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The Ansoff Matrix: A Powerful Tool for Business Strategy and Growth

In today's fast-paced and ever-changing business landscape, companies must continuously seek out new opportunities for growth in order to remain competitive and thrive. However, identifying the most promising avenues for expansion and weighing the associated risks can be a daunting challenge for any business leader. This is where the Ansoff Matrix comes in - a simple yet highly effective strategy framework that has helped countless organizations successfully navigate the complexities of business growth for over half a century.

Developed by applied mathematician and business manager H. Igor Ansoff in 1957, the Ansoff Matrix (also known as the Product/Market Expansion Grid) provides a structured approach for evaluating different growth strategies based on whether they involve new or existing products and markets. By examining the four distinct quadrants of the matrix - Market Penetration, Market Development, Product Development, and Diversification - decision makers can gain valuable insights into the potential risks and rewards associated with each option, enabling them to make more informed choices and allocate resources effectively.

In this article, we will take an in-depth look at the Ansoff Matrix and its applications in business strategy . We'll explore the key characteristics and considerations for each of the four growth strategies, discuss the benefits and challenges of using the Ansoff Matrix, and provide practical tips and examples for putting this powerful tool into action. Let's dive in!

Understanding the Four Quadrants of the Ansoff Matrix

At the heart of the Ansoff Matrix lie four distinct growth strategies, each defined by a unique combination of products and markets (existing or new). These strategies are:

• Market Penetration: Focusing on increasing sales of existing products in existing markets.
• Market Development: Introducing existing products into new markets.
• Product Development: Developing new products for existing markets.
• Diversification: Creating new products for new markets.

The Four Growth Strategies of the Ansoff Matrix

Let's take a closer look at each quadrant and the key considerations for pursuing growth within these areas.

1. Market Penetration

The market penetration strategy focuses on increasing sales of existing products within existing markets. This approach is generally considered the least risky of the four options, as it leverages the company's established strengths and market knowledge. Typical tactics for achieving market penetration include:

• Increasing marketing and promotional efforts to attract new customers.
• Improving product quality or features to encourage repeat purchases.
• Adjusting pricing strategies to boost sales volume.
• Acquiring competitors to gain market share.

For example, a consumer packaged goods company seeking to increase its share of the snack food market might invest in targeted advertising campaigns, introduce new packaging designs, or offer promotional discounts to drive sales of its existing product lineup.

The primary advantage of the market penetration strategy is that it allows businesses to capitalize on their current assets and capabilities, minimizing the need for substantial investments in new product development or market exploration. However, the potential for growth may be limited, particularly in mature or saturated markets where competition is fierce and opportunities for differentiation are scarce.

2. Market Development

The market development strategy involves taking existing products into new markets, whether by targeting different customer segments, expanding into new geographic regions, or exploring alternative distribution channels. This approach enables companies to leverage their proven product offerings while tapping into fresh sources of demand. Common market development tactics include:

• Adapting products or marketing messages to appeal to new demographics.
• Establishing a presence in untapped geographic markets, either domestically or internationally.
• Partnering with new distributors or retailers to reach wider audiences.
• Developing online sales channels to complement brick-and-mortar operations.

A classic example of successful market development is Apple's expansion into the Chinese market, where the company's iconic iPhone and iPad products have found a massive new customer base.

While market development can open up significant growth opportunities, it also comes with its own set of risks and challenges. Entering new markets often requires substantial investments in market research, localization, and infrastructure development, and companies may face intense competition from established players or cultural barriers to adoption.

3. Product Development

Product development focuses on creating new products to serve your existing market. This strategy aims to leverage your brand's reputation and customer loyalty to introduce innovative offerings that address evolving customer needs or capitalize on emerging trends.

To implement a product development strategy , businesses should:

• Invest in research and development to identify opportunities for innovation and create products that align with customer needs.
• Gather customer feedback and insights to inform product design and features.
• Collaborate with key stakeholders, such as suppliers and distributors, to ensure successful product launches.
• Develop a strong value proposition and marketing strategy to generate interest and demand for the new product.

An example of product development is a smartphone manufacturer introducing a new model with advanced features to appeal to its loyal customer base.

4. Diversification

Diversification is the riskiest of the four growth strategies, as it involves entering entirely new markets with new products. This strategy can be further divided into two types:

a. Related Diversification: Expanding into new markets or products that are related to your existing business, allowing for potential synergies in terms of resources, capabilities, or customer base. An example of related diversification is a car manufacturer expanding into the electric bicycle market, leveraging its expertise in vehicle design and manufacturing.

b. Unrelated Diversification: Venturing into markets or products that are unrelated to your current business, which can help mitigate risks associated with relying on a single market or product line. An example of unrelated diversification is a software company acquiring a chain of fitness centers to diversify its portfolio.

To pursue a diversification strategy, businesses should:

• Thoroughly assess the risks and potential returns associated with entering new markets or developing new products.
• Conduct extensive market research to validate the demand for the new product or service in the target market.
• Develop a clear understanding of the resources and capabilities required to successfully execute the diversification strategy.
• Create a robust plan for integrating the new business into the organization's overall structure and operations.

By carefully considering diversification opportunities through the lens of the Ansoff matrix, business leaders can make strategic decisions that drive growth while managing risk. The key is to find the right balance between leveraging existing strengths and exploring new opportunities in a way that aligns with the company's overall vision and goals.

Benefits of Using the Ansoff Matrix

The Ansoff Matrix offers several key benefits for business leaders and organizations:

• Strategic clarity: By providing a clear framework for evaluating growth options, the Ansoff Matrix helps business leaders gain clarity on their strategic direction and prioritize initiatives based on their risk-return profile.
• Risk assessment: The matrix helps businesses understand the relative risks associated with each growth strategy, enabling them to make informed decisions and allocate resources appropriately.
• Structured decision-making: Using the Ansoff Matrix encourages a structured approach to decision-making, ensuring that all relevant factors are considered when evaluating growth opportunities.
• Alignment with business objectives: By aligning growth strategies with the overall business strategy and objectives, the Ansoff Matrix helps ensure that initiatives are focused and purposeful.
• Adaptability: The framework can be applied to various industries, business sizes, and market conditions, making it a versatile tool for any organization seeking growth.

How to Apply the Ansoff Matrix in Your Business

To effectively use the Ansoff Matrix in your business, follow these steps:

• 1. Assess your current situation: Evaluate your existing products, markets, and capabilities to establish a clear understanding of your starting point.
• 2. Identify potential growth opportunities: Brainstorm potential growth options within each of the four quadrants of the Ansoff Matrix, considering your business's strengths, weaknesses, and market trends.
• 3. Evaluate risks and potential returns: Assess the risks and potential returns associated with each growth option, taking into account factors such as market demand, competition, and required resources.
• 4. Prioritize growth strategies: Based on your risk assessment and alignment with business objectives, prioritize the growth strategies that offer the best balance of risk and return for your organization.
• 5. Develop an implementation plan: Create a detailed plan for executing your chosen growth strategy, including resource allocation, timelines, and key performance indicators (KPIs) to measure success.
• 6. Monitor and adapt: Continuously monitor the performance of your growth initiatives and be prepared to adapt your strategy as market conditions or business circumstances change.

Real-World Examples of Ansoff Matrix Application

Here are some real-world examples of Ansoff Matrix application:

• Market Penetration: Coca-Cola, the global beverage giant, has successfully employed market penetration strategies by increasing its advertising efforts, running promotional campaigns, and expanding its distribution network to reach more consumers within its existing markets.
• Market Development: Netflix, the streaming service provider, has pursued market development by expanding its services globally, entering new countries, and adapting its content offerings to suit local preferences.
• Product Development: Apple, the technology company, consistently engages in product development by introducing new products and services, such as the iPhone, iPad, and Apple Watch, to its existing customer base.
• Diversification: Amazon, the e-commerce and cloud computing company, has diversified its business by entering new markets and offering new products, such as Amazon Web Services (AWS) and Amazon Prime Video, which are distinct from its original online retail business.

The Ansoff Matrix is a powerful strategy framework that helps business leaders evaluate and plan for growth. By considering market penetration, market development, product development, and diversification strategies, companies can make informed decisions about how to expand their business while managing risk.

Each growth strategy within the Ansoff Matrix comes with its own set of opportunities and challenges. Market penetration, the least risky option, focuses on increasing sales of existing products within current markets. Market development involves selling existing products in new markets, while product development introduces new products to existing markets. Diversification, the riskiest strategy, entails entering new markets with new products and can be further divided into related and unrelated diversification.

To effectively apply the Ansoff Matrix, businesses should assess their current situation, identify potential growth opportunities, evaluate risks and returns, prioritize strategies, develop an implementation plan, and continuously monitor and adapt their approach as needed.

Whether pursuing market penetration, market development, product development, or diversification, the key is to find the right balance between leveraging existing strengths and exploring new opportunities in a way that aligns with the company's overall vision and goals.

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Article • 8 min read

The Ansoff Matrix

Understanding the risks of different strategic options.

By the Mind Tools Content Team

(Also known as the Product/Market Expansion Grid)

Successful leaders understand that if their organization is to grow in the long term, they can't stick with a "business as usual" mindset, even when things are going well. They need to find new ways to increase profits and reach new customers.

There are numerous options available, such as developing new products or entering new or existing markets, but how do you know which one will work best for your organization?

In this article, we'll look at a model called the Ansoff Matrix which can help you to do just that by getting you to think about the potential risks of each option, and to devise the most suitable plan based on your situation.

What Is the Ansoff Matrix?

The Ansoff Matrix was developed by H. Igor Ansoff and first published in the Harvard Business Review in 1957, in an article titled "Strategies for Diversification." [1] It has given generations of marketers and business leaders a quick and simple way to think about the risks of growth.

Also known as the Corporate Ansoff Matrix and the Product/Market Expansion Grid, the Matrix (see figure 1, below) shows four strategies you can use to grow your business. It also helps you analyze the risks associated with each one. The idea is that each time you move into a new quadrant (horizontally or vertically), risk increases.

Figure 1: The Ansoff Matrix

You can also use the Ansoff Matrix as a personal career planning tool. It can help you weigh up the risks of certain career decisions, and to choose the best option for you. Learn more about how to do this in our article, the Personal Ansoff Matrix .

The Four Quadrants of the Ansoff Matrix

Let's examine each quadrant of the Matrix in more detail.

• Market Penetration (lower left quadrant) . This is the safest of the four options. Here, you focus on expanding sales of your existing product in your existing market: you know the product works, and the market holds few surprises for you.
• Product Development (lower right quadrant) . This area is slightly more risky, because you're introducing a new product into your existing market.
• Market Development (upper left quadrant) . Here, you're putting an existing product into an entirely new market. You can do this by finding a new use for the product, or by adding new features or benefits to it.
• Diversification (upper right quadrant) . This is the riskiest of the four options, because you're introducing a new, unproven product into an entirely new market that you may not fully understand.

How to Use the Ansoff Matrix

Now, let's take a look at how you can use the Ansoff Matrix to weigh up the different risks involved when making strategic growth and marketing decisions:

Step 1: Analyze Your Options

Download our free Ansoff Matrix Worksheet . You can use this to plot the approaches you're considering on the Matrix. The table below helps you to think about how you might classify different approaches.

Reprinted by permission of Harvard Business Review . From "Strategies for Diversification" by H. Igor Ansoff, 1957. Copyright © 1957 by the Harvard Business School Publishing Corporation; all rights reserved. [1]

Step 2: Manage Risks

Conduct a Risk Analysis to gain a better understanding of the dangers associated with each option. (If there are a lot of these, prioritize them using a Risk Impact/Probability Chart .) Then, create a contingency plan that addresses the risks you'll most likely face.

Step 3: Choose the Best Option

By now, you might have a sense of which option is right for you and your organization. But to double-check your findings use the Decision Matrix Analysis to weigh up the different factors you've brainstormed for each quadrant.

Using a Nine-Box Ansoff Matrix

Some marketers use a nine-box grid for a more sophisticated analysis. This puts "modified" products between existing and new ones (for example, a different flavor of your existing pasta sauce rather than launching a soup), and "expanded" markets between existing and new ones (for example, opening another store in a nearby town, rather than expanding internationally).

This is useful as it shows the difference between product extension and true product development, and also between market expansion and venturing into genuinely new markets (see figure 2, below).

However, be careful of the three "options" in orange, as they involve trying to do two things at once without the one benefit of a true diversification strategy: completely escaping a downturn in a single-product market.

Figure 2: The Nine-Box Grid

The Ansoff Matrix was originally developed by H. Igor Ansoff in 1957. It offers marketers a simple and effective way of weighing up the options and risks involved when taking new strategic decisions.

The Matrix outlines four possible avenues for growth, which vary in risk:

• Market Penetration.
• Product Development.
• Market Development.
• Diversification.

To use the Matrix, plot your options into the appropriate quadrant. Next, look at the risks associated with each one, and develop a contingency plan to address the ones that will most likely affect you. This will help you make informed and effective strategic marketing decisions for your organization.

Download Worksheet

[1] Ansoff, H. (1957.) 'Strategies for Diversification,' Harvard Business Review , Volume 35, Issue 5, October 1957. (Available here .)

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Annelies Tjebbes

Thanks for this valuable article. Just a heads up that the link to the Ansoff Matrix leads to a link for the Force Field Analysis worksheet by accident. Would love to have access to the Ansoff Matrix worksheet if possible. Thanks!

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Ansoff Matrix: Use, Examples, Case Study, and Template – Comprehensive Overview

What is the ansoff matrix.

Ansoff matrix also known as corporate Ansoff matrix and product/market expansion grid is an essential business strategy tool used in business schools globally. The model focuses on providing a structure for business owners and marketers to strategize growth and risks of growth for their businesses. The Ansoff Matrix can be used during various stages of a product or a company life cycle making it one of the most versatile tools for managers. From Strategic Exercise to Market Planning,

Ansoff matrix helps marketers get opportunities to grow their sales and generate revenue by using different combinations of new markets and products and existing markets and products.

Ansoff Matrix finds wide usage in almost every field of management. Ansoff Matrix also helps in identifying potential growth areas and areas where management should retract, making it an important tool for business prioritization as well. The universality of the tool makes it a favorite of strategic consultants who carve out new and niche strategies for the organization. in this blog, we will discuss in detail the history, usage, and advantages of a case study.

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History of Ansoff matrix

H. Igor Ansoff, an applied mathematician, and business manager developed the Ansoff model. The matrix was first published in Harvard Business Review in 1957 under an article called “strategies for diversification”. In his model, Ansoff has hinted at some of the strongest and weakest business strategies. 

