The Ansoff Matrix is a tool that helps businesses analyze the market accurately to implement effective business plans. The Ansoff model includes 4 core strategies, helping businesses make the right decision between market expansion and product development. In this article, GOBRANDING will explain what the 4 strategies of the Ansoff Matrix are and how to apply this model to businesses.
I. What is Ansoff Matrix?
The Ansoff Matrix is a strategic model consisting of four strategic boxes: market penetration, market development, product development, and diversification.
All four strategies aim at the common goal of promoting growth by focusing on two core elements: product and market. Based on the Ansoff model, businesses can choose to continue developing existing products or expand into new markets. In addition, the company can plan to innovate or diversify new product lines to reach customers and increase the opportunity to compete with competitors in the same industry.
II. 4 business strategies of Ansoff matrix
ansoff matrix strategy
What is Ansoff Matrix? Opportunities and challenges of 4 strategies
In addition to understanding what the Ansoff matrix is, businesses also need to understand how to apply this model to their business plans, including promoting existing products, finding new markets, creating new product lines, and diversifying them effectively. However, each strategy has its own benefits and challenges. Let’s analyze the 4 strategies of the Ansoff model to help businesses make the right decisions for effective corporate-level business plans .
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1. Market Penetration
Market penetration is a strategy in which companies will focus on customers based on their performance in the current market. To implement this strategy, businesses need to combine the Ansoff matrix with the 4P strategy in Marketing to continue developing the product lines they have produced. In addition, improving the quality of customer care is a necessary task to help businesses manage their loyal customers in the most optimal way.
Advantage:
Make the most of your business’s existing resources such as products, markets, and customers.
Bring quick profits.
Reduce costs for product advertising and market research.
Increase customer lifetime value.
Challenge:
High level of competition due to expansion of market share by competitors.
May affect profits due to discount programs.
Limits the ability to create new products.
Difficulty when market share reaches its limit and cannot continue to expand.
2. Market Development
Market Development in the Ansoff matrix is a strategy to expand the business’s market by promoting current products to new customers. This is an opportunity for the company to reach new customers through geographic locations around the world.
A common form of Market Development strategy is to export domestic goods to international markets. However, before deciding to apply this strategy, businesses need to be careful in researching new markets, especially accurately grasping the needs of customers in that market, then conducting a campaign to increase brand awareness performance using the company’s Marketing project management processes .
Advantage:
Expand your business scope.
Increase growth opportunities for product promotion campaigns.
High probability of increasing sales revenue.
Collect more target customers in new markets.
Challenge:
Compete with new rivals.
It costs a lot to invest in researching new markets.
Difficulties in legal procedures and regulations.
High risk of failure when analyzing the expansion market incorrectly.
3. Product Development
In contrast to the market development strategy, the Product Development strategy of the Ansoff matrix focuses on developing new products to attract customers in the current market. The company will develop products by upgrading, optimizing the functions of existing products or creating new product lines to bring better performance to customers. In addition, this strategy contributes to promoting the creativity of the company’s staff and enhancing the value of the company’s products in a sustainable way.
Advantage:
Increase options for existing customer needs.
Enhance the value of your business’s products to customers.
Increase competitiveness in the market.
Increase sales revenue for business.
Challenge:
Spend a lot of resources and time on developing new products.
Risk of customer non-acceptance of new product.
High level of competition with rivals.
Incur investment costs in the process of improving new products.
4. Diversification
Diversification is a strategy that focuses entirely on new products and markets. This is the riskiest move of all four strategies in the Ansoff matrix because the company is introducing its current products to a new market with a customer base that has never heard of their products.
In addition, the company can also choose to invest in
products that are completely different from the field it is working in (Unrelated Diversification) to expand its multi-field operations and create a competitive advantage. This business strategy can be a challenge for businesses in case of lack of knowledge about the new market and establishing close relationships with customers compared to the b to b database other three strategies. On the contrary, if successfully implemented, this will be a major turning point to help businesses expand market share and increase revenue from a variety of different product sources.
Advantage:
There is no need to focus on just one market or product.
Increase revenue from a variety of product sources.
Opportunity to expand market share and attract new customers.
Avoid risks due to current market fluctuations.
Challenge:
Difficulty in managing diverse business activities.
Costs of investment in producing new products and expanding markets.
Legal barriers to doing business in new markets.
High level of competition.
III. In which areas is the Ansoff matrix applied?
After analyzing all 4 strategies in the Ansoff matrix, many businesses have applied this model to support the implementation of market expansion and product development plans in many different industries. Let’s join GOBRANDING to learn how to apply the Ansoff model in 3 popular industries including food and beverage, technology and services.
ansoff matrix field
3 common areas in the Ansoff matrix
1. Food and beverage industry
The food and beverage industry is a popular industry for the Ansoff matrix. Companies in this industry will often focus on brand extension by entering new markets or developing products to meet the changing needs of customers. This strategy includes creating new product lines with improved formulas, flavors or implementing a plan to increase brand awareness to help companies maintain their position in the fiercely competitive environment of the food and beverage industry today.
For example, Coca-Cola is a brand that has been successful in the beverage market for over a decade. Coca-Cola’s Ansoff Matrix is deployed as follows:
Market Penetration: Coca-Cola penetrates the market by strongly promoting its already manufactured products in the market through a strong advertising and communication campaign aimed at reaching customers’ demand for commercial beverages.
Market Development: After successfully penetrating the market, the company decided to further expand the market by exporting its products to 200 countries around the world. The main objective of this strategy is to reach new customer segments and spread its influence in the global market.
Product Development: Coca-Cola not only focuses on producing carbonated soft drinks but also develops new product lines such as sugar-free drinks, fruit juices and other healthy drinks. This development direction helps the company adapt to market trends and meet the diverse needs of customers.
Diversification: In addition to creating new products to adapt to trends, the company’s main goal is to maximize the influence of the brand to bring value to users. Moreover, the product diversification campaign also brings opportunities for businesses to increase revenue without having to rely on a specific product or market.
2. Technology industry
In addition, economic experts assess that the information technology sector is likely to continue to grow strongly in the future. Therefore, large technology corporations such as Apple or Samsung are constantly striving to increase sustainable sales by applying the Ansoff matrix to their business strategies.
3. Service industry
The service industry is also a popular field in applying the Ansoff Matrix strategy to build sustainable relationships with customers and increase competitive efficiency compared to competitors in the same segment in this field.
For example, the F&B service industry is popular in constantly improving product quality and service quantity based on customer feedback to enhance brand value in the hearts of customers. In addition, F&B stores also regularly apply preferential policies or discount programs for loyal customers.
Service companies also implement market development como encontrar uma agência de marketing de conteúdo competente strategies that may include searching for potential markets or proposing new services based on the specific needs of customers in that market.
IV. Conclusion
Through this article, it can be seen that all 4 strategies in the Ansoff matrix play an important role in business development through investment in products and analysis of potential markets. Market penetration, market development, product development and diversification strategies all encourage businesses to develop flexible business plans to help businesses both fully meet customer needs and reduce risks of environmental changes.
To effectively expand your product and penetrate new markets, the first thing you need to do is to promote your brand awareness campaign both online and offline. GOBRANDING ‘s comprehensive SEO service will be the solution to help your brand website increase its recognition on search engines and reach customers in the market quickly.
