According to Ansoff model, every company has 4 strategic options to grow. Company can choose if it will grow in existing or new markets, with existing or new products. Each alternative poses differing levels of risk for an organization.
When to use it?
You can use the Ansoff matrix in basically two situations.
The Ansoff Matrix is a useful tool for organizations wanting to identify and explore their growth options. Although the risk varies between quadrants, with Diversification being the riskiest, it can be argued that if an organization diversifies its offering successfully into multiple unrelated markets then, in fact, its overall risk portfolio is lowered.
Market penetration
is used if the current market still provides space. However, for end-of-life products, this option is often out of the question due to the age of the product and thus the impossibility of growth.
Market development
With this approach company wants to reach new markets with an existing product. This can be, for example, an international expansion or an expansion from the local market to the rest of the state or country.
Market development is used when a company wants to reach new markets with an existing product. This can be, for example, an international expansion or an expansion from the local market to the rest of the state or country.
Product development or innovation
It is focusing on bringing new – innovated product to the existing market and thus revive the interest of customers. Examples are facelifts of products, such as cars.
Product development is a common choice for end-of-life products. It will thus introduce a new – innovated product to the existing market and thus revive the interest of customers. Examples are facelifts of products, such as cars.
Differentiation
This is to introduce a completely new product, service or additional service to the current product. This will increase the possibility of its sales. It is a very common strategy of large companies, which increase their overall size – they expand their portfolio.
Market penetration is the first option a company typically uses if the current market still provides space. However, for end-of-life products, this option is often out of the question due to the age of the product and thus the impossibility of growth.
This model was introduced by Ansoff, in 1957
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