According to Ansoff, there are only two approaches to developing a growth strategy, diversifying Product Growth and Market Growth. 

 Uses of Ansoff matrix

Ansoff matrix can be used to assess the different strategies for business growth also known as the four quadrants of the Ansoff model. The four quadrants are: 

Market penetration

Product development, market development.

• Diversification 

In the first quadrant, market penetration is the safest with minimum risk. This strategy focuses on increasing sales of existing products or offerings in the markets you are already familiar with. This can be achieved by:

• Lowering your prices or giving discounts
• Promoting your business on a larger scale
• Buying or obtaining a rival’s company in the very market
• Changing  opening hours for stores
• Focusing on product refinement

For a better understanding, let us take an example: Popular brands like coca cola are known to focus a lot on getting their brand distributed among the right target audience. They spend a lot of money on getting help from supermarkets, sports stadiums, diners, etc. to penetrate the market and get their brand sold on a higher scale.

In the second quadrant, product development is riskier than market penetration. This strategy focuses on selling new products in the existing markets. You can also modify the products or extend the range of existing products. The strategy also focuses on the needs and welfare of target customers and markets. This can be achieved by:

• Making investments in the research and development of new products.
• Buying someone else’s products and obtaining the rights to claim them as one’s own.
• Acquiring the rights to build someone else’s products
• Creating new packaging for the existing products

The strategy also focuses on the needs and welfare of target customers and markets. A good example of product development can be taken from the pharmaceutical companies that have been actively investing in the research and development of new drugs. 

Market development or the third quadrant carries furthermore risks. The strategy focuses on sales of existing offerings in new markets and among different types of customers. This can be accomplished by:

• Promoting your offerings in different customer segments
• Targeting markets in new areas of the country
• Foreign marketing
• Taking the help of online sales

Market development strategy is not that risky if the new markets are similar to the previous ones that you are familiar with. This can be better understood with an example, such as: google started in California, United States but extended its business to Chinese markets.

Diversification

In the last quadrant, diversification is the riskiest of all. It focuses on taking new products into new markets . Even with high risks, diversification can sometimes procure greater rewards. This strategy can be of two types, related and unrelated. 

• Related diversification : there remains a connection between the new offerings and the existing firms/businesses.
• Unrelated diversification : there are no connections between the businesses and the new offerings. 

The strategy proves to give an edge in a way that, if one business fails to flourish, the others will remain unaffected. Let us take two examples to understand each of these diversifications better. 

A shoemaker making shoe with leather decides to make belts and bags instead. This is a case of related diversification as the products are different but the raw material is common for both. Another example can be the company Samsung. Samsung offers a variety of products from mobile phones, laptops, and air conditioners to hotel chains, insurance, and chemicals. This example is of unrelated diversification. Even if the hotel chains don’t return promising results, mobile phone sales of Samsung won’t be affected.

Advantages/Benefits of using Ansoff Matrix

Simplicity : Ansoff Matrix is a very simple yet powerful tool for visualization for managers. Many managers depend on Ansoff Matrix to find the right strategy for the organization

Easier for brainstorming : Unlike other strategic tools, Ansoff Matrix is perfect for a brainstorming session.

Management Summary : The final outcome of a strategic exercise is often very complex. With Ansoff Matrix, it is relatively easier to find a management summary easily. It also becomes easier for an organization to communicate new or changed strategies down the line.

Universality : The Ansoff matrix is very universal. It can be used in a wide range of problems ranging from consulting to new business expansion to strategic marketing problems. It is widely used in assessing the current strategy and finding what’s needed to go to derived strategy

Ansoff Matrix: Case Studies

Founded by Henri Nestle, the famous multinational company, Nestle is one of the world’s largest food and drinks processing companies. Nestle was started in 1866 as a small firm known to produce infant milk and now it has earned the name of a business with the most winning marketing strategy. It is headquartered in Switzerland. The products the company offers are diverse, such as beverages, ice creams, baby food, pet food, bottled water, etc.

For over 150 years, their business has been flourishing. The company also possesses a special focus on sustainable development. They have the largest research and development network in the food and beverage industry which makes them stand out. With the tagline “Good Food, Good Life”, the brand has created a catalyst to promote its sales. 

Nestle is a multibillion-dollar company with a market capitalization of more than 247 billion USD. As of 2021, the brand has generated a revenue of around CHF 87.10 billion. Nestle has made use of Ansoff Matrix successfully over the years to become the leading international food processing brand in the world. Let us have a look at the strategic analysis of the Ansoff Matrix of Nestle.

Market penetration by Nestle

For smooth market penetration, Nestle uses its existing products in the existing markets to grow their sales. They focus on aggressive marketing to increase purchases. Nestle uses various tactics to grow their sales such as manufacturing different packaging sizes to give customers a wider choice of selection, offering discounts on larger purchases, lowering prices on certain products, etc.

They are also known to acquire similar brands and companies to reduce competition. Nestle uses promotion strategies like encouraging people to purchase their products by including the customers’ pain points in their advertisements. The brand also keeps on introducing new flavors to keep their customers interested in their products.

Product development by Nestle

Nestle launches new products in the existing markets almost regularly. For instance, they first manufactured chocolates that many customers liked. They later went one step ahead and introduced ice creams using those chocolate flavors.

To promote these ice creams they kept the prices low, advertised more, and used different channels to increase the reach of their products. Once the ice creams were a hit, they adjusted the prices, improved the packaging, and also introduced more variants of the product. All this helped them generate revenue from the ice creams and grew their sales. This is how Nestle focuses on its product development

Market development by Nestle

Nestle uses exciting products in new markets for market development. They expand consistently to new geographical areas where they haven’t marketed yet. They make sure that the products are readily available with the help of different distribution channels to help them increase their reach to the local markets. For this very goal, they also advertise the products through the regional media. They also focus on making the products affordable, targeting the customers’ needs, and introducing variants according to the preference of customers from that particular region. For example, India has more variants of Maggi instant noodles that aren’t available elsewhere. 

Diversification by nestle

Nestle regularly launches new products in new markets for diversification. The new products can be related to the existing range of products or can be a different range itself. For example, Nestle offers baby food but they can also launch diapers and other baby products in new markets to grow their sales. Of course, it takes a strategic plan to execute such a stunt with so much risk. But with such marketing understanding, Nestle rarely disappoints.

Coca-Cola is a giant in the beverage industry. It serves almost every continent in the world.

Samrat is a Delhi-based MBA from the Indian Institute of Management. He is a Strategy, AI, and Marketing Enthusiast and passionately writes about core and emerging topics in Management studies. Reach out to his LinkedIn for a discussion or follow his Quora Page

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The Ansoff matrix: Comprehensive overview with examples

Numerous considerations are important in a decision-making context. One of those considerations is making the decision-making process transparent and easy to grasp in a quick glance.

The good news is that there are numerous decision-making techniques available — many of which are easy to learn and can provide visibility into trade-off decisions in particular.

In this article, we’ll take a look at one such technique: the Ansoff matrix.

What is the Ansoff matrix?

The Ansoff matrix is one of many manifestations of a 2×2 matrix that helps with product decision making. Being visually-oriented, the Ansoff matrix is especially appealing for making rapid trade-off decisions.

The idea behind the Ansoff matrix originated in a paper from the 1950s by the mathematician Igor Ansoff. In the paper, Ansoff articulated considerations behind product-market fit. In particular, he focused on ways in which organizations could balance risk by assessing the potential for new or existing products in new or existing markets.

What are the four factors of the Ansoff matrix?

The four components (quadrants) of an Ansoff matrix serve to help with making trade-off decisions. They’re each based on what is known about products and the markets they potentially operate in.

The four components are market penetration, product development, market development, and product/market diversification:

The decision-making power behind the Ansoff matrix has a lot to do with its ability to make the level of relative risk immediately apparent. There is a big difference between making adjustments to an existing product, in a familiar market, as opposed to playing in a completely different product and/or market space.

The four areas that an Ansoff Matrix focuses on are:

• Market penetration (lower left quadrant) — Low risk because it focuses on existing products in existing markets. Any idea that lands in this quadrant means that the organization is sticking with familiar terrain, and seeking to leverage the familiar to find ways to extract greater value with minimal investment
• Product development (lower right quadrant) — Moderate risk because it focuses on new products in existing markets . Any idea that is part of this quadrant looks to augment product offerings within a reasonably familiar market context. Risk exposure is minimized by introducing the new product to a familiar market segment or demographic, as it tests the new product before sending it to a less-familiar market
• Market development (upper left quadrant) — Moderate risk because market development focuses on existing products in new markets. Any idea that is part of the market development quadrant flips the risk to be mostly in the product domain instead of being mostly in the market domain, while keeping the risk manageable
• Product/market diversification (upper right quadrant) — High risk because it focuses on new products in new markets. Ideas that startup companies pursue tend to be in the product/market diversification quadrant, as in such cases the hypothesis is that there is a significant market opportunity open to the company that launches a “good enough” product into that space. The risk of failure is considerable

Risk is not the only factor worthy of consideration when making decisions about product-market fit, however. The flip side to risk is reward. And often, the highest potential reward tends to land in the upper right quadrant. Let’s take a look at each of the four components in greater detail.

Market penetration

We’re certainly on familiar terrain when it comes to evaluation of market penetration. When we’re working in this quadrant, we’re looking at products that already exist, and where we’re selling those products into an existing market.

For this and subsequent examples, let’s say we work for a company that makes chewing gum, and let’s call this company Chewing Yum. Let’s further suppose that at Chewing Yum, our products focus primarily on health-conscious adults, and that our product distribution is limited to the United States.

At Chewing Yum, our market analysis tells us that we’re seeing consistent erosion in market share. Given that information, we might decide to embark on a number of relatively low-risk strategies to address this situation, by experimenting in areas such as:

• Distribution
• Minor product enhancements

For example, we might choose to experiment by dropping the price, for:

• One of our products, in a single existing market segment
• One of our products, in multiple existing market segments
• A family of related products, in a single existing market segment
• A family of related products, in multiple existing market segments

We might even find that by swapping one ingredient with another, we can get more flavor, we can get a lower cost, or we may find that our customers are more likely to buy our product if it’s located in the health section of the store.

Product development

As we move into the lower right quadrant of the Ansoff matrix, we’ve entered the domain of introducing new products into existing markets. In some cases, when we say “new product,” it could mean releasing an existing product with significant modifications, it could mean a brand new product that takes us in a significantly different direction as a company, or multiple other variations around the same theme.

On the less ambitious end of the spectrum, let’s suppose that our Chewing Yum market research tells us that our product packaging would be more likely to generate sales if we gave it a fresh look, and we’ve decided to do that in conjunction with changing the name of an existing product (where we’ll have a bold new marketing campaign associated with those changes). And that product re-launch in turn might lead to an idea for a brand new product.

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On the more ambitious end of the spectrum, let’s say that we’re looking closely at our competitors, and that we’re seeing an opportunity to increase our market share via some form of acquisition. For example, we might decide to:

• Acquire a competitor and thereby increase our product portfolio
• Obtain the rights to make and distribute a different company’s product
• Jointly develop a new product with another company

Market development

Market development takes us into the upper left side of the Ansoff matrix, where we seek to find new settings in which we can sell our existing products. Also known as market extension, market development offers a number of approaches that we could potentially consider.

At Chewing Yum, we might very well have found via research that we have a significant growth opportunity if we explore selling our products outside of normal retail outlets, where we can reach more health-conscious people by partnering with health clubs or health spas to sell our products into several large, well-established partners in that space. We might also have found that we can significantly expand our market share by moving into online sales, to enhance our more traditional distribution channels.

And looking further afield, let’s suppose that we see a particularly promising opportunity in the English-speaking European market, where we can potentially dramatically increase our reach without making changes to product packaging or branding. We might even catch a break because a prominent health guru has mentioned our product on a television show or a podcast, which opens the door to one or more additional potential markets.

Product/market diversification

The fourth and final quadrant of the Ansoff matrix is the upper right quadrant. It is here where we can potentially explore opportunities that may come with the largest possible payoff, but these often are accompanied with the largest potential risk.

Given that the potential for surprises is the greatest when exploring diversification, it’s especially important for our market research to be particularly robust. Indeed, we might decide that we are not yet ready to explore diversification until we invest in further research and data collection.

The good news is that at Chewing Yum, we’ve done our homework. Thanks to our research, we envision a phased approach, where we envision introducing new products, and also entering new markets. It can be helpful when thinking about diversification to break it down into a couple of sub-categories. Let’s call these categories:

Parallel diversification

Orthogonal diversification.

In parallel diversification, the changes that we’re contemplating with respect to new products and new markets are largely in alignment with our existing branding and product offerings.

At Chewing Yum, we’ve decided the first part of our diversification strategy will be to augment our market share by introducing a new product line focusing on a younger audience. And as part of the launch of the new product line, we plan to expand into the English-speaking component of the Canadian market, because we see less competition in that space than we do in some other markets for our new product offering.

In orthogonal diversification, we’re going in a significantly new direction for our company. At Chewing Yum, we’ve discovered that there is a growing market for chewables for pets (dogs in particular). To expand into this market, we’re going to offer a new product line that acts as a dietary supplement and also cleans the dogs’ teeth and gums. As part of this product launch, we’re going to initially sell into existing markets, and also explore the possibility of exploring into new markets.

Note : There are additional ways to articulate forms of diversification, which we won’t delve into here. For instance, some practitioners distinguish between horizontal diversification (similar to what I’m calling parallel diversification) and vertical diversification. In vertical diversification, a company might choose to increase how much it is involved in different parts of the value chain. For instance, a company might choose to focus its diversification activities more on the top of the funnel, or it might choose to diversify in areas such as procurement and manufacturing.

