Product/Market Grid
(Ansoff)

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Summary

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.


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Best Practices

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Ansoff Matrix Applications
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Diversification Types and Examples
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What is the Optimal Level of Diversification for Firm Performance?
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Expert Tips

Advanced insights about the Product/Market Grid. Here you will find professional advices by experts.


Typical Risks of a Diversification Strategy

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

A More Advanced Version of the Ansoff Matrix

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While his original Product Market Matrix had only two dimensions: 1. Product, and 2. Market), in 1987 Ansoff introdu (...)

How to Find or Redefine Market Boundaries?

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

Must-haves of a Portfolio Strategy

Product Portfolio Management, Best Practices, Product Strategy
Ansoff mentions 4 components of a portfolio strategy: 1. (Geographic) Growth Vector: a graphical representation of the (...)

Diversification Pitfalls

Things to Signal and Avoid when Diversifying
Diversification of businesses has in many cases resulted in success. An example is General Electric, a very large compan (...)

Pitfalls and Obstacles in Product Development Strategy

Product Development, Product Portfolio Management
Although product development can be an important growth strategy, it is necessary to keep in mind that several factors t (...)

Be Careful with Diversification - Misconceptions and Generalizations

Diversification
WHY DIVERSIFY According to Reel and Luffman (1986) the reason behind diversification lies within the benefits connected (...)

Challenging the Existing Strategic Logic

Market Development, Diversification
A tool by Kim and Mauborgne is the "Four Actions Framework". This Four Actions Framework can be used to challenge the ex (...)

Typical Risks of a Market Development Strategy

Marketing Strategy
Typical risks in the Ansoff framework of a Market Development strategy are: 1. New markets may be different then expec (...)

In Which Direction Should we Grow our Portfolio?

Portfolio Strategy, Innovation Strategy
According to Professor Aneel G. Karnani in 'Mastering Strategy', there's no standard way to gain market value for all bu (...)

Typical Risks of a Market Penetration Strategy

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

Determining the Optimal Breadth of your Product Portfolio

Product Portfolio Analysis
Due to technology changes and a stiffing competition at all levels, historically companies needed to constantly check th (...)

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Information Sources

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Ansoff Matrix

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

A Service-Oriented View on Marketing

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Presentation about a service-dominant logic mindset in marketing, including the following sections: 1. Getting the logi (...)

Diversification Strategy and Portfolio Management

Diversification, Corporate Strategy, Portfolio Management, Corporate Center
Presentation about diversification including many graphs and figures for clarification. The presentation includes the fo (...)

Ansoff Matrix Explained with Apple Inc. as Example

Growth Strategies
The fundamentals of the Ansoff Product/Market Matrix, a tool used to analyse and plan business growth strategies. Examp (...)

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Presentation about concept testing and conjoint analysis, including the following sections: 1. Evaluating with Customer (...)

Product/Market Grid Diagram

Product Development
Download and edit the 12manage PowerPoint model for limited personal, educational and business use. Republishing in int (...)

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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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