Ansoff Matrix
Part 1: What is Ansoff Matrix
The Ansoff Matrix is a strategic tool that companies use to analyze and plan their growth and diversification strategies. The main focus of this matrix is four strategies that can be used to help an organization grow and explore the risk associated with each system.
Ansoff Matrix is an essential model for strategic marketing planning. Here it is used to analyze the opportunities to grow revenue for a business by developing new products and services or exploring new markets. It is one of the most frequently used models for growth and marketing because it can evaluate opportunities for companies to increase their sales through exploring new markets, customer segments, and geographical locations.
The other names for the Ansoff Matrix are 'Product-Market Matrix' and Product/Market Expansion Grid.
Part 2: Purpose and benefit
Ansoff Matrix is used for strategic planning, and there are numerous advantages for Ansoff Matrix such as;
- It is a simple tool that is quick and simple to understand. It is simply a 2×2 matrix with two variables, i.e., Existing & New products on the X-axis. The other two variables on the Y-axis are Existing & New Markets.
- Ansoff Matrix promotes a growth mindset and drives the organizations to focus on expansion and development.
- It can also be used for risk identification and evaluation. It helps the teams to manage risk while expanding.
- It is an easy way to guide the discussion of options because it can show different combinations for exploring new opportunities. It works as a visual communication tool to help the decision-maker to visualize the company's current position. With this knowledge base, teams can decide the direction to take.
- Ansoff Matrix is also helpful to classify strategic choices and risk evaluation for organizations.
- It is a flexible tool that can be used across the organization or for any particular department.
Part 3: The four strategies of the Ansoff Matrix
Ansoff Matrix is based on a 2 x 2 matrix combining four variables. Different combinations of these variables take the form of four strategies of the Ansoff Matrix. These four strategies are:
1. Market Penetration
Market penetration focuses on two variables that are existing products and existing markets. It helps the teamwork on increasing sales of existing products in the current market(s). Examples of strategies are changing your opening hours for the business, reducing order processing times and cutting down on delaying factors, and showcasing the entire product portfolio more creatively.
How to sell a more significant number of your existing products or services to your existing customer base?
2. Product Development
Product development focuses on two variables that are new products and existing markets. This strategy calls for creating new products marketed in the exact needs the business is already working. It can be supporting products for your existing merchandise. For example, if the company deals with one food group like ketchup and sauces, they may want to introduce their snacks. Focuses on introducing new products to an existing market.
Product development focuses on two variables that are new products and existing markets. This strategy calls for creating new products marketed in the exact needs the business is already working. It can be supporting products for your existing merchandise. For example, if the company deals with one food group like ketchup and sauces, they may want to introduce their snacks. Focuses on introducing new products to an existing market.
It answers the question, How to develop existing products or services for new markets?
3. Market Development
This strategy focuses on the variables of new markets and existing products. Here you will work on exploring new markets for your existing products. It can be a new territory or a new industry, depending on the type of your product. You will see if a new market has a gap that your product can fill and can your organization support this new market with existing resources.
It answers the question, How to enter new markets? It can be new markets in the same territory or different geographical locations.
4. Diversification
This is probably the epitome of innovation for a company. This strategy focuses on new products in new markets. Here all the technical and analytical resources will be used to explore new horizons. It is essential to focus on marketing and support mechanisms as well as expert assessment and technical knowledge.
It answers the question, How to move into new markets with new products or services. It may be used in the scroll to increase your sales with your existing customer base and acquisition.
Part 4: How to make Ansoff Matrix in EdrawMax
1. Start EdrawMax software program.
2. Goto New> Strategy and planning > Business Matrix.
3. For creating an Ansoff Matrix from scratch, click the + tile in the bottom pane.
4. Drag a suitable diagram on the canvas and start customizing it
5. If you would like to use a pre-made template for your diagram, select the Ansoff Matrix in the lower pane. This is the recommended way to create the matrix because it is easy and saves a lot of time.
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Part 5: Tip for making Ansoff Matrix
The Ansoff Framework is far different from other metrics like SWOT Analysis or PESTLE Analysis, etc.; it acts as a pathfinder or a guide to discussion and analysis. You will identify and discuss potential strategies, identify risks and decide what options are the most suitable.
The things to discuss while making the Ansoff Matrix are;
- Current performance of existing products and support departments.
- They are the existing market share of each product line.
- Customer feedback.
- Competitor analysis.
- Potential innovation
- Potential markets
Part 6: How to use Ansoff Matrix
The Ansoff Matrix is employed in the strategy development phase of the marketing planning process. It helps in the identification of potential expansion of the organization into new markets and new products.
Ansoff Matrix can also be used to reduce the risks in developing new products in existing or emerging markets. This strategy of diversification links the opportunities with the capacity of the company to achieve realistic goals. The Ansoff matrix paves the way for observation, synthesis, qualitative analysis, and exemplification.
Part 7: Examples of Ansoff Matrix
This Ansoff Matrix focuses on personal development. The horizontal axis is for skills, and the vertical axis is for industries. It shows four career growth strategies: conversion industry, retraining, professional development, and skill development.
An example Ansoff Matrix diagram shows a simple Ansoff Matrix Model. The designer can use the follow Ansoff Matrix template to start the marketing growing analysis.
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