Advantages and disadvantages of using the Ansoff matrix

Let’s now turn to advantages and drawbacks associated with the use of an Ansoff Matrix. Advantages include:

• Simplicity — It’s an easy technique to master, with little introduction required
• Portability — It’s straightforward to use in a variety of settings, whether virtual, in-person, or hybrid
• Transparency — It offers visibility into the decision-making process

As is the case with any decision-making tool, it’s important to recognize the strengths, and also the weaknesses, inherent in the approach. Examples of disadvantages associated with Ansoff matrix usage include:

• It’s not a stand-alone artifact . Depending on the level of rigor of the work that preceded usage of the Ansoff matrix, along with how well-understood the competitive landscape is, it’s important to see its usage as just one tool in the decision-making toolbox, and not rely on it alone for making key decisions
• It’s not a remedy for lack of alignment . If decision-makers do not have the same understanding of foundational terms and business dynamics, the Ansoff matrix alone cannot by itself address that gap

Complementary techniques to the Ansoff matrix

Given both the advantages and the disadvantages associated with usage of an Ansoff matrix, it is common to use it in conjunction with other techniques. To name a few examples:

• SWOT analysis — The thought process when considering strengths, weaknesses, opportunities, and threats works well in conjunction with an Ansoff matrix. For instance, by conducting a SWOT analysis before using an Ansoff matrix might best inform which quadrant of the Ansoff matrix to focus on
• PESTLE analysis — Because PESTLE (political, economic, sociocultural, technological, legal, and environmental) helps with taking a big-picture view, completing an Ansoff matrix might point to which aspect(s) of PESTLE is/are most important to focus on
• Porter’s Five Forces — This model can provide additional perspective, since it helps organizations better understand the risks in their business context, such as the bargaining power of buyers and suppliers, and the threat of potential competing goods and services or competing market players

Based on the preceding examples, using our fictitious Chewing Yum company, we have seen some of the most common ways in which organizations can use an Ansoff matrix. As such, it most often serves as a decision-making tool, enabling people in various parts of an organization to explore their growth options. Due in large part to its simplicity, and to its visual nature, it’s an excellent tool to include in any organization’s decision-making toolbox.

Because of its structure, an Ansoff matrix also serves as a reminder about certain realities in any organizational context. That is, it illustrates how business growth is possible without product or market development. And it also shows what options might exist in the middle ground, by expanding either products or markets, without relying on more risky diversification strategies.

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Ansoff Matrix explained plus example

Ansoff Matrix: this article explains the Ansoff Matrix by Igor Ansoff in a practical way. It covers an Ansoff Matrix example, what the Ansoff growth matrix is, along with an explanation of the four strategies, and what its limitation are. After reading you will understand the basics of this marketing strategy tool. Enjoy reading!

Introduction

“Stagnation means decline.” This is a significant starting principle for both profit and non-profit organizations.

When an organization wants to grow, it is important to take the right steps. Based on the factors product/ service and markets there are four different growth strategies that need to be developed and which have been set out in a matrix by Igor Ansoff , the Ansoff matrix.

What is the Ansoff Matrix?

This Matrix was developed by strategy professor Igor Ansoff in the 1960s.

The idea behind the Ansoff Matrix is simple; a company or organization gains a clear insight into the possible growth strategies based on the combination of existing and new products and existing and new markets. These could also be services instead of products.

The term market is aimed at concrete markets as well as various target groups. In addition, Ansoff’s Growth Matrix should always be considered from the perspective of the organization.

This strategic planning tool, Ansoff’s Growth matrix, is connected to the general strategic direction of an organisation. Additionally, four alternative growth strategies are presented in the table, being:

• Market growth : market penetration by pushing existing products in market segments
• Market development : development of new markets for existing products
• Product development : developing products for existing markets
• Diversification : developing new products for new markets

An Ansoff Matrix example

The Ansoff Matrix, also referred to as the product market matrix or growth matrix, can be divided into four strategies. Here, Igor Ansoff indicates that growth occurs in steps. For instance, he believes diversification can only be chosen after the stages of market penetration, product development and market development have been completed. Below is a brief and practical clarification.

Figure 1 – The Four Strategies of the Ansoff Matrix (Ansoff, 1965)

Market Penetration

This is a product/ market combination of a current product, offered in the current market; opening a new branch and/or focusing on competitors’ customers.

With this strategy, the organisation uses its own products in the existing market. In other words, a company aims to increase its market share with a penetrating market strategy. This market penetration can be conducted in several ways:

• Lower price to attract existing or new customers
• Greater efforts in the field of promotion and distribution
• Acquiring a competitor in the same market/ sector

An example of this are companies in telecommunication. These are all active within the same market and often use a penetration strategy by lowering their prices and increasing their distribution and promotion efforts.

Another example of a company that successfully deploys this strategy is Coca-Cola. This company, just like Heineken , is known for spending a lot of money on marketing to penetrate and conquer new markets.

Additionally, they try to maximise the use of distribution channels by closing attractive deals with large distributors such as supermarkets, restaurants and football stadiums.

Product Development

This is a product/ market combination of a new product, offered in a current market; renewing and improving the product range and attracting more customers this way.

In the product development strategy, a company develops a new product to meet the needs of consumers of an existing market. The shift typically includes extensive market research and development and expansion of the current product range. The product strategy is often used when companies are well informed of what is going on in the market, and are able to offer innovative solutions to meet the needs of the existing market. The product development strategy can be implemented in several ways:

• Investing in Research & Development to develop new products that respond to the existing market
• Acquiring a competitor’s product and joining forces to develop a new product that better meets consumers’ requirements
• Entering into strategic partnerships with other companies to gain access to the distribution channels and other resources of each partner

An example of product development strategy is a car company that manufactures electric cars to meet the consumers’ changing needs. The current consumers in the car market are typically becoming more eco-friendly.

Another example of a company that excels in applying product development is Apple . Every so often, Apple markets a brand-new smartphone, the iPhone, that is always an improvement of the last model. Other examples can be found in the pharmaceutical industry, where new and innovative medication is frequently developed.

Market development

The third quadrant of the Ansoff Matrix represents market development. This is a product/ market combination of a current product, offered in a new market; the own product range offered in a different way, such as online, abroad or through franchise at another company.

The market development strategy is applied when a company enters a new market with their existing product portfolio. Expansion to new markets means that companies expand to new regions, customer segments, etc. The market development strategy is most effective when:

• A company has its own technology and can utilise this in new markets
• Consumers in the new market are profitable
• Consumer behaviour doesn’t deviate much from existing markets

The market development strategy can be applied in several ways:

• Catering to a different customer segment
• Entering a new domestic market
• Entering a new foreign market

Examples of companies that have successfully managed to do this are Nike and Adidas. The two companies offer the same products to the market in China and Europe, for instance.

Diversification

This is a product/ market combination of a new product, offered in a new market; tapping into a new market with a new product range (parallelisation is an example of this).

The diversification strategy is applied when a company enters a new market with a new product. Such a strategy is by far the most risky of the four. This is due to the fact that this strategy demands both market and product development. On the other hand, diversification could also reduce future risk.

There are two types of diversification strategies a company may apply:

• Related diversification : when potential synergies can be realised between existing activities and the new product or the new market
• Unrelated diversification : there are no potential synergies to be realised between the existing activities and the new product or the new market

A manufacturer of handmade leather shoes that starts to produce phones is an example of an unrelated diversification strategy. When the same producer of leather shoes starts a line of leather wallets or other leather accessories, this is an example of related diversification.

As the growth strategy shifts from current products and markets to new products and markets, this increases the risk for the organisation. A new market must be explored and it takes time before new demographics are familiar with the products of a new provider.

Moreover, strategy guru Igor Ansoff emphasises that diversification is therefore actually separate from the other three strategies.

Ansoff Matrix limitations

The Ansoff matrix has several limitations that are important to consider before actually applying the tool in practice. Read the following points.

Isolation through the Ansoff Matrix

When the Ansoff matrix is used as an isolated tool, the results could be misleading. This is due to the fact that it doesn’t take competitors’ activities into account and the competitors’ ability to counter the shift to other industrial sectors.

Additionally, the model doesn’t take into account the risks and challenges involved in changes in an organisation’s daily activities.

A company that hopes to enter new markets or create new products, or both, must consider whether they possess the necessary skills, flexible structures and consenting stakeholders .

Consistency

Several critics indicate that the logic of the Ansoff matrix is dubious at best. These problems concern interpretations about novelty.

When one assumes that a product is truly new for a company, the product will often bring the company to a new, previously unknown market as well. In that case, one of the Ansoff quadrants, diversification, becomes redundant. On the other hand, when a new product doesn’t necessarily bring the company to a new market, the combination of new products in new markets doesn’t always equal diversification, as it concerns a completely unknown company.

Conclusion on the Ansoff Matrix

The Ansoff matrix is an effective framework for assessing a company’s options, with the goal to grow. The market penetration strategy is the least risky of the four and occurs most frequently in everyday situations.

Diversification is the most risky because a company introduces a completely unknown product to a completely new market. However, when a company is successful in entering unrelated markets, the advantage is that this creates a diverse portfolio, reducing the overall risk.

It’s Your Turn

What do you think? Is the Ansoff Matrix applicable in today’s modern economy and marketing? Do you recognize the practical explanation or do you have more suggestions? What are your success factors for the good matrix set up?

Share your experience and knowledge in the comments box below.

More information

• Ansoff, H. I. (1965). Corporate strategy: business policy for growth and expansion . McGraw-Hill .
• Ansoff, H. I. (1980). Strategic issue management . Strategic Management Journal, 1(2), 131-148.
• Green, P. E. (1977). A new approach to market segmentation . Business Horizons, 20(1), 61-73.
• Webster Jr, F. E. (1988). The rediscovery of the marketing concept . Business horizons, 31(3), 29-39.

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Ben Janse is a young professional working at ToolsHero as Content Manager. He is also an International Business student at Rotterdam Business School where he focusses on analyzing and developing management models. Thanks to his theoretical and practical knowledge, he knows how to distinguish main- and side issues and to make the essence of each article clearly visible.

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Ansoff Matrix Explained

Few businesses that have stuck to their traditional products and markets have managed to grow in the long term. Over the past century, America’s most valued companies that made it to Forbes’s top ten were very different when compared across the years 1917, 1967 and 2017:

Data suggests that merely to survive the race of innovation and competition, a company must go through continuous growth and change. To improve its position, it must do it twice as fast.

Evaluating growth strategies with Ansoff Matrix

The Ansoff Matrix , also known as the Product-Market Expansion Grid, is a tool used to evaluate growth strategies. It was developed by H. Igor Ansoff [2] , a Russian-American mathematician and business leader, dubbed the father of strategic management. His work was first published in Harvard Business Review in 1957 [3] .

Using a 2 x 2 grid, the Ansoff matrix lays out the four basic growth alternatives open to any business.

A business can pursue either any or all of these strategies which are: increase market penetration, market development, product development and diversification:

Market penetration strategy

This strategy involves increasing efforts to grow sales without departing from the original product-market strategy. Simply put, this is an approach where a company tries to sell more of the same things to the same people.

Out of the four options, this is the one with the lowest risk as there are no substantial changes involved and the company continues to do what it is already doing, only better.

Under this strategy, business performance can be improved in two ways: by increasing the volume of sales to present customers or by finding new customers within the same market for existing products.

Typical market penetration efforts include:

• New marketing and advertising efforts.
• Refined pricing.
• Offering incentives, discounts, or loyalty programs to encourage repeat purchases.
• Improved distribution (focus on improving/expanding channels).
• Productivity improvements.

An increased market penetration strategy is well-suited to organizations that find themselves operating in a large and growing market where their offerings have a competitive advantage over rivals. It is also relevant when the products are new and the benefits from factors such as economies of scale, learning effects, and network effects are yet to be fully realized.

Though the risks and investments are low, this strategy by itself is often insufficient to support ambitious growth plans. Beyond a point, a market cannot expand any further as there is a limit to what companies can sell to the same customers without changing products.

Product development strategy

In this strategy, a company remains in the same market but develops products that have new and different characteristics. In simple terms, it is about selling more things to the same people.

This is a medium-risk strategy requiring a company to develop additional skills and/or business processes to support the new offerings. Since the company (usually) has a sound understanding of the market, the risks are manageable.

There are two routes to pursue this strategy:

• Be the follower – Introduce products or services that are already known to the market but new to the business: For example, in 2015, Apple launched its smartwatch, which quickly became the top-selling wearable device, boasting over 4.2 million units sold in the second quarter of that fiscal year. Although the smartwatch was a fresh addition to Apple’s product line, it was a familiar offering in the market, already established by brands like Garmin and Fitbit.
• Pioneer ( Innovator ) – Introduce products that are new to the market. Apple’s iPhone launch in 2007 was a groundbreaking innovation that combined music, phone, and internet communication into a single device. At the time, there was no direct precedent for such a device in the market. Apple took the pioneering approach, capitalized on its strength in technology and revolutionized the smartphone industry.

A company can choose to develop its offerings in several ways such as own R&D efforts, by entering a joint venture, by purchasing other company’s products or through licensing.

Product development strategy is best suited to situations where a company can leverage its existing distribution channels, brand value, know-how, staff, and systems such that costs can be kept under control.

A drawback of this strategy is that unless a company can protect its offerings through patents and copyrights, the benefits are short-lived as competitors quickly catch up.

Market development strategy

Also referred to as the market extension strategy, this is about finding new markets for the same product or with minimal adaptation. It is basically selling more of the same things to different people.

This is also considered a medium-risk strategy, although the risks are slightly higher when compared to the product development strategy.

Efforts required to research and understand the needs of a new market, to become known, develop trust and therefore gain a meaningful market share is often greater than the effort of developing and launching a new product in a known market.

Typical risks include a failure to understand the characteristics of the new market, the competitive landscape, or the regulatory landscape. Many companies have tried and failed to implement this strategy.

Walmart’s entry into the German market in 1997 is a classic example. Known among the most successful retailers in the United States, Walmart opened its doors for business in Germany after acquiring the retail chain Wertkauf [7] .

However, it failed to understand the characteristics of the German supermarket industry. Unlike the US, German regulators favoured smaller shops vs hypermarkets and did not permit the predatory pricing that worked in Walmart’s favour. A mismatch in culture was another factor – for example, employees were trained to smile at customers when they shopped while the customers found the practice embarrassing.

By 2006, Walmart made a rare admission of failure to convert German shoppers and regulators to its low-price, American-style trading and announced its plan to exit after taking a loss of $1bn [8] .

Market development is the natural path for companies when they find that all opportunities in the existing markets have been exploited and there is no room to grow, even with the introduction of new products.

In the context of new market development, the word “new” can mean several things, such as:

• Geographical area (e.g.: domestic or international, a new country or a state).
• Customer segments.
• Sales outlets and distribution channels that expand reach (e.g.: going online from a store-only model).
• Rebranding/repackaging existing products with slight modifications (e.g.: Coca-Cola reached new markets by introducing low-sugar alternatives such as Coke Zero).

Nike’s transformation from a purely sportswear brand to a lifestyle brand that today includes athleisure – comfortable clothing suitable for both exercise and daily wear – is a classic example of an effective market development strategy.

According to Grand View Research, the worldwide athleisure market size is anticipated to reach USD 662.56 billion by 2030 [9] . Being a leader, Nike is well-positioned to exploit this growth.

Diversification strategy

Diversification is the final alternative which calls for a simultaneous departure from the present product line as well as the present market structure.

