The process of upgrading some measures for a company’s success is directly proportional to the growth of the business. Though a business can thrive in terms of customer base, international coverage, number of employees, profits, but majorly revenue is looked upon to determine its actual growth.
There are several ways of growing a business and reaching the heights of success. One such tool developed by H Igor Ansoff is the Ansoff Matrix. It is a tool adopted by businesses to examine and plan their strategies for growth.
Also known as the the Product/Market Expansion Grid, the Ansoff Matrix displays four strategies that can be employed to help a business grow and help analyse the risk amalgamated with each strategy.
The Ansoff Matrix has benefited several marketers and executives to understand the risks inherent in advancing their business. Below mentioned are the four strategies of the Ansoff Matrix that can help grow your business exponentially.
Four Strategies to Grow Your Business with Ansoff Matrix
– Focus is on increasing sales of existing products in an existing market.
The strategy of selling more of the company’s existing products to existing markets is referred to as Market Penetration.
A business may cut prices, invest more in marketing, improve its distribution network, and expand existing production capacity to penetrate and grow the consumer base in the existing market.
For example, brands like Heineken and Coca-Cola are known for spending a lot on marketing in order to sniggle their markets. Moreover, such brands try their hands in maximizing the use of distribution channels by offering attractive deals with a wide variety of distributors such as restaurants, bars, football stadiums, and supermarkets.
– Focus is on introducing new products to an existing market.
Developing and selling new products to existing markets is known as the Product Development strategy.
For example, businesses could make few alterations in the existing products to give enhanced value to the buyers for their purchase. Or the company can develop and launch new products besides a company’s existing product offering.
To understand product development strategy, let’s take the example of Apple which launches a new iPhone every few years. We can also consider other examples like the pharmaceutical industry, where companies such as Merck, Bayer, and Pfizer are profoundly investing in Research and Development (R&D) in order to come up with innovative and new drugs in the market every now and then.
– Focus is on entering a new market using existing products.
Market Development is a strategy that is all about selling more of the company’s existing products to new markets.
The strategy is all about reaching new consumer segments or growing globally by targeting new geographic areas. The main focus of this strategy is that – If a product of the business is doing exceptionally well in one market, then why not try its hand to enter a new market with the same products?
For example, over the past few decades, IKEA has done a lot to become one of the biggest furniture retailers in the world. IKEA began to expand its business in the nearby markets which were close to it in terms of the culture of its home country (Sweden). It then moved further to target challenging geographical areas like China and the Middle East.
– Focus is on entering a new market with the introduction of new products.
The strategy that involves entering new markets with new products which are either associated or completely unattached to a company’s existing offering is known as the Diversification strategy.
This strategy can be categorized into three types of strategies:
1. Concentric/Horizontal diversification (or related diversification)
The strategy of entering a new market with a new product that is moderately related to the business’ existing product offering.
2. Conglomerate diversification (or unrelated diversification)
This strategy is about entering a new market with a new product that is entirely unrelated to a company’s existing offering. For example, Samsung is a conglomerate that is engaged in businesses ranging from smartphones, computers, and refrigerators to insurances, hotel chains, and chemicals.
3. Vertical diversification (or vertical integration)
This strategy involves backward or forward movement in the value chain by gaining control over activities that used to be outsourced to third parties like OEMs, suppliers, or distributors.
By using the above strategies of Ansoff Matrix one can aim to grow his/her business to an undefined height of success. One has to choose wisely as per their goals and product offering to achieve the desired results.