This is a planning tool that provides a framework for helping managers, business executives, and marketers devise strategies for future growth.
It was developed by a mathematician and business manager, H. Igor Ansoff, and was published at Harvard business in 1957. It has helped many executives and market managers for the inherent risk in their growing business.
Basically, there are four strategies that analyses the risk associated with each strategy and also helps in growing of a firm.
1. Market penetration:
It is considered as the least risky growth option as this increases the market share, which involves increasing market share within existing market share. If more products and services are sold to established customers, then this can be achieved by:
⁕ Decreasing price
⁕ Defeating rivals in the same market
⁕ Increase in promotion and distribution support
⁕ Modest product refinements
2. Product development:
This involves extensive research and development by expanding the company’s product range. This is employed when firms have good knowledge of their current market and are able to provide innovative solutions for the existing market that can be achieved by:
⁕ Customer segments
⁕ Different regions across the country
⁕ Industry preference
⁕ Abroad markets
3. Market development:
The expansion of products in new regions, customer segments, services, etc. has lead to the most successful strategy, where a company grows by itself. This also includes extending the product range available to the firm’s existing market. This can be further achieved by:
⁕ More research and development
⁕ Obtaining the rights to produce the product
⁕ Tagging the product under a brand name
⁕ Collaboration of development under the ownership of other company.
Since both the market and product development is required, so this is considered as one of the riskiest strategies. Under this section, new offerings are introduced by the firm and is categorized namely:
⁕ Related diversification:
A bond of potential synergy between firms and market
⁕ Unrelated diversification:
This is a strategy where a large firm made of several companies.