It is the riskiest of the four strategies as it involves two unknowns. On one hand, there is the challenge of creating a new product with all the potential problems that may occur during the process, while on the other, developing a new market where there is little experience and whose characteristics may differ significantly from the currently known market.

Despite the risks, diversification is attractive and adopted by many firms because the rewards of a successfully executed strategy far exceed the risks. When done right, firms can achieve significantly higher growth and greater returns when compared to the other three conservative options.

In the long term, firms that diversify build resilience. For example, a change in regulatory norms in a geographic location or a particular market or a shift in customer preference may impact one segment or a product line but will have a limited impact on the overall revenue of a well-diversified firm.

The test for diversification

Michael Porter proposed three questions that a firm must answer to determine if it must pursue a proposed diversification [10] :

• How attractive is the industry that a firm is considering entering? Unless the industry has strong profit potential, entering it may be very risky. Porter’s Five Forces Analysis [11] can help with this assessment.
• How much will it cost to enter the industry? Executives need to be sure that their firm can recoup the expenses that it absorbs in diversifying. For example, when Philip Morris, a tobacco giant bought 7Up with plans to diversify into the soft drinks business, it paid four times what 7Up was worth. Making up these costs proved to be impossible and 7Up was sold in less than 10 years [12] .
• Will the new unit and the firm be better off? Unless at least one side gains a competitive advantage, diversification should be avoided. In the case of Philip Morris and 7Up, for example, neither side benefited significantly from joining together.

Firms that choose to diversify can look at two types of diversification strategies: related and unrelated which are explained in more detail:

Related diversification

A firm pursuing this strategy diversifies into business lines within the same industry which has important similarities with the firm’s existing industry/industries.

Businesses are considered related if they [13] :

• Serve similar markets and use similar distribution systems.
• Employ similar production technologies.
• Exploit similar science-based research.

Volkswagen’s acquisition of Audi and Disney’s purchase of the American Broadcasting Company (ABC) are examples of related diversification.

Firms that engage in related diversification aim to develop and exploit a core competency to become more successful. A core competency is a skill set that is difficult for competitors to imitate, can be leveraged in different businesses, and contributes to the benefits enjoyed by customers within each business.

For example, Google’s core competency lies in search technology and monetizing online advertising. When it acquired YouTube in 2006, Google extended its core competency into video streaming, allowing it to capitalize video content market and grow revenue.

Honda Motor Company is another good example of a firm leveraging its core competency through related diversification. Honda started out in the motorcycle business and developed a unique ability to build small and reliable engines. It applied its engine-building skills to diversify into cars, all-terrain vehicles, lawnmowers, boats and even generators.

But sometimes the benefits of related diversification that executives hope to enjoy are never achieved. For example, soft drinks and cigarettes are products that companies must convince consumers to buy through marketing activities such as branding and advertising.

On the surface, the acquisition of 7Up by Philip Morris seemed to offer the potential for Philip Morris to leverage its marketing competency, but the benefits never materialized.

Unrelated diversification

An unrelated diversification occurs when a firm enters an industry that lacks any important similarities with the firm’s existing industry/industries.

Such a firm pursues growth in markets where the main success factors are unrelated to each other and expects little or no transfer of functional skills among its various businesses.

Unrelated diversifications are hard to pull through and success is rare. Only companies that possess the skills and resources to analyze and manage the strategies of widely different businesses can consider unrelated diversification to be the best strategic option.

Berkshire Hathaway is a case in point, it owns controlling stakes in businesses spread over 35 sectors!

The Virgin Group is another example of unrelated diversification. Virgin started business as a record shop, first by mail order and in 1971 with a physical store and today, 50 years later it has diversified into a multinational venture capital conglomerate.

In the 1980s, Virgin entered the airline industry and applied its internal competence of providing excellent customer experience throughout its existing family of companies. At the time, great customer service was a rare quality in the airline industry, which was instead plagued by canceled flights, delays, and lost baggage. Virgin offered an advantage that was hard for competitor airlines to replicate and, therefore, could charge a price premium [16] .

But unrelated diversification strategy is far from foolproof and there are examples of failure within the very same Virgin group.

The short rise and rapid fall of Virgin Cola in the 1990s after an ambitious, but unsuccessful plan to compete with Coca-Cola and Pepsi is a classic example of failure. Despite the growing fizzy drinks market, Virgin Cola managed a mere 3% market share on its home turf UK before exiting [17] .

As of 2023, the group has a presence in over 20 sectors ranging from banking to aviation to commercial spaceflight [18] .

Another risk that comes with the unrelated diversification strategy is the threat of losing brand strength by blurring the delivery of a single strong message.

When a firm diversifies into sub-brands that do not comfortably fit together, it must depart from the way it currently defines itself. This brings the risks of being perceived as a generic brand and not a leader.

Benefits and limitations of the Ansoff Matrix

Even though the Ansoff Matrix is over 60 years old, it remains an important tool in the strategic management toolkit. Even today, it is popular and widely used by organizations due to its simple, clear, and intuitively sensible design.

The matrix is particularly well suited for:

• Setting high-level corporate strategic direction-
• Helping management to consider all available growth options-
• Making apparent, the risks of pursuing different growth strategies – the greater the move from existing products or markets, the greater the risks-

However, the matrix is not suited for:

• Determine the detailed content and steps in any strategy.
• Considering the impact of the economic, technological, or social environment that a firm operates in.
• Matching strategy to the organization’s capabilities and resources.

Putting it together

It is important to remember that the four options in an Ansoff matrix are not mutually exclusive and an organization’s strategy can have elements of all four options.

The below figure summarizes the essence of the Ansoff Matrix:

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• “Diversification via Acquisition: Creating Value”. Malcolm S. Salter and Wolf A. Weinhold, https://hbr.org/1978/07/diversification-via-acquisition-creating-value . Accessed 27 Feb 2024
• “Honda – How we move you”. Honda, https://global.honda/en/ . Accessed 27 Feb 2024
• “List of assets owned by Berkshire Hathaway”. Wikipedia, https://en.wikipedia.org/wiki/List_of_assets_owned_by_Berkshire_Hathaway . Accessed 27 Feb 2024
• “What if travelling by plane could be fun? The story of Virgin Atlantic”. Virgin (Richard Branson Blog), https://www.virgin.com/branson-family/richard-branson-blog/what-if-travelling-by-plane-could-be-fun-the-story-of-virgin-atlantic . Accessed 01 Mar 2024
• “Crashing The Soda Wars”. Tedium, https://tedium.co/2021/07/21/richard-branson-virgin-cola-history/ . Accessed 01 Mar 2024
• “Overview”. Virgin Group, https://www.virgin.com/about-virgin/virgin-group/overview . Accessed 26 Feb 2024
• VRIO Framework Explained
• Theory of Change (ToC) Explained
• Perceptual Map Explained
• First Mover Advantage Explained

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The Ansoff matrix: A strategic approach to growth

Reading time: about 7 min

Some business success stories happen overnight. More often, a company that seemingly comes “out of the blue” to disrupt a product space or industry has strategized their way to the top, using tools to establish their market penetration strategy. Of course, growth always comes with risk, and any decision that has a long-term impact on an organization requires a thorough evaluation of both what’s possible—and what’s at stake.

What is the Ansoff growth matrix?

Developed in 1957 by H. Igor Ansoff, the Ansoff growth matrix offers a simple and useful way to think about product and market development strategy. By looking at ways to grow via existing products and new products, and in new or existing markets (customers), the matrix outlines four possible areas of opportunity for growth, which vary in risk:

Market penetration

Product development, market development, diversification.

The benefits of the Ansoff matrix lie in its simple 2x2 matrix design and ability to quickly convey your company’s current state and potential risk factors. The matrix itself is quite self-explanatory, which makes it an effective tool to gain buy-in as a company collaboratively evaluates and moves from one quadrant of the matrix to another.

Selecting a product market growth strategy

To use the Ansoff growth matrix, you must first align around the business goal you’re trying to accomplish. Is your product new or existing? Are you trying to disrupt an existing space? Your approach—and the resulting risks—will depend largely on your company’s maturity, current state, and long-term roadmap. It also depends on how much risk you’re currently willing—or able—to take.

Start by plotting your strategic options into the appropriate quadrant. Next, look at the risks associated with each one, and develop a contingency plan to address the most likely risks. This risk analysis will help you make the best choice for your organization. Here’s a look at each strategic approach in the Ansoff matrix.

You’ve created a solid product. You’ve identified a market for it, and you’ve been able to demonstrate demand through consistent sales. That’s a great start, but how do you grow those sales and learn more about the customers using your product?

The market penetration quadrant of the Ansoff matrix helps you determine strategies to sell more of your existing products or services to your existing customer base through aggressive promotion and distribution. Using this strategy, the organization tries to increase its market share in its current market scenario.

Note: This approach does not involve expansion into new markets or product innovation. Rather, it maximizes on the value and capital of your existing product and customer base.

Benefit: This strategy is low-risk as it leverages many of the company’s existing offerings.

Drawback: Market penetration strategy is an inherently limited approach for long-term, high-growth companies. Ideally, a company will outgrow a market penetration strategy and will need to pursue a more ambitious strategic approach to continue growth.

Let’s say you’ve created a successful product and expanded into new markets. After a while, you may hit a point of market saturation, particularly if there isn’t a need for customers to repurchase or replenish your product on a regular basis. Perhaps your customer base loves your existing products and services so much that they’re demanding more from your company.

In these cases, you might consider creating new products and services, or expanding existing products or services, to meet those demands. Product development strategy is targeted at existing markets to achieve growth and involves extending the product range available to existing markets.

Benefit: By paying attention to what’s already working and listening to consumer feedback, companies can develop products to directly meet customer needs to grow the business.

Drawback: New product development is inherently risky. Additionally, new product development requires heavy upfront investment in new technologies or production strategies. Companies should also anticipate delays and increased costs.

Even the most successful lineup of products or services can hit a point of market saturation. In that case, the best strategic approach might be to expand into new markets (either users or geographies) using existing offerings.

However, it’s important to consider that a market development strategy may also need to include some level of product development as you adapt your offerings to meet the unique needs, or even legal requirements, of a new market or economy. Think about updated packaging, including any language translation.

There are several tools that can help a company strategically evaluate a market before entering it. The PEST analysis, which identifies the political, economic, social, and technological factors that might influence a market, and Porter’s Five Forces , a tool for analyzing a business’s competition, are two common approaches.

Benefit: This strategy provides an alternative to risky and expensive product development strategies.

Drawback: Market developers might lack the required knowledge and skills for making the necessary progress in an unfamiliar market with unfamiliar users.

Diversification exists to some degree in every quadrant of the Ansoff matrix. But at times, an opportunity could be big or disruptive enough to bypass every other growth strategy and introduce a new product. In that case, companies should dive right into a pure diversification strategic approach. It is the riskiest strategy as it radically shifts the scope of the organization by entering completely new markets with completely new products.

Benefit: Diversification presents a huge opportunity to tap into and own an underserved market or uniquely differentiate your company from the competition.

Drawback: As it inherently embraces uncharted territory, a diversification strategy is the riskiest in the Ansoff matrix. Often, companies following this growth strategy must move ahead without existing industry knowledge or a roadmap for scaling the product or service to meet market demands.

How to use an Ansoff matrix

1. Outline your matrix

Now you can fill in the matrix with potential strategies you can adopt under each quadrant. These should be practical ways you can grow the company from each angle. For instance, in your Ansoff matrix example, you might write “implement a new loyalty scheme” under the market penetration ideas.  

2. Analyze your options 

Now you can fill in the matrix with potential strategies you can adopt under each quadrant. These should be practical ways you can grow the company from each angle. For instance, in your Ansoff matrix example, you might write “implement a new loyalty scheme” under the market penetration ideas.

3. Assess risk

Once you’ve filled in your matrix, analyze the risks associated with each idea (and quadrant). Some strategies are more inherently risky than others, but their potential reward may offset them.

4. Outline contingencies

When you understand the risks, you can plan for contingencies to mitigate and address them. Prioritize risks with the highest probability and potential impact. 

5. Choose your approach

With the options, risks, and contingency plans outlined, you can now select the best strategy for your business.

Using the nine-box Ansoff growth matrix

For more sophisticated marketers, the standard four-box Ansoff grid might feel too simplistic. After all, markets are rarely easily defined, and product development often involves numerous stages of testing and refinement.

For example, if you’re a tortilla chip company, you may just want to launch a new flavor rather than an entirely new product to your already satisfied customer base. If you’re a software company, a fine-tuned update to an existing capability might be a more valuable—and safer—bet than an entire product relaunch.

That’s why some marketers use a nine-box matrix for a more thorough analysis of their business’s current risks and opportunities. The nine-box matrix allows consideration for modified products, services, and markets between existing and new ones. This matrix is useful as it shows the difference between product extension and true product development and also the difference between market expansion and venturing into genuinely new markets.

Grow your business with Lucidchart

The Ansoff matrix is one of the most widespread tools managers use in strategic planning for most organizations. It is easy to understand and allows decision-makers to visually represent the organization’s scope of work.

Lucidchart offers hundreds of strategic business templates like the fishbone diagram , to efficiently help teams anticipate and calculate risk throughout the product development process—and establish the right marketing mix  for your business.

Explore hundreds of Lucidchart templates to grow your business.

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Ansoff matrix: what it is, and how to use it

April 1, 2021 by MindManager Blog

By: Emily Finlay

Growth is the primary concern for most businesses. This development can take many forms, but eventual financial gain is typically the most important result.

To achieve sustainable growth, however, businesses have to determine the best ways to expand. Leading the company to a successful future requires careful strategizing. Should you expand your product line? Maybe it’s better to find new markets. Or should you find a completely new product and market entirely?

An Ansoff Matrix is a tool that can help you determine the best path for your company’s growth. With this simple diagram, you can discover the most beneficial direction to take your business and team.

What is an Ansoff Matrix?

The Ansoff Matrix definition is: a strategic planning tool that shows four different ways companies can grow through product or market expansion. By using the matrix, businesses can better understand the risks and challenges presented by each strategy.

The diagram, also known as the Product/Market Expansion Grid, was created by an applied mathematician and business manager named H. Igor Ansoff. He published the matrix, included in an article called “ Strategies for Diversification ,” in the Harvard Business Review in 1957. Over 60 years later, his work remains a powerful tool for businesses looking to expand and grow.

How to use an Ansoff Matrix

When using an Ansoff Matrix, you and your team will consider questions, risks, and opportunities that follow under four categories. These include:

Market Penetration

Market development, product development, diversification.

