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
- 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.
- 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.
- 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.
- 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
- 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
- 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
Three Dimensional Business Definition is superior to the Model of Ansoff.
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