Product/Market Grid

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Market Penetration, Market Development, Product Development, Diversification. Explanation of Product/Market Grid of Igor Ansoff. ('57)


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Ansoff Matrix Product MarketWhat is the Product/Market Grid? Description

The Product/Market Grid of Ansoff is a model that has proven to be very useful in business unit strategy processes to determine business growth opportunities. The Product/Market Grid has two dimensions: products and markets.

Over these 2 dimensions, four growth strategies can be formed.

four growth strategies in the Product/Market Grid

  1. Market Penetration. Sell more of the same products or services in current markets. These strategies normally try to change incidental clients to regular clients, and regular client into heavy clients. Typical systems are volume discounts, bonus cards and Customer Relationship Management. Strategy is often to achieve economies of scale through more efficient manufacturing, more efficient distribution, more purchasing power, overhead sharing.
  2. Market Development. Sell more of the same products or services in new markets. These strategies often try to lure clients away from competitors or introduce existing products in foreign markets or introduce new brand names in a market. New markets can be geographic or functional, such as when we sell the same product for another purpose. Small modifications may be necessary. Beware of cultural differences.
  3. Product Development. Sell new products or services in current markets. These strategies often try to sell other products to (regular) clients. These can be accessories, add-ons, or completely new products. Cross-selling. Often, existing communication channels are used.
  4. Diversification. Sell new products or services in new markets. These strategies are the most risky type of strategies. Often there is a credibility focus in the communication to explain why the company enters new markets with new products. On the other hand diversification strategies also can decrease risk, because a large corporation can spread certain risks if it operates on more than one market. Diversification can be done in four ways:
    • Horizontal diversification. This occurs when the company acquires or develops new products that could appeal to its current customer groups even though those new products may be technologically unrelated to the existing product lines.
    • Vertical diversification. The company moves into the business of its suppliers or into the business of its customers.
    • Concentric diversification. This results in new product lines or services that have technological and/or marketing synergies with existing product lines, even though the products may appeal to a new customer group.
    • Conglomerate diversification. This occurs when there is neither technological nor marketing synergy and this requires reaching new customer groups. Sometimes used by large companies seeking ways to balance a cyclical portfolio with a non-cyclical one.

Although the Product/Market Grid of Ansoff is already decennia old, it remains a valuable model for communication around business unit strategy processes and business growth. The Matrix is also known as: the Ansoff Matrix, the Product Market Expansion Grid, and the Growth Vector Matrix. Derek F. Abell has suggested that a Three Dimensional Business Definition is superior to the Model of Ansoff.

Product/Market Grid Forum
  Be Careful with Benefits of Diversification - Misconceptions and Generalizations
According to Reel and Luffman (1986) the reason behind diversification lies within the benefits connected to a broader product-market base. However, they also point out that before being lured by the benefits from implementing such...
  How to Decide in Which Sector to Diversify?
When a firm decides to diversify there could be several possible factors to take into account when making the choice for the business or industry in which to diversify.
  • According to Neffke and Henning, the factor that matters ...
  What is the Optimal Level of Diversification for Firm Performance?
The relationship between diversification and financial performance has been a topic of research for many years but is yet to reach a consensus. However, there are several suggestions on how diversification could influence a company's performance
  How to Prioritize Business Growth Opportunities (Ansoff): The ICE Prioritization Tool
The Ansoff Matrix can be a useful model to generate and communicate business growth opportunities. However, organizations need to keep in mind that there are several factors that might hinder companies to pursue certain strategies, such as the availa...
  Diversification in Africa: Why African Economies must Diversify
Many African economies have not diversified. Rather they are highly dependent on the production and export of one specific type of commodity. For example, between 1992 and 1997 more than 85 percent of export earnings of Unganda came from exporting co...
  Strategy for Expanding a Business
A person started a business of extracting metals. Soon it became a popular business. In order to expand his business, he needs to utilize a strategy and follow it.
What kind of strategy could he use?...
  Summary of STRATOP Model
Who can provide a short summary of the STRATOP model? It is supposed to be a model for designing effective product and communication strategies. Thank you......
  Product/Market Growth Matrix, Product Market Combination (PMC), PMG
The Product/Market Grid or Ansoff Matrix is also called: Product/Market Growth Matrix.
The 4 growth strategies are also called Product/Market Combinations (PMCs), although product/market combinations are also referred...
  Diversification and Globalisation
How can diversification be a tool for globalization?...
  Ansoff Matrix for Marketing Strategy
The Ansoff matrix clearly describes the marketing strategy and how to launch our product in the market and at what time....
  Turbulence, Planning and Paralysis
Igor Ansoff (1918-2002) was (one of) the first to recognize that the amount of strategic 'turbulence' (~pace of change) was increasing and to devise a structured strategic planning process to cope with this. But he also coined the humor...
  Ansoff Matrix Applications
The Products/Markets grid helps in differentiating between game changing & orbit changing moves of an organisation from a strategy perspective....

