1.7 (?) ansoff matrix
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1.7 (?) Ansoff matrix. Describe Ansoff matrix. Igor Ansoff (1957) developed a strategic decision-making tool ( Ansoff matrix) to analyze the different options for expansion available to a business. - PowerPoint PPT PresentationTRANSCRIPT
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1.7 (?)Ansoff matrix
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Describe Ansoff matrix
• Igor Ansoff (1957) developed a strategic decision-making tool (Ansoff matrix) to analyze the different options for expansion available to a business.
• His approach is represented in the form of a matrix with 4 possible growth strategies in terms of products and markets.
• These options can be illustrated as follows:
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Illustration
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What is Market Penetration?
• Market penetration is a low-risk growth strategy that is simply selling more of existing products to existing customers.
• It can be achieved by reducing price, more advertising, better advertising, improving sales techniques, more and/or better distribution methods, new packaging, etc.
• The aim is to increase market share of existing market.
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Features of market penetration
• It is the safest of the four product-market strategies and requires minimum marketing or product research expenditure compared to other growth strategies
• One limitation is that competitors will respond quickly leading to price wars. Also existing markets can become saturated quickly and an alternative strategy has to be found
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What is Product Development?
• Product development is a medium-risk growth strategy that involves introducing new products in existing market.
• In industries where there is a short product life cycle (I-phones, computers, cars), product development is a central strategy to retain existing customers. E.g. Apple, Toyota, McDonald, etc
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Features
• It is suitable way of retaining existing customers when existing products have reached the saturation stage of their life cycle and new products can be launched under the same brand name.
• However, it requires some investments in product research and development and all new products may not be successful.
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What is market development?
• Market development is a medium risk growth strategy that involves selling existing products in new markets.
• To attract different market segments, prices can be changed or new promotion techniques can be used
• New markets can be another geographical area, another demographic group (a new social class) or another audience (new channel users :e-customers).
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Features
• One key advantage of this growth is that the business is familiar the product and can move from a saturated segment into a new one.
• However, success is not guaranteed in another market segment and some marketing expenditure is necessary.
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Diversification?
• Diversification is a high risk strategy that involves introducing new products in new markets. Its main objective is spreading of risks.
• A common way to diversify is to become a holding (parent) company with several subsidiaries and this is why it is sometimes known as conglomerate diversification.
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Two types of diversification
• Related diversification occurs when a business caters different but within the same range of products for a new market. E.g. Toyota offering Lexus, Pepsi offering bottled water.
• Unrelated diversification occurs when a business caters for completely new products in new markets. E.g. Samsung operates in electronic, shipbuilding, insurance, etc.
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Features
• Diversification allows spreading of risks to a great extent and to become a powerful market player
• However, the dangers of diversification are that too much time and resources can be devoted to non-core activities or there can be no managerial skills in the alternative industries.