As you can see in the example, these categories make up the four quadrants in the matrix. Moving into a new section, either vertically or horizontally, increases the risks of the actions you’re considering. Market penetration is the option with the least risks, while diversification holds the highest risks.

Let’s look into these quadrants a bit deeper.

This option is the most simple and, as mentioned above, least risky. Rather than trying to develop a new idea, you would find new ways to make your existing product more appealing and successful within the market you already use.

Since you’ve already found some success in that arena, the challenge would be increasing sales by changing your marketing strategies instead of the product. You might accomplish this by running promotions, lowering your prices, or changing your distribution strategy. Whatever will attract new buyers and increase your sales, that’s the direction you need to go.

For example, a local bakery could expand by offering a loyalty program that rewards returning customers with free baked goods. They could also send a voucher for a free meal to anyone who signs up for their newsletter. Even though the business and product remain the same, these new strategies bring in fresh business.

When market penetration doesn’t offer enough potential, it’s time to consider moving your products into a new market . This can include opening stores in new locations, targeting a new audience, or moving your products into international markets.

These moves give your successful products new exposure. Since you already know that there’s a need for your items, this is a great way to find more interest.

A silly sock company that caters only to adults can also begin offering a line for kids. Though the focus is different, the basic concept and materials are exactly the same. By targeting this new customer segment, they can sell more pairs than ever before.

Conversely, product development involves creating new products for an existing customer base. These new offerings generate renewed interest in the company, retaining customers that might otherwise choose competitors with more products.

There are a couple of ways businesses can approach product development, such as:

• Creating a new product that appeals to your current audience.
• Developing a service related to your existing products.
• Partnering with businesses to offer a package deal that includes your product.
• Acquiring a competitor and using their value to increase your own.

Expanding your product line is risky and expensive, so this avenue requires in-depth research and development. You should only use this option if you have a strong grasp of your audience and a firm place within your existing market

One of the most prevalent examples of product development today can be found within streaming services. Though these companies, such as Disney and NBC, may have already reached every available viewer in their main market (creating entertainment), developing a streaming platform keeps these customers invested in the company. Along with a new stream of revenue, it also provides the opportunity to offer exclusive items only to subscribers and further solidify their market share.

When the other three strategies are exhausted, it’s time to consider diversification . This quadrant is the most risky option for a reason. Diversifying involves creating a new product for a new market. Rather than relying on an existing customer base or product, this strategy starts from scratch.

That said, businesses can use related diversification to make things somewhat easier. Rather than creating a line of products that has nothing to do with your existing offerings ( unrelated diversification ), you can develop items that are similar. This allows you to use the knowledge and experience you’ve gained to direct your new venture.

When Apple began selling smartphones alongside their computers, tablets along with their smartphones, and watches with their tablets, for instance, these were examples of related diversification. The introduction of the Apple credit card and AppleTV, however, are reflections of unrelated diversification strategies.

How to create an Ansoff Matrix

You can create an Ansoff Matrix by making a four-quadrant grid that includes Market Penetration, Market Development, Product Development, and Diversification. The matrix should also show the overlap of new markets, existing markets, new products, and existing products for the quadrants.

You can create either virtual or physical versions with any medium you prefer, such as on paper, whiteboards, slideshows, and more. Using mapping software, such as MindManager , is also a great option. These tools offer options such as Ansoff Matrix templates and editing capabilities that further simplify creating and using your matrix.

To create your diagram, follow these steps:

1. Create your matrix

Using the tool of your choice, design your grid with each category, as described above. Templates are the best and easiest option, allowing you to save time and energy. This step, while important, should not take long to complete.

2. Consider your options

Next, plot the potential strategies you can pursue in each quadrant. Consider the practical ways you can grow the company. While you should be realistic about the viability of each idea, don’t limit your brainstorming. Think big and bold.

3. Run a risk assessment

Understanding the risks is the main point of the Ansoff Matrix. Use a Risk/Reward Matrix template to identify the ways you are putting your business in danger and the potential challenges involved. You can also use a risk impact/probability chart to order them by importance.

4. Plan for your risks

Now that you know what you might face, create contingency plans that address these risks. Focus on the risks with the highest probability and level of impact.

5. Select your approach

After walking through these steps, you will hopefully know which growth strategy is the best option to pursue. Take this direction and start planning how you’ll implement it!

Example of a Ansoff Matrix

When using this tool to develop growth strategies, use the Ansoff Matrix example below as a guide for your own diagram.

Ansoff Matrix use cases

Now that you know all about the Ansoff Matrix, we want to talk about the specific ways you can use it within your own business. Below, we’ve outlined some of the situations you may face and the best strategy to use.

Plateaued sales

If you have a good product that meets the needs of the people in your market, but you are struggling to attract new customers, consider market penetration. Offer rewards for referrals or a limited-time sale on your top-selling products. Give people a reason to learn about your brand.

Market saturation

When you’ve reached the limits of your current market, it’s time to branch out with market development. If you’re not already, start selling your products online. This can give you national and even global reach. You can also open a new location in a new city, bringing your products to a brand new crowd.

Questions about new products

If customers keep asking when you’re going to offer something, you should consider selling it. Product development increases your revenue and generates fresh interest in your brand. Just do your homework to make sure this is a sustainable option.

Needs that your products can’t solve

Are you seeing an unmet need? Do you have the ability to fill it? Even if it’s outside your sphere, this can be a life-changing opportunity to expand. Just remember, diversification is a risky move. Make sure you’re completely prepared and able to execute this shift before taking the jump.

Downloadable Ansoff matrix templates from MindManager

Click the images below to access the Ansoff matrix example shared above, and a blank template created using MindManager. Click “Menu” in the bottom left corner of your browser window, and then click “Download” to get a copy of the template. Open the template in MindManager to start working.

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How to Use Ansoff Matrix For Successful Business Strategies

The Ansoff Matrix is a strategic planning framework to help businesses develop and decide upon strategies for growth. This guide will teach you how to use it.

Table of Contents

This guide will teach you how to use The Ansoff Matrix to help you make decisions and determine a strategy for your business.

Igor Ansoff developed a matrix over 50 years ago that is still commonly used today by businesses and education institutes to help make decisions and pick a strategy. That’s obviously a good matrix!

What is the Ansoff Matrix?

The Ansoff Matrix (sometimes referred to as the Strategic Opportunity Matrix) is a strategic planning framework to help businesses develop and decide upon strategies for their growth. It’s designed to effectively provide four strategic options and highlight the levels of risk associated to those for the business.

It works as a 2×2, housing four generic strategies that can be applied to your business, highlighting a default risk level for each one. It’s also known as the Product/Marketing Expansion Grid.

This quick video guide will tell you everything you need to know to about the framework – what it is, why it’s so useful, how to use it and what to do with the ideas and insights it will give you.

What are its advantages?

There are a number of advantages including:

• An easy way to guide discussion of options
• Helpful to classify your strategic choices and evaluate risk
• It can be used as a company tool or individual departments, such as Marketing
• It’s quick and simple to understand
• It has a growth mindset and is designed to help businesses focus and develop
• Highlights risk and ensures it’s discussed

What are its limitations?

As with every framework, there are some limitations to Ansoff Matrix such as:

• It’s very simple to the extent that a lot of extra thought is required
• It doesn’t capture some of the detail of your market research or position, eg competitors
• While risk is measured, reward is not factored into the tool
• Can’t be used on it’s own to decide your strategic direction

What are the four strategies of an Ansoff Matrix?

The four strategies are:

• Market Penetration: Selling more of your existing business to existing customers or existing markets
• Product Development: Developing your existing product and/or service
• Market Development: Entering new markets
• Diversification: Entering new markets with new products and/or services

What is Market Penetration?

The Market Penetration strategy is about focusing on your existing business, your current product or service, and your current segmentation. If you’re picking this strategy then you’re objective is market share growth.

Some considerations may include:

• What’s your current market share and can it sustain growth?
• How will you continue growth? Price decrease? Partnerships?
• Are there competitors that you can acquire or work with?
• Are other plays in the market moving or focusing, how well are they doing?

This approach sometimes is viewed as just doing “more of the same”, which is perhaps unfair. If you’ve got a successful niche and there’s significant growth in your market, then it’s a sensible decision to continue to focus and reap the rewards.

Read more about the Market Penetration Strategy .

What is Market Development?

The Market Development strategy is taking your existing products or services into new marketplaces, both geographic or customers. For example, you might want to move from the UK and begin selling to the US, or you might decide that your product or service would be fantastic for a completely different type of customer.

The market growth potential of this strategy is significant, but it requires you to pick the right market to enter and history is littered with examples of companies not getting it right.

Some considerations include:

• Can you rapidly scale your product or service?
• Is your industry similar across countries?
• What is the competitive landscape like in your new market?
• What is your current segment of customers and who is similar?
• How will it impact your internal teams (e.g. Marketing)?
• What’s the new market size?

If you’re exploring a new market, one tool to consider using is Porter’s Five Forces. Here’s an introduction to Porter’s Five Forces and a guide on how to complete your own Five Forces .

What is Product Development?

The Product Development strategy is the one often associated with Innovation, even though Innovation can sit in many places in your strategy – see 4Ps of Innovation . It’s where a business decides to develop new products or services targeting the existing customer market.

This strategy has a mix of growth alternatives by new business and growth by upselling existing customers, and the advantage that if done successfully means cross selling can occur between the products. A good example of this is SalesForce with their CRM and then their sister product FinancialForce.

Considerations:

• How will you sustain innovation without derailing your existing business?
• Are there obvious gaps in products or services that competitors offer?
• What do your customers tell you? Is there demand for a particular service or product?
• How can your current product be altered within the 4Ps of Innovation?
• Can you acquire a product or white label a product with your brand?
• Can you partner with businesses to provide services or become a channel partner?
• How can you open your innovation ideas up to the whole company – it could be informal hack days, a formal stage gate approach, or a mix.

What is Diversification?

Arguably the trickiest of all four is the diversification strategy – this is where a business moves into a new market and creates a new product or service, at the same time! There’s more to get right with this strategy but many examples of success. Wrigley started off selling soap, only moving into chewing gum when a free promotion proved gum was more popular than soap.

There are many failures too. Did you know Cosmopolitan (magazine) launched a brand of Yoghurt?

Some considerations to ask yourself on this strategy choice…

• How can you diversify, is there a product or service that is related to your current offering?
• What framework will you use to test the ideas and concepts?
• What level of risk and investment can you tolerate?
• How strong are the competition in your new market?
• What is the overall goal?
• What is the potential return?
• How do your current strengths and weaknesses align to the needs of the new offering?

With all these strategies you need to do some work, but especially this one requires considerations by creating a SWOT and completing Five Forces .

What are the risk levels of each strategy?

The framework suggests the following:

• Diversification High Risk
• Product Development Medium Risk
• Market Development Medium Risk
• Market Penetration Low Risk

Crucially though, the framework doesn’t take into account the detail of your situation. For example, it may be for you Market Development has quick wins with low risk, while your current market may be saturated with little growth.

Ultimately use the risk levels as a guide around generic difficulty, rather than specific risk.

What preparation should be done before using an Ansoff Matrix?

This framework isn’t like SWOT Analysis , PESTLE Analysis , etc – it’s much more a guide to discussion. You don’t complete the framework, you use it to debate potential strategies and list them out. So in that sense, no preparation is required.

However, you’ll get significantly more out of the framework is you circulate it round in advance and have some thoughts about…

• Potential innovation
• Potential marketplaces
• Your current performance
• Your current market share
• Your competitor activity
• Your customer feedback

Who invented the Ansoff Matrix?

It was created by H. Igor Ansoff in 1957 as part of a research paper he published called Strategies for Diversification.

What is the difference between the Ansoff Matrix and the Strategic Opportunity Matrix?

Nothing – they are two names for the same matrix!

How often should a company use the Ansoff Matrix?

Every time a strategy or direction is evaluated, it’s worth keeping this framework in mind as a broad way to classify your behaviour, and a manner to suggest alternatives.

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The Ansoff Matrix: 4 Growth Strategies Explained (With Examples)

• Ansoff Matrix is a popular strategic framework for decision-makers, entrepreneurs, and business managers tasked with evaluating opportunities for business growth.
• Marketing teams can also use it in the marketing planning phase.
• Best for companies with a serious commitment to aligning their efforts and prioritizing transparency
• Pros: Simple to use and easy to understand, helps stakeholders understand the level of risk associated with different strategies.
• Possible cons: It can’t be used as a standalone tool and it’s hard to make accurate predictions. 

The Ansoff Matrix, also known as a product/market expansion grid, is a 2x2 strategic framework designed for organizations that want to move beyond 'business as usual’ and prioritize their strategic options.

It's designed to help you figure out which of four strategic directions you should take to successfully grow your business. The chosen approach should then inform which tactics should be used in the strategy execution phase .

Tip: Consider the fact that you don't have to stick to one strategy. Some organizations adopt multiple strategies to reach different markets. 

In this article, we are going to explain each of the 4 growth strategies and how to use the Ansoff Matrix in your strategic planning process.

⚠️ The Ansoff Matrix offers options, but don't get stuck in analysis. Cascade Strategy Execution Platform bridges the gap between growth plans and real execution. Talk to our experts to translate your Ansoff Matrix insights into a clear action plan for achieving sustainable growth.

Now, let's take a closer look at the matrix and its four quadrants.

What are the 4 growth strategies of the Ansoff Matrix? 

1. Market Development Strategy

new markets / existing products

This is all about selling more of your current product or service to a different or expanded group of people. In other words, you will focus on finding new market segments to sell your product to.

These new customer segments will have the same needs as your existing customers, but perhaps aren't aware that your product could help them.

Some examples of market development strategies that would fit into this part of the matrix would be:

• Expanding into foreign markets (international expansion)
• Use of new sales channels such as online
• Franchising

A great example of market development:

Coconut Water had been on sale in health stores for decades. More recently, several large manufacturers decided to change how they marketed the product.

They enlisted sports stars and celebrities, positioning Coconut Water as the healthy alternative to sports drinks such as Gatorade. A year later, Coconut Water had snagged nearly 6% of the global juice market.

📚 Recommended read: Market Development Strategy In 6 Steps (With Free Template)

2. Market Penetration Strategy

existing markets / existing products

Market penetration strategy is focused on selling your current product to the same people but in larger quantities. 

Here are some possible examples of how you can approach it: 

• You may be more aggressive with your marketing but in the same customer segment
• You may also offer incentives for people to buy more of your product in exchange for a discount
• Change pricing strategy: Lower or increase the price of your product
• Identify a business partnership that can help you grow your market share 

A great example of market penetration: 

Have you ever wondered how and why Coca-Cola is associated with Christmas? The answer is that they decided to implement an aggressive strategy of market penetration.

