48961349 01-ansoff’s-matrix
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ANSOFF’S MATRIX
IGOR ANSOFF’s MATRIX
Market
Product
EXISTING NEW
EXIST MARKET PENETRATION•Increase sales to existing market•Penetrate existing market more deeply
MARKET DEVELOPMENT•Existing products sold to new markets
NEW NEW PRODUCT DEVELOPMENT•New products developed for existing markets
DIVERSIFICATION•New Products sold to new markets
IGOR ANSOFF MATRIX
MKT
PRODUCT
EXISTING NEW
EXIST MARKET PENETRATION
•Little riskMARKET DEVELOPMENT
•Moderate Risk
NEW NEW PRODUCT DEVELOPMENT
•Moderate Risk
DIVERSIFICATION•High Risk
IGOR ANSOFF MATRIX – Growth of TESCO
MKT
PRODUCT
EXISTING NEW
EXIST MARKET PENETRATION•Increase in share of grocery business at the expense of Sainsbury
MARKET DEVELOPMENT•Move into convenience store market•Expansion abroad
NEW NEW PRODUCT DEVELOPMENT•Expansion into Petrol Sales•Development of financial services
DIVERSIFICATION•High Risk
Market Penetration
Maintain increase market share in current market with current products
Selling more of the same to the same people
In saturated market - Difficult In stagnant market – grab market share
from others – intense competition
Market Penetration
Increase usage by existing customers Encourage increase in frequency of use Attract customers away from rivals /
Gain market share at expense of rivals Devise and encourage new applications Encourage non-users to buy
Market Penetration
REQUIRES RE-
ALIGNMENT OF
MARKETING MIX
Use Market Penetration when -
When the market is not saturated When there is potential of growth When competitors share is falling When increase in volume leads to
economies of scale When there is scope to sell more to
existing users
Market-Penetration Strategy
Why ? To dominate market How ? To increase usage or get new
customers; reduce price; expand distribution or increase promotional activities
When ? When market is growing What to look out for ? Competitive
reaction; cost of conversion Example: Airlines used reduced fares &
promotion various family travel packages to penetrate market
A product- (new offering-) development strategy dictates that an organization create new offerings existing markets.
PRODUCT-MARKET STRATEGIES
Developing totally new offerings.
Adding different features, sizes, etc. to broaden the existing line.
Enhancing the value to customersof existing offerings.
PRODUCT-DEVELOPMENT STRATEGY
ProductAugmentation
ProductInnovation
ProductLine Extension
This strategy involves:
Product Development Strategy
New product to replace old product New innovative products Product improvements Product line-extensions New products to complement existing Products at a different quality level from
existing product
Factors to consider when adopting this strategy:
The market size and volume needed for profitability.
The magnitude and timing of competitors’ responses.
The impact of the new product on the sales of existing offerings (cannibalization).
The capacity of the organization to deliver the offerings to the market(s).
PRODUCT-DEVELOPMENT STRATEGY
Product-Development Strategy
Why ? To satisfy buyer’s need How ? New or improved product;
innovate or augment product When ? Customer has a need or a
problem What to look out for ?
Market size/volume competitor reaction effect on existing products resources to deliver new products
IGOR ANSOFF MATRIX
MKT
PRODUCT
EXISTING NEW
EXIST MARKET PENETRATION
•Little riskMARKET DEVELOPMENT
•Moderate Risk
NEW PRODUCT DEVELOPMENT
•Moderate RiskDIVERSIFICATION•High Risk
A market-development strategydictates that an organization introduce its existing offerings to markets other than those it is currently serving(existing offerings new markets).
PRODUCT-MARKET STRATEGIES
Market Development Strategy
Selling the same product to different market
Entering new markets, segments with existing products
Gaining new customers, new segments, new markets
Requires changes in marketing strategy, distribution, pricing policy, promotional strategy
Use market development when
Untapped market is beckoning The firm has excess capacity Attractive channels to access new
markets
This strategy involves:
Adjusting the marketing mix, such as:
Analyzing competitors’ strengths, weaknesses, and potential for retaliation.
• Modifying the basic product offering
• Using different distribution outlets
• Changing the sales effort or advertising
MARKET-DEVELOPMENT STRATEGY
This strategy involves (continued):
Identifying the number, motivation, and buying patterns of new buyers.
Determining the organization’s ability to adapt to new markets to evaluate success.
MARKET-DEVELOPMENT STRATEGY
Internationally, this strategy has four forms:
Licensing
Joint Venture/Strategic Alliance
Exporting
DirectInvestment
MARKET-DEVELOPMENT STRATEGY
Licensing
Exporting
DirectInvestment
Involves marketing the same offering in another country through sales offices or intermediaries.
Is a contract where one firm (licensee) is given the rights to patents, trademarks, etc. by the owner (licensor) in turn for a royalty or fee.
Involves investment by both a foreign firm and a local company to create a new entity in the host country. The two forms share ownership, control, and profits of the entity.
Involves investing in a manufacturing and/or assembly facility in a foreign market. Is the most risky and requires the most commitment.
Joint Venture/Strategic Alliance
MARKET-DEVELOPMENT STRATEGY
Market-Development Strategy
Why ? To venture into new markets How ? Sell existing products in new
markets; modify product; use different distribution; use different advertising/sales strategy
When ? Present market is saturated What to look out for ? Competitive
reaction; understand new buyers; adaptability
IGOR ANSOFF MATRIX
MKT
PRODUCT
EXISTING NEW
EXIST MARKET PENETRATION
•Little riskMARKET DEVELOPMENT
•Moderate Risk
NEW PRODUCT DEVELOPMENT
•Moderate RiskDIVERSIFICATION•High Risk
Diversification
New products sold to new markets New products sold to new customers Select based on growth prospects which
the two new variables offer that the present product-market does not
Diversification Types
Related Beyond present
product –market, but within present industry
Synergistic diversification
Lesser risk
Unrelated Entirely new
product and market
Conglomerate diversification
Related Diversification
Horizontal – new products introduced to current markets (new product development)
Vertical – when an organization moves into its supplier’s or customer’s business
Concentric – when new products closely related to existing products are introduced in new markets
Diversification Strategy (cont’d)
Three types of diversification Concentric, horizontal and
conglomerate Three essential tests of success
Attractiveness Cost-of-entry Better-off
Vertical Integration
Why? To gain operating economies i.e. to lower
costs To gain access to or control supply demand To enhance technological innovation
How? Integrate backward and forward
When? Basic industry is in a growth stage
What to look out for? Problems in managing very different businesses; increase risk, reduced flexibility; cost of excessive in-growing
Example of Vertical Integration
Airlines integrate backward to in-flight kitchens; forward to travel agencies
Related Diversification
Development beyond present product market mix but within the broad confines of the industry
Diversification Strategy
Why ? Growth opportunities outside current business
How ? New products for new markets When ? Distinctive competencies available What to look out for ? High risks, resources
required, need to understand new markets, fit with distinctive competencies
Uses of Ansoff’s Matrix
A framework to explore directions for strategic growth
Most commonly used model for strategic growth
Identify and analyze growth opportunities
Considers expected returns and