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Typical Risks of a Diversification Strategy

Typical risks of a Diversification strategy in the Ansoff Grid are:
1. Requires a company to acquire new skills, new techniques and new facilitie...
Usage (application): Marketing Strategy

A More Advanced Version of the Ansoff Matrix

While his original Product Market Matrix had only two dimensions:
1. Product, and
2. Market),
in 1987 Ansoff introduced the Geograp...
Usage (application): Product Development, Product Portfolio Management

How to Find or Redefine Market Boundaries?

In their book: Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition...
Usage (application): Diversification

Must-haves of a Portfolio Strategy

Ansoff mentions 4 components of a portfolio strategy:
1. (Geographic) Growth Vector: a graphical representation of the firm's current stra...
Usage (application): Product Portfolio Management, Best Practices, Product Strategy

Pitfalls and Obstacles in Product Development Strategy

Although product development can be an important growth strategy, it is necessary to keep in mind that several factors tend to hinder this strategy: Usage (application): Product Development, Product Portfolio Management

Diversification Pitfalls

Diversification of businesses has in many cases resulted in success. An example is General Electric, a very large company that operates in many busine...
Usage (application): Things to Signal and Avoid when Diversifying

Challenging the Existing Strategic Logic

A tool by Kim and Mauborgne is the "Four Actions Framework". This Four Actions Fr...
Usage (application): Market Development, Diversification

Typical Risks of a Market Development Strategy

Typical risks in the Ansoff framework of a Market Development strategy are:
1. New markets may be different then expected (especially in new geo...
Usage (application): Marketing Strategy

In Which Direction Should we Grow our Portfolio?

According to Professor Aneel G. Karnani in 'Mastering Strategy', there's no standard way to gain market value for all businesses. An answer that works...
Usage (application): Portfolio Strategy, Innovation Strategy

Typical Risks of a Market Penetration Strategy

Typical risks of a Market Penetration strategy in the Ansoff Growth Strategies model are:
1. May lead to a price war with a competitor with the ...
Usage (application): Marketing Strategy

Determining the Optimal Breadth of your Product Portfolio

Due to technology changes and a stiffing competition at all levels, historically companies needed to constantly check their portfolio and cut off unpr...
Usage (application): Product Portfolio Analysis

The SCAMPER Technique to Creatively Solve Problems and Create Innovative Ideas

SCAMPER is a creative or lateral thinking technique that can be applied particularly for the developme...
Usage (application): Creative Thinking, Lateral Thinking, Idea Generation, Innovation Ideas, Product Innovation, Product Development

Resources - Product/Market Grid Premium

Ansoff Matrix

Good article on Ansoff Matrix by NGFL Wales Business Studies....
Usage (application): Product Portfolio

A Service-Oriented View on Marketing

Presentation about a service-dominant logic mindset in marketing, including the following sections:
1. Getting the logic right
2. Goods-Domi...
Usage (application): Service-Dominant Logic, Perspectives on Marketing

Diversification Strategy and Portfolio Management

Presentation about diversification including many graphs and figures for clarification. The presentation includes the following sections:
1. Basi...
Usage (application): Diversification, Corporate Strategy, Portfolio Management, Corporate Center

Concept Testing and Conjoint Analysis for New Products

Presentation about concept testing and conjoint analysis, including the following sections:
1. Evaluating with Customers
Usage (application): Concept Test, Concept Statement, Conjoint Analysis, Product Design, Product Innovation

The Importance of Noncustomers

Even the biggest enterprises (other than a government monopoly) has many more noncustomers than it has customers". Peter Drucker in "Management Challe...
Usage (application): Market Research, Customer Strategy, Innovation Strategy, Customer Survey Pitfalls

Product/Market Grid Diagram

Download and edit the 12manage PowerPoint model for limited personal, educational and business use. Republishing in intranets, websites, books, magaz...
Usage (application): Product Development


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Compare with: Three Dimensional Business Definition  |  Blue Ocean Strategy  |  Positioning  |  Relative Value of Growth  |  Porter Competitive Advantage  |  Parenting Advantage  |  Core Competence  |  BCG Matrix  |  Growth Phases  |  Distinctive Capabilities  |  Organizational Configurations  |  3C's

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