Ansoff matrix

Question 1

Ansoff matrix?

Answer 1

The Ansoff matrix is a strategic decision-making tool, used to devise product and market growth strategies for an organization

Question 2

Market penetration (2) risk, examples (4)

Answer 2

• This growth strategy focuses on developing existing markets with existing products in order to increase sales revenue and market share.
  
  • It focuses on using strategies to increase the usage rate of existing customers.
    It is a relatively low-risk strategy
• Risk - little, as it focuses on what the organisation does and knows well.
• Examples include: charging more competitive prices, using customer loyalty schemes, broadening channels of distribution (e.g., delivery services) and improved advertising campaigns.

Question 3

Market development (3) risk

Answer 3

• This growth strategy involves selling existing products in new or unexplored markets.
  
  • It focuses on using customer loyalty to persuade them (and prospective customers) to buy a new product
  • It also relies on a greater distribution network, such as retailers, to get the product to customers spread around the world.
• Risk - medium, as the organization might not succeed in unexplored markets. After all, consumer habits and tastes vary in different part of the world, It can also be expensive for a business to invest and establish itself in new markets, especially if these are in overseas locations.

Question 4

Market development (3) risk

Answer 4

• This growth strategy involves introducing new products to existing customers.
• It focuses on product differentiation in order to remain competitive or to improve its competitiveness
• Typically, products are developed to replace their existing ones (e.g., the latest iPhone) or to extend the product range (e.g., iTunes, iPads, and Apple Watch) and marketed at current customers.
• Risk - medium - product development can incur substantial investment costs, such as the expenditure on market research (to find out what customers want), prototyping, and test marketing.

Question 5

Diversification (1), risk, 2 types

Answer 5

• Diversification involves organisations moving into new markets with new products
• Risk - high, growth strategy as the organisation enters a market that it has no experience or expertise in. Existing rivals may already have established themselves with brand recognition and customer loyalty.

1. Related diversification – the organisations operate within the same industry, e.g., Coca-Cola entering the energy drinks market
2. Unrelated diversification – involves the organisations entering new industries, e.g., McDonald’s entering the hotel industry or offering wedding reception services