They invested heavily in marketing to create a positive association between the two. The target of the marketing effort was existing customers who already loved Coke, and already loved Christmas.

By linking the two, Coca-Cola created a 13% revenue increase linked directly to Christmas sales.

3. Product Development Strategy

existing markets / new products

This strategy is all about developing new products and selling them to your existing customer base. For example, makers of sports shoes have aggressively developed products such as sports clothing to sell to the same group of people who were originally just buying shoes.

A great example of product development: 

McDonald's seems to have done a pretty good job of weathering the changes in consumer taste over the years. They've done this by supplementing their mainstream fast-food products with new additions.

The strategy was to appease customers who've grown tired of high-fat junk food (but love the convenience/low cost that McDonald's offers). A great example is the McSalad, a completely different product from burgers and fries.

The McSalad debuted on the Maccas menu to stop an increasingly health-conscious customer base from going elsewhere.

4. Diversification Strategy

new markets / new products

Diversification is the riskiest of all 4 growth strategies. This quadrant involves selling new products to new markets.

The risk lies in your lack of familiarity with either the product or the market. In spite of this, diversifying can often result in substantial gains.

There are two types of diversification strategy: 

• Related diversification: It happens when the company moves into a new market that has similarities with the company’s existing market. 
• Unrelated diversification: It happens when the company moves into a new market that has little to no similarities with the company’s existing market. 

A great example of related diversification: 

Long ago, Apple was a brand that only appealed to serious graphic designers and a certain type of tech geek. Then came the iPod (and eventually the iPhone).

These products were actually very different from anything that had come before (from Apple or anyone else). They were designed from day 1 to appeal to a totally different customer base than had previously been buying Apple products.

What enabled them to do that? 

As both products share similar manufacturing processes, Apple could share resources across both product groups.

This is probably the single best-executed example of a new product + new customer the world has seen.

How to use Ansoff Matrix?

OK, so now we know what the Ansoff Matrix is all about, and how powerful it can be in helping organizations grow their business. Let's take a look at how exactly to implement it.

1. Analyze the current state and evaluate your options

Ansoff Matrix is essentially a brainstorming tool that can help you in your strategic planning phase. Preparation isn't necessary, but we believe it's key to success. It will make your brainstorming session more focused and productive. Set an agenda and tell each invitee which data or insights should they bring to the table. 

The Ansoff Matrix is often used in conjunction with other business and industry analysis tools to support more robust assessments of business growth drivers. You need to know where you stand today so you can plan for your future. What are your strengths and weaknesses? Where do you see opportunities and challenges? 

You can choose from a range of tools, including GAP analysis , SWOT analysis , and PESTLE analysis , or Porter’s Five Forces . 

No matter which you use, ultimately, it's about asking yourself critical questions such as:

• What makes me different from my competitors?
• Why do people buy from me instead of others?
• How are we currently performing?  
• What is our current market share? 
• What are competitors doing? 
• What are our internal capabilities to innovate?

Answering those questions should give you some insight as to which part of the Ansoff Matrix to attack first.

2. Determine your risk appetite

OK, so just because you're good at something, doesn't mean you should stick to doing only that. In fact, the right move may be to push yourself a little harder - either because you see a big opportunity or even a big looming threat to your current industry.

The more risk appetite you have, the further away from your strengths you might want to push yourself. Generally speaking, the risk factors of the Ansoff Matrix look like this:

As a company moves away from its comfort zone - from what it is currently doing and therefore knows to work - the level of risk increases.

Figure out where you want or need to sit on that spectrum and use that to influence your decision as to which quadrant to attack.

3. Make a strategic plan

Now that you've chosen which part of the Ansoff Matrix you want to attack, it's time to make a plan. Start by creating a succinct vision statement that captures what you're trying to achieve.

If you were Apple and were about to pursue the diversification strategy, you might have had a vision statement somewhere along the lines of:

"To capture the hearts, minds (and wallets) of a new generation of a computer geek, through innovative technology that increases their access to pop culture staples such as music and movies."

(OK, so I made that up on the spot - it's not an actual Apple vision statement, but you get the idea!)

Once you've got your vision, the rest of your strategic plan should be much easier to create.

We've created a detailed guide on how to do just that here - and you'll definitely want to check out our own Cascade Strategy Execution platform when you get to this part of the journey.

Don't be afraid to try creating plans for a few different quadrants of the Ansoff Matrix to see which one suits you best! As we mentioned before, many companies tackle 2 strategies at the same time due to their diversified range of products. 

This piece is part of a series that covers 5 of the best strategy frameworks out there. Be sure to have a read of the guide, as you may find that one of the other frameworks will fit a little better with your organization at this stage.

Frequently asked questions about Ansoff Matrix

Who created ansoff matrix.

The Ansoff Matrix was created by Igor Ansoff and was first published in Harvard Business Review in 1957. The matrix is as relevant today as it was over 50 years ago.

What is extended Ansoff Matrix?

Extended Ansoff Matrix is an upgraded version of the classic Ansoff Matrix. It’s a nine-field matrix with additional fields: market expansion, product modification or extension, limited diversification, and partial diversification.

What is the difference between Ansoff Matrix and PEST?

PEST is another useful strategy tool that helps you identify threats and opportunities in the market by analyzing political, economic, social, and technological factors. It can be used together with Ansoff Matrix so you can get a better understanding of external factors that could have an impact on your business in the future.

What is the difference between Ansoff Matrix and BCG Matrix?

BCG, also known as a product portfolio matrix, helps business prioritize their resource allocation based on two dimensions: market growth and relative market share. BCG Matrix focuses on the product, while Ansoff Matrix also takes into account the market. Both have their own pros and cons, but used together can provide great support in the strategic planning process.

Editor’s note: We've written extensively on strategic frameworks businesses can use. Check out some of our other articles below:

• Value Disciplines Model & Your Competitive Advantage
• The Benefits of Applying The Stakeholder Theory
• Maslow's Hierarchy As a Business Framework
• Unlocking the Power of the Balanced Scorecard
• Using the VRIO Framework to Create Sustained Competitive Advantage
• McKinsey's Three Horizons of Growth Can Help You to Innovate

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Your toolkit for strategy success.

How to use the Ansoff Matrix for strategic planning (with examples)

If the last couple of years have taught us anything, it’s that the marketplace can change quickly and without warning. In case you were wondering, yes — we are talking about the pandemic.

To keep up with changes, businesses need to adapt to their surroundings. This means creating new plans for growth and tailoring your business strategy to align with market trends and consumer behavior.

But how can you create a corporate strategy that’ll help your business succeed in the long run?

Enter the Ansoff Matrix.

The Ansoff Matrix helps businesses figure out which avenue to go down to give themselves the best chance of growth and success.

Keep reading to find out more about what the Ansoff Matrix is, how to implement it in your business, and the pros and cons of using it.

• What is the Ansoff Matrix?

The Ansoff Matrix is a strategic tool that helps businesses evaluate growth opportunities. Also known as a product or market expansion grid, it can come in various formats. But generally speaking, people use Igor Ansoff’s matrix from 1957 (see below).

The matrix has four key quadrants: market penetration, market development, product development, and diversification (more on this later). Using the grid, businesses review the potential risks of each option and create a growth plan.

• What are the benefits of using the Ansoff Matrix?

Now that we know what the Ansoff model is, let’s take a look at some of the benefits of using it.

Assess risk

Analyzing risk is a key part of business growth. If you’re not prepared for what might go wrong, you’re putting your business in a pretty vulnerable position.

That’s where an Ansoff Matrix strategy can help. Each quadrant helps business owners weigh the risks and prepare accordingly.

Imagine you’re thinking about diversifying your product market. You currently sell your product in the U.S., and you want to expand to the UK market.

The Ansoff Matrix helps you identify the risks associated with this diversification strategy. For instance, you might have to offer your product at a lower price to penetrate the market. This could mean losing out on potential revenue for the first six months of the expansion.

By identifying this potential risk, you can prepare your business to deal with it and give your growth strategy the best chance of success.

Identify the best strategy for growth

If you’ve decided to use the Ansoff Matrix, chances are you want to experience business growth.

The good news is, you’ve picked the right tool.

The Ansoff Matrix is designed to help businesses take a strategic approach when planning business growth. Using the four quadrants (which can be filled in using the Ansoff Matrix template below), businesses make informed decisions about which avenue to pursue with the highest chance of success.

It also helps you identify new strategies for growth that you might never have thought about before. If you’re thinking about how you can grow and develop your business, the Ansoff Matrix is a great place to start.

• Are there any downsides to the Ansoff Matrix?

As with every business tool, there are pros and cons. The Ansoff Matrix is no exception, so let’s take a look at some of the downsides.

The reward isn’t measured

To make a well-rounded decision, it’s helpful to compare risk with reward. Unfortunately, the Ansoff Matrix doesn’t allow you to do this. And without this additional information, you could miss out on potential growth opportunities.

Let’s say you’re using the Ansoff Matrix. You look at how you can boost sales with your current product in your current market (market penetration). You also look at launching a new product to a new market (diversification). The matrix tells you that trying to boost sales in your current market is low risk, while launching a new product is high risk.

This is correct, but the matrix hasn’t taken reward into account. Launching a new product to a new audience could have a greater return on investment (ROI) in comparison to boosting sales on existing products. The risk might be higher, but the reward might be as well.

It’s tricky to compare risk and reward with the Ansoff Matrix. You’ll have to do this separately to figure out if your strategy is an avenue worth pursuing.

It doesn’t capture the big picture

The matrix is great for helping you plan your strategy, but it’s pretty simple in its structure. As a result, a lot of extra thought is required to visualize the bigger picture.

Take competitors, for example.

There’s no way to review competitors with the Ansoff Matrix. Instead, you have to do a competitor or SWOT analysis separately and integrate what you’ve learned. It’s not the end of the world, but it means that the process isn’t as streamlined and efficient as it could be.

The Ansoff Matrix is great for finding the best strategy for growth and analyzing risk, but it does have some limitations. So long as you’re aware of what these are before you start using the matrix, you can make sure your growth strategy is as robust as possible.

• How to use the Ansoff Matrix for strategic planning

Ideally, you should use the Ansoff Matrix whenever you do strategic planning .

Because a successful strategy should help your business grow and succeed, and that’s exactly what the matrix does best. Some businesses also find it helpful to fill out the matrix more regularly, especially if conditions change rapidly in their industry.

So how do you use the Ansoff Matrix for strategic planning?

Unfortunately, there’s no one-size-fits-all solution. It all depends on the industry you’re in, your position in the marketplace, and what you’re trying to achieve.

However, we can offer some advice. To do this, we’re going to give you a full rundown of each quadrant, when it’s best to use it, and examples of companies that have done it well.

• Understanding the four key quadrants and how they help with strategic planning

We’ve briefly touched upon the four quadrants of the Ansoff Matrix. Now, let’s look at them in more detail and outline how they can help your business with strategic planning.

Market penetration

First up, our top left contender: market penetration.

A market penetration strategy focuses on boosting sales in your existing market and to an existing customer base. For example, you could offer an incentive to increase sales. Or streamline your order and delivery process by adding more distribution channels.

It’s the most low-risk quadrant of the matrix, which makes it the “safest” option for businesses — but that doesn’t necessarily mean it’s the right choice. As we’ve already mentioned, it all depends on your goals and the industry you’re working in.

When to use market penetration

If any of these goals are on your list, market penetration could be the way to go:

• Market share growth
• Increase customer loyalty
• Improve customer value

If you decide to use market penetration, Miro’s chart feature could be incredibly useful to you. You can integrate our chart within the quadrant itself, allowing you to visualize areas where market penetration could increase your sales and improve your business.

Real-life example: Under Armour

In recent years, Under Armour has surpassed Adidas to become the second-largest athletic-wear provider in the U.S.

With market penetration.

To increase its market share, the company increased spending on endorsements and advertisements by 35% . This included signing professional basketball player, Stephen Curry , to launch the Curry Brand.

This is where it gets interesting.

The release of his signature shoe resulted in footwear growth of almost 95%.

This is a great example of using market penetration to increase market share. By releasing a new product with a well-established sportsperson, Under Armour surpassed Adidas to become the second-largest athletic-wear provider in the U.S.

Product development

Product development involves introducing a new product into the marketplace. Or, if you’re a SaaS business , introducing a new service.

When to use product development

The clue is in the name with this one. Generally speaking, most businesses use a product development strategy for the following:

• To expand their current product line/services
• To offer a completely new (but similar) product to the same market

If you’re thinking about pursuing product development, take a look at Miro’s collaboration tools .

A product development strategy will require a team of people to pull it off, so using a collaborative platform is pretty important. This is where Miro can help.

With our software, teams can seamlessly collaborate and communicate across departments. For example, users can add comments , tag users, and even share their screens .

Real-life example: Karma

Karma’s co-founders, Stas Kulesh and David Kravitz, had been running their own design and development company for over 10 years.

When the team shifted from using email communication to business chats, they created Karma. It started as a rustic, internal tool to keep each other accountable and motivated.

Using Miro to collaborate and communicate, the team began to share, discuss, and document their ideas about how Karma could be used by other businesses. The visual workspace became a vital and multipurpose tool for Karma’s distributed team during various stages of development.

The company used brainstorming and impact mapping templates to create a visual overview, allowing everyone involved to see the current status of the project.

Before long, the Karma Bot was born. Karma Bot is a tool used by teams to track performance, handle promotions, assign rewards and bonuses, and review salary appraisals.

After launching the product, it was quickly apparent that other companies were interested in using the services Karma Bot had to offer. By using product development, Karma fulfilled a need in the marketplace and provided consumers with a new, in-demand service.

Market development

Market development is riskier than both market penetration and product development. It involves launching an existing product into a new market. This can be done as follows:

• Finding a new use case for your product
• Adding features to meet a different customer need

When to use market development

Market development is often used when a business wants to diversify its audience. For instance, if it’s targeting an audience aged 18-25, the business might try to target an audience aged 19-30.

It can also be used if a business discovers a new use for its product or service. For instance, some changes in the marketplace could mean that you have a whole new audience to target.

Look at the pandemic, for example. Before, face masks would usually have only been supplied to medical offices and hospitals. Now, they’re supplied to businesses of all sizes and varieties as well as individual consumers.

If you’re considering market development, take a look at our user persona template to help you figure out who your new target audience will be.

Real-life example: National Van Lines

National Van Lines started as a B2C company, helping customers with their moving needs. However, the company used a market development strategy to expand into the B2B market.

