Ansoff's Matrix

Question 1

Definition

Answer 1

An analytical tool that helps managers choose and devise product and market growth strategies
* choice depends on the company’s objectives for its products and markets

Question 2

Answer 2

Question 3

Market penetration

Answer 3

Involves choosing to focus on selling existing products to existing markets

Question 4

Features of market penetration (3)

Answer 4

• minimal risk
• seeks to maintain or increase market share
• intense competition

Question 5

Product development

Answer 5

Selling new products in existing markets

Question 6

Features of product development (3)

Answer 6

• moderate risk
• innovation to replace existing products
• product improvements

Question 7

Market development

Answer 7

Selling existing products in new markets

Question 8

Features of market development (3)

Answer 8

• moderate risk
• entry into overseas markets
• new distribution channels

Question 9

Diversification

Answer 9

Selling new products in new markets

Question 11

Features of diversification (3)

Answer 11

• high risk
• enables spreading of risk with a balanced product portfolio
• use of subsidiaries and strategic units

Question 12

Types of diversification

Answer 12

• related diversification: when a business caters for customers within the same industry
• unrelated diversification: growth by selling completely new products in untapped markets

Question 13

Benefits of matrix (2)

Answer 13

• simple, straightforward way to compartmentalise growth strategies
• enables discussions about potential risks and rewards of each growth strategy

Question 14

Drawback of matrix (2)

Answer 14

• does not quantify the level of risk of each strategy
• does not suggest a particular strategy - other tools needed for this