoff-Matrix-93098.html