By partnering with regional companies and agents, National Van Lines expanded its sales reach to include national and international B2B relationships.

By working with these partners, the company built direct relationships and expanded its B2B sales. They still offered the same service to their existing customers but also targeted a whole new customer base with the same service.

Diversification

Diversification is the riskiest of all the quadrants. It involves introducing an entirely new product into a new market.

Successful diversification takes a lot of work. You need to be extremely clear on your business goals, prepare yourself for the risks, and thoroughly review your financial situation. You’ll also need a solid marketing team in place to make sure there’s a market for your new product or service and that you launch everything successfully.

Although it’s the riskiest, it can have the biggest payoff — when used in the right circumstances, of course.

When to use diversification

Here’s when you might consider using diversification:

• If you want to expand into a new industry or market you haven’t currently explored.
• If you’re looking to expand your current business. For example, a graphic design company that starts to offer design products. This might still appeal to their current audience, but they’ll also reach a whole new audience in the process.

If you opt for diversification, check out Miro’s product development roadmap template . This template will help you plan, manage, and execute the roadmap for your new product.

Real-life example: HubSpot

Hubspot began in 2006 as a content and customer management platform for small businesses with one to 10 employees. By 2008, they had 600 customers.

As time went on, they adapted to the marketplace and created new features. This allowed them to diversify, creating an entirely new product for a new audience — a CRM for enterprise-level businesses.

Today, they are an all-in-one CRM platform with 121,000 global customers . It’s safe to say their diversification efforts paid off.

• Start using the Ansoff Matrix today with Miro

By now, you should have a pretty solid understanding of how to use the Ansoff Matrix for strategic planning. You know what each quadrant means and how to use them, and you’ve got some real-life examples to inspire you.

If you want to get started, take a look at our Ansoff Matrix template . With functionalities like sticky notes, pen tools, and shapes, you can use it to map out your strategic ideas in a visual, easy-to-understand way.

Miro is also a great tool for cross-functional collaboration, allowing teams to communicate and work together from one central platform. If you’ve got a remote team, using our platform is a pretty handy way to keep collaboration smooth and efficient.

Keep your business growing and scaling — try our Ansoff Matrix Template .

Miro is your team's visual platform to connect, collaborate, and create — together..

Join millions of users that collaborate from all over the planet using Miro.

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What Is Ansoff Matrix? – Strategies & Examples

As the world shrinks with each passing day, the business opportunities multiply at an ever-increasing rate leading to intense competition. Due to this pressure of survival and growth, organisations must devise and implement a competitive growth strategy to strengthen their economic position.

The Ansoff Matrix is one such framework that aids in formulating an effective growth strategy. In this article, we will discuss what is Ansoff Matrix, its importance, the four strategies associated with it and some examples to understand it better.

What Is Ansoff Matrix?

The Ansoff Matrix, also known as the product/market expansion grid, is a future-oriented portfolio analysis tool marketers use to devise future growth strategies while factoring in the inherent risks associated.

Developed by Igor Ansoff in 1957, the Ansoff model is based on the fundamental question of ‘where should a company direct its growth efforts?’ and provides four distinct growth strategies that a company can adopt, depending on whether it wants to target new markets or new products.

The matrix suggests 4 different growth strategies that can be implemented in the business namely –

• Market penetration [existing product, existing market]: The company tries to grow its existing products’ sales in the existing market. The aim is to increase the market share of the company. For example, Coca-Cola focusing on selling more bottles of Diet Coke in the US market.
• Product development [new product, existing market]: The company tries to develop new products for its existing markets. The aim is to satisfy the changing needs of the customers in the existing market. For example, Samsung launching the new Galaxy phone focused just on the needs of Gen Z .
• Market development [existing product, new market]: The company tries to enter new markets with its existing products. The aim is to increase sales by selling the same product in a new market. For example, Google focusing on the Chinese market.
• Diversification [new product, new market]: The company enters a new market with a new product. The aim is to reduce the risk by spreading the business into new areas. For example, Apple launching a home theatre system for Indian customers.

The 4 Strategies Of The Ansoff Matrix

Product and market are the most important factors driving business growth. The Ansoff Matrix factors in both aspects to create a 2-dimensional matrix that gives rise to 4 growth strategies.

Market Penetration

Market penetration is a measure of how much an offering is bought by customers as compared to the total estimated market.

This is the most commonly used strategy wherein the company focuses on selling more of its current products to its current markets. This can be achieved by either improving marketing efforts or providing customers with additional benefits that encourage them to buy more. For example, a mobile phone company may offer more minutes or data at a lower price to attract new customers and encourage existing customers to buy more.

What Is The Goal Of A Market Penetration Strategy?

The goal of a market penetration strategy is to increase sales of a company’s products or services in the existing market without changing the product. This is usually done by increasing marketing efforts and improving customer service.

For example, a company may offer discounts or special deals to customers in order to increase sales. Additionally, the company may invest more in advertising and promotion to increase brand awareness and reach more potential customers.

When Is A Market Penetration Strategy Used?

The market penetration strategy is used by firms when they don’t have any new product or service to launch or any new market to explore but still wish to expand their revenue and market share. Companies usually adopt this strategy in the early stages of their product life cycle when they are still trying to gain a foothold in the market.

How To Use A Market Penetration Strategy?

There are various ways in which a company can go about adopting a market penetration strategy. Some of the most common methods are as follows:

• Price Reduction: By reducing prices, companies make their products and services more affordable and thus attract more customers. This strategy is particularly effective in markets where the price is a major deciding factor for customers.
• Advertising and Promotion: Advertising and promotion can help create awareness about a company’s products and services and make them more attractive to potential customers.
• Improved Distribution: By incorporating new distribution channels or improving existing ones, companies can make their products and services more accessible to customers.
• Mergers and acquisitions: Mergers and acquisitions involve combining two or more companies to create a new entity. This strategy can help companies expand their reach and increase penetration in the current market.

Risks Associated With Market Penetration Strategy

The main risk associated with market penetration strategy is that of becoming complacent. Companies that have successfully penetrated their markets may become overconfident and stop innovating. This can lead to them losing their competitive edge and eventually being replaced by newer, more agile firms.

Product Development

The product development strategy is where a firm introduces a new and improved product line in its existing market.

The main aim of this strategy is to maintain market share and generate new revenue streams by offering customers something new that they value.

In order to successfully implement a product development strategy, companies need to deeply understand their target market and what they are looking for.

An excellent example of a company that has successfully used a product development strategy is Apple. Starting as a computer company, it has expanded its product range to include iPods, iPhones, iPads, and a host of other electronic devices.

What Is The Goal Of A Product Development Strategy?

The main goal of a product development strategy is to create new products or services that appeal to customers and generate new revenue streams for the company in the existing market.

Product development can also help companies to stay ahead of the competition by constantly innovating and offering new products or services that the competition does not have.

When Is A Product Development Strategy Implemented?

The product development strategy is implemented when the company has an established large customer base and the market for its existing products is on the brink of saturation.

This involves high inherent risk as it demands a huge investment from research and development to build a new product.

However, it’s easier to market a new product to an existing customer base as they are already aware of the company and its products.

How To Use A Product Development Strategy?

The organisation focuses on building a differentiated product to improve its product portfolio and operate on the customer’s brand loyalty. The courses of action include:

• Investing in research and development to provide better and cost-efficient solutions.
• Merging resources with competitors to save time and effort in research.
• Forming strategic partnerships to acquire rights to sell a product developed by another company.

Risks Associated With Product Development Strategy

The risks associated with product development strategy are:

• Developing a new product takes a lot of time, effort, and resources.
• The success of the new product is uncertain as it needs to be accepted by the customers.
• The new product can cannibalise the sales of the existing products.

Market Development

The market development strategy is adopted to target new markets with the existing products.

For example, a company selling tennis shoes in the domestic market may decide to target foreign markets.

Another example would be a company selling healthy snacks to working professionals, targeting the same to students in college canteens. Here, the company would not be introducing any new product but targeting a new market segment .

What Is The Goal Of A Market Development Strategy?

Businesses aim to reach a wider audience and expand their user base by selling their offerings in previously unexplored markets. This makes way for acquiring new customers and acts as a driving force for growth and increased revenue.

When Is A Market Development Strategy Implemented?

A business generally uses a market development strategy when its existing market has reached a saturation point, and they are not ready to launch a new product.

The focus is on existing products, so it does not require a huge investment in product research and development, resulting in low business risk. So this strategy best works for a business that is not willing to take risks at the moment.

How Is A Market Development Strategy Implemented?

The strategy concentrates on taking the existing product to a new market. Here’s how they implement it:

• Entertaining a different customer segment in the same geographic area
• Expanding markets geographically i.e. domestically and internationally

Risks Associated With Market Development Strategy

The main risk involved in this strategy is that the company may not understand the needs of a new market and thus, the product may not be accepted. Also, it is difficult to forecast demand in a new market.

Another risk is that the company may incur a lot of costs to enter a new market. This is because they would need to research, develop new marketing strategies and create awareness about their product.

Diversification

A diversification strategy is a market strategy where the business focuses on selling a new product to a new market and involves entirely different skills, technology and knowledge.

The risks are much higher as the company is starting from scratch. This strategy is generally adopted by companies that have spare cash and want to enter a new business.

An example of a company that has used this strategy is Google. It started with the search engine and then moved into selling mobile phones (Pixel), home appliances (Nest) and even forays into self-driving cars.

What Is The Goal Of A Diversification Strategy?

Businesses generally implement diversification strategies to reduce their reliance on a single line of products while gaining a synergetic advantage to sell more of their existing product by adding a new product.

When Is A Diversification Strategy Implemented?

Diversification acts as a means to utilise the spare capacity of the business more efficiently and effectively by developing a new line of products.

It is the riskiest strategy in the matrix as it demands both product and market development on the part of the business and focuses on an entirely new revenue stream. But with the increased risk it also offers the opportunity for huge returns.

How Is A Diversification Strategy Implemented?

The management has mainly two different approaches when it comes to implementing diversification strategies.

• Related diversification: The marketing strategy where the business enters into a new industry by exploiting brand name, sales and distribution capacity and marketing skills as the new product has some similarities with the existing products. For example, Apple, a technology company, introduced AirPods when it was already established in the smartphone industry.
• Unrelated diversification: The marketing strategy where a business invests in a new product portfolio and employs different technologies where it’s unlikely to have any similarities between the new and existing products. For example when Coca Cola a soft drink company, acquired Columbia Pictures, a movie studio, in 1982.

Companies use related diversification to mitigate their risk and use unrelated diversification to reduce risk by operating in multiple industries.

Risks Associated With Diversification Strategy

The main risks associated with diversifying into new products or services are:

• Difficulty in managing multiple products and businesses : If a company has a wide range of products and businesses, it can be difficult for managers to keep track of everything and make sure that each business is profitable.
• Lack of focus: A company that is diversified into too many different areas may lack focus and could end up spread too thin.
• Increased complexity: A diversified company is likely to be more complex than a single-business company, making it more difficult to manage and understand.

The Importance Of The Ansoff Matrix

Companies with multiple offerings large enough to be categorised into SBUs (Strategic Business Units) face the problem of correct resource allocation. Ansoff Matrix provides a framework for resource allocation and developing marketing plans. It forces the company to consider the risks inherent in its growth strategy.

Moreover, designing a strategy involves a careful analysis of the strengths and weaknesses of the company to fit the external opportunities and threats present in the market. Once an organisation has derived its results from the SWOT analysis , it needs to channel them into individual strategies and choose a business model. Ansoff Matrix helps the business to choose one such model.

The Ansoff Matrix is simple to understand and gives an overview of all possible alternatives. It is best suited for organisations operating in multiple industries. The business can choose the best strategy based on its requirements and risk-taking capacity.

Bottom Line?

Each company has its own method of analysing its business position and choosing a business strategy for growth and development in the market. Several tools are available that aid the process of identifying, analysing and choosing from alternatives much easier.

Risk cannot be totally eliminated from a business. The solution is to choose the right strategy at the right time, and using a portfolio analysis model like the Ansoff Matrix, it becomes much easier to make decisions. 

Go On, Tell Us What You Think!

Did we miss something? Come on! Tell us what you think about our article on  Ansoff Matrix  in the comments section.

A startup enthusiast, optimist and full time learner. With keen interest in finance and management, Khushi believes communication to be the key to every management. Always ready to explore more and walking that extra mile in putting efforts.

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Ansoff Matrix: explained with examples

Ansoff Matrix is a tool for improving revenue. Even more important is profitability. Ansoff matrix can help us extract more profit too. So, how exactly can an analytical tool invented in 1957 help us today?

Igor Ansoff

The Ansoff Matrix was developed by Igor Ansoff. He published this strategic tool in the article ‘Strategies for Diversification’ in 1957.

He comes from an applied mathematics background. However, he is known for his work in strategy. In fact, he is known as the father of strategic management.

Ansoff’s strategies

One of the challenges for a firm is growing. The shareholders demand growth every quarter of every year! Therefore, growth is a primary focus. This is where this matrix helps us. As a result, it can help us generate alternative growth strategies. Now, the next question arises how do we generate these alternatives. In order to answer this question, let us first consider two broad areas of concern for a firm.

What are the two broad areas of concern?

The firm can grow either by having more products out in the market. Also, it can grow by catering to more people. Subsequently, we shall see, how to make this possible through different types of strategies.

Types of strategies for growth

• Pure product Strategy – Product development
• Pure market strategies – Market development & Penetration
• Combined Strategies – Diversification

Product development

Pure product strategy is about product development. Therefore, in this type of growth strategy, the firm only focuses on the introduction of new products. The primary consideration is to sell more products by introducing new products to the market. New product creation is fraught with risks .

Market development

On the other hand, an example of a pure market-based strategy is market development. In this approach, the firm attempts to enter a new market or expand into new geography. This strategy has a moderate risk because we are trying to expand into unknown territory(quite literally). A lot of things can go wrong.

Market Penetration

Another pure market strategy is market penetration. In this type of approach, the firm tries to capture more market share within the same geography and with the same set of products. Market penetration has the lowest risk. As a result of having a known market as well as a product.

Diversification

Finally, the firm may try a combination of marketing and product strategy. This comes under the diversification strategy. Here, the firm focuses on the creation of new products that it uses to enter a new market.

Ansoff Matrix explained

Product Development

The products are the final sellable output. For example, the iPhone is a product from the firm Apple. In order to grow its market share, it can introduce a new product for the market. For example, it introduced AirPods.

Market Development

Another way of growing is market development. Let us take our Apple example. Market development means that the firm seeks a new market . Let us say Apple sells well in North America, China, and Europe. However, it did not have presence in Africa. Apple can start selling phones in Africa to increase its revenue. This would be an example of Market Development.

Now, let us consider that Apple wants to improve its revenue but does not want to introduce new products. Also, they don’t want to enter a new market. In this case, they have one option: capture more market share of the current market. For instance, let us say, Apple has 39% of the market share in the US . Meanwhile, they can develop a strategy to increase the market share by 5% in the next two years. As a result, this strategy would be an example of market penetration.

Finally, Apple can also expand its market and introduce new products at the same time. This is the most realistic scenario among all four. Apple can pursue diversification by launching a new product and expanding into a new market at the same time. For example, Apple realized that there is a demand for a cheaper iPhone in developing economies like India and Brazil. However, their current lineup is expensive for the market. Consequently, they introduced the iPhone SE 2020 model. A phone that is priced more appropriately for the developing economies.

Ansoff Matrix for Apple

We have created the Ansoff matrix for Apple based on our discussion. We can also use tools like SWOT analysis to further scrutinize the different strategies. Therefore, it can give us an idea of how firms develop strategies.

Important questions on Ansoff Matrix

It provides a fast and easy to use framework to analyze all the strategic directions for a firm.

The Ansoff Matrix is based on the idea of providing the right products to the right customers. The right product can be in the form of a newer product or offering the existing product.

1. Market penetration 2. Product extension 3. Market development 4. Diversification

The Ansoff Matrix is used to assess the opportunities and risks associated with growth. It can help us identify the best approach for growth.

The Ansoff Matrix was invented by Harry Igor Ansoff. He had a master’s degree in Modern Physics and a doctorate in Applied Mathematics.

The ‘diversification’ strategy is the riskiest. In this strategy, we have more things that are unknown. Therefore, more things can go wrong.

You can draw Ansoff Matrix by drawing a quadrant. In the top left quadrant you can write ‘market penetration.’ In a clockwise manner you can write ‘product development’ in top right, ‘diversificaiton’ in the bottom right. Finally you can write ‘market development’ in the bottom left side.

> Ansoff Matrix looks at both products and markets. BCG focuses on the products only. > The Ansoff-matrix is forward-looking while BCG is better suited as an assessment tool for past performance.

You can use the ‘market penetration’ strategy to grab a larger market share.

You can use the Ansoff Matrix to develop a strategy to expand into a new market. This will help the firm grow as well.

The answer depends on a lot of factors. Firstly, entering a new market with new products is risky. Secondly, you need to ascertain what benefits you get by developing new product vis-a-vis using available products.

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Ansoff Matrix

Last updated 22 Mar 2021

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Ansoff's Matrix is a marketing planning model that helps a business determine its product and market growth strategy.

Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets. The output from the Ansoff product/market matrix is a series of suggested growth strategies which set the direction for the business strategy. These are described below:

Market penetration

Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets.

Market penetration seeks t o achieve four main objectives:

• Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resource s dedicated to personal selling
• Secure dominance of growth markets
• Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors
• Increase usage by existing customers – for example by introducing loyalty schemes

A market penetration marketing strategy is very much about “business as usual”. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.

Market development

Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets.

There are many possible ways of approaching this strategy, including:

• New geographical markets; for example exporting the product to a new country
• New product dimensions or packaging: for example
• New distribution channels (e.g. moving from selling via retail to selling using e-commerce and mail order)
• Different pricing policies to attract different customers or create new market segments

Market development is a more risky strategy than market penetration because of the targeting of new markets.

Product development

Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets.

A strategy of product development is particularly suitable for a business where the product needs to be differentiated in order to remain competitive. A successful product development strategy places the marketing emphasis on:

• Research & development and innovation
• Detailed insights into customer needs (and how they change)
• Being first to market

Diversification

Diversification is the name given to the growth strategy where a business markets new products in new markets.

This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience.

For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks. However, for the right balance between risk and reward, a marketing strategy of diversification can be highly rewarding.

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Ansoff Matrix: How to Grow Your Business?

Growing a business is the process of improving some measure of a company’s success. A business can grow in terms of employees, customer base, international coverage, profits, but growth is most often determined in terms of revenues. There are different ways of growing a business. Igor Ansoff identified four strategies for growth and summarized them in the so called Ansoff Matrix. The Ansoff Matrix (also known as the Product/Market Expansion Grid) allows managers to quickly summarize these potential growth strategies and compare them to the risk associated with each one.  The idea is that each time you move into a new quadrant (horizontally or vertically), risk increases.  Each quadrant of the Ansoff Matrix will be elaborated on below.

Figure 1: Ansoff Matrix

Market Penetration: Existing Products in Existing Markets

Market Penetration is about selling more of the company’s existing products to existing markets. To penetrate and grow the customer base in the existing market, a company may cut prices, improve its distribution network, invest more in marketing and increase existing production capacity. Brands such as Coca-Cola and Heineken are known for spending a lot on marketing in order to penetrate their markets. In addition, they try to maximize the use of distribution channels by making attractive deals with a large variety of distributors such as supermarkets, restaurants, bars and football stadiums for example.

Product Development: New Products in Existing Markets

Product Development is about developing and selling new products to existing markets. Companies could for example make some modifications in the existing products to give increased value to the customers for their purchase or develop and launch new products alongside a company’s existing product offering. A classic example of product development is Apple launching a brand new iPhone every few years. Other examples can be found in the pharmaceutical industry where companies such as Pfizer, Merck and Bayer are heavily investing in Research and Development (R&D) in order to come up with new and innovative drugs every now and then.

Market Development: Existing Products in New Markets

Market Development is about selling more of the company’s existing products to new markets. This strategy is about reaching new customer segments or expanding internationally by targeting new geographic areas. If a company’s product is doing exceptionally well in one market, why not try to enter a new market with the same products? This is what for example IKEA has done over the past few decades in order to become one of the biggest furniture retailers in the world. IKEA started off expanding to markets relatively close in terms of culture as to its home country (Sweden) before targeting more challenging geographic areas such as China and the Middle-East. The Eclectic paradigm (also known as OLI Framework ) is a great tool to determine how to enter foreign markets.

D iversification: New Products in New Markets

Diversification strategies are about entering new markets with new products that are either related or completely unrelated to a company’s existing offering. Diversification in turn can be classified into three types of diversification strategies.  Concentric/horizontal diversification  (or related diversification) is about entering a new market with a new product that is somewhat related to a company’s existing product offering.  Conglomerate diversification (or unrelated diversification) on the other hand is about entering a new market with a new product that is completely unrelated to a company’s existing offering. A great example of a conglomerate is Samsung, which is operating in businesses varying from computers, phones and refrigerators to chemicals, insurances and hotel chains. Finally.  vertical diversification (or vertical integration ) means moving backward or forward in the value chain by taking control over activities that used to be outsourced to third parties like suppliers, OEMs or distributors.

Ansoff Matrix In Sum

The Ansoff Matrix is a great framework to structure the options a company has in order to grow. Market Penetration is the least risky of all four and most common in day-to-day business. Diversification is the most risky since a company starts entering a completely new and unfamiliar market with a new and unfamiliar product. However, if a company manages to successfully enter several unrelated markets, it has the advantage of having a well-balanced product portfolio which actually decreases the total risk. In such a situation it is useful to work with frameworks like the GE/Mckinsey Matrix or the BCG Growth-Share Matrix .

Further Reading:

• Ansoff, I. (1957). Strategies for Diversification. Harvard Business Review.

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Ansoff Matrix Examples and How to use It?

Business leaders have long used a framework known as the Ansoff Matrix to analyze their business. It is based on the idea of strategic planning. It classifies business strategies into four categories based on their relationship with the market.

Several companies, such as Google, Microsoft, and Apple, have already used Ansoff Matrix to better their position in the market.

In this article, we will discuss the fundamentals of the Ansoff Matrix and how it can be used for PPC campaigns.

In this guide, we’ll cover the following:

Definition of Ansoff Matrix

How to use ansoff matrix, ansoff matrix examples.

You can simply define the Ansoff Matrix as a strategic planning model that classifies business strategies based on their relationship with the market. It was developed by H. Igor Ansoff in the late 1950s

Ansoff Matrix can be used to identify alternative marketing opportunities for your company or product, allowing you to expand into new markets.

It can also be used to analyze your competitive position, facilitating the identification of new product/market opportunities for increasing its market share. Furthermore, it can be used to assess the degree of diversification within existing markets and which products should be eliminated.

The Ansoff Matrix is made up of four main categories. They are as follows:

Product Development

Market penetration, market development.

Diversification

Let us delve deeper into the four categories to understand better how they can be used on PPC campaigns.

The product development strategy is designed to improve the sales of existing products by making them more useful, affordable, or attractive. This strategy involves the development of new features on a product, improving its quality, or creating brand extensions related to the original product.

The essence of this strategy is to increase overall sales from existing products.

The market penetration strategy is designed to increase sales volume by making more potential buyers aware of your products. This strategy involves aggressive marketing and promotion activities such as advertising, public relations, and e-commerce marketing services such as PPC and SEO.

The idea behind this approach is that your current customers are valuable and that they will recommend your products to their friends, families, or business partners.

Take an example of a company that offers mobile phones with particular features. It can use the product development strategy by adding new features, improving quality, or creating related brand extension products such as cases and chargers. All this will help in increasing the sales from its original product line.

You can utilize this strategy in your PPC campaigns by focusing entirely on conversions. You can optimize your Google Ads to drive traffic towards the ultimate conversion.

The market development strategy is designed to enter new markets with the same product. These new markets may be related, international, or based on different demographics.

This is done by identifying unmet needs in untapped markets where there is room for your products or services.

The diversification strategy is designed to enter new markets by offering completely different products to existing customers. Successful diversification requires elements of innovation or the creation of something new. You also have to clearly understand where your market is headed and what your target demographic is. Create strategies based on this knowledge, and you will see a successful increase in your market share.

Ansoff’s diversification strategy can be applied to optimize PPC campaigns in the following manner. You can augment your PPC campaigns by offering related products. For example, if you sell shoes online, you can target your ads towards accessories such as bags or belts. Or else, you can create different campaigns to target new customers.

Now that you know how to use the Ansoff matrix. Let us look at incredible Ansoff Matrix examples to inspire you. Our Ansoff Matrix examples come from successful case studies of companies that have incorporated Ansoff Matrix as part of their business strategy.

Xiaomi Inc. is a Chinese mobile phone manufacturer that entered the mobile phone market in 2011 with its Android-based MIUI operating system. Since then, it has become one of the biggest companies in China.

The company started using the diversification strategy when it entered the mobile phone market by launching products such as consumer electronics, household items, home appliances, software, and even bags.

It has invested in research and development to remain competitive and has sales offices in various countries such as India, Malaysia, and Indonesia.

Xiaomi Inc.’s diversification strategy helped in enhancing the company’s growth. It also helped in increasing the number of customers by targeting new markets . Therefore, it can be said that a diversification strategy is a great way to increase your success.

Market development strategy is a brilliant way to implement the Ansoff Matrix, as it involves targeting untapped markets. IKEA has adopted this strategy and has continued to thrive for over 30 years.

IKEA has grown into one of the most successful furniture retail brands globally. It has opened many home furnishing stores across the globe.

IKEA’s market development strategy is successful as it has constantly targeted new markets. To successfully implement this strategy, you must identify a new market that is segmented from your existing market.

People are always anticipating the next iPhone release. Apple Inc. knows this and has launched a new iPhone every year since 2007.

Apple’s iPhone is one of the most notable product development examples. Apple has always invested heavily in R&D to improve its products. Each device they release is loaded with new features.

So, their customers will always be looking forward to the next big thing. This strategy has been affecting the company’s sales positively since 2007 and has helped enhance Apple’s growth across the globe.

Its investment in R&D has sometimes seen it release products before its competitors. Keeping up with the market trends and anticipating the next big thing is a great way to keep your customers happy. It will also help you to remain competitive in the long run.

Apple’s iPhone product development strategy has helped create a market for itself. Customers are almost sure to purchase the next iPhone once it is out. Therefore, this strategy requires extensive research and analysis to be implemented successfully.

Marketing the new product to existing customers and getting them on board is another task. You must identify the target market for the new product and ensure that it is compatible with your existing products.

Fortunately, Apple has always convinced its customers that the new product is better than its predecessor.

The diversification strategy is a great way to implement the Ansoff Matrix. Google has been using this strategy to increase its revenue and improve its market share.

Since its launch in 1998, Google has been expanding its services. It started as a search engine and has now extended to software, online advertising, and hardware.

It has improved its products over the years to ensure that they are compatible with new trends. An example of this is the development of Chrome in 2008.

It also made a breakthrough when it successfully implemented the diversification strategy by launching the Android operating system to compete with iOS.

Google’s diversification strategy has been successful as it ensures that the company remains competitive and relevant in the market. It has helped the company earn a strong foothold in different technology areas.

Right now, there is no aspect of internet technology that Google has not dabbled with. Therefore, it is not surprising that the company has plenty of revenue to its name.

How to use PPC Signal to monitor your PPC campaign effectively?

Many business owners have a hard time figuring out whether PPC campaigns are working or not. This is mainly because managing PPC campaigns is complex and requires constant monitoring. There are many PPC tools that an individual can use to monitor their campaigns’ efficiency. Getting a signal on time if something unusual happening in your campaign can be achieved through a PPC Signal.

However, it is crucial to understand that the success of your campaign will be determined by how well you can measure its efficiency. This is where using PPC Signal will prove to be beneficial. PPC Signal is a full-fledged Google Ads monitoring and optimization tool. It was developed specifically to ensure that your campaign is working as efficiently as possible.

You can monitor your Google Ads performance with PPC Signal to ensure that the campaign is on the right track. You can also determine which keyword has done better than others. This strategy will help in improving your

PPC Signal provides several filters to help you narrow down your search for a specific metric. This function is excellent as it ensures that you monitor only the relevant aspects of your campaign.

What are the 4 strategies of Ansoff Matrix?

The four strategies in the Ansoff matrix are market penetration, market development, product development, and diversification.

Why does Coca-Cola use Ansoff’s matrix?

Coca-Cola is one of the Ansoff Matrix examples that use the Ansoff Matrix to identify its market growth and product development strategies. The company has identified untapped markets, tapping into them with its new products.

The company is constantly diversifying its product line to keep up with the changing trends.

Ansoff Matrix is a valuable tool that can be used to diversify your product line and introduce new products. It will help you to increase your market share and generate more revenue. The key is identifying potential markets and the existing ones to succeed in implementing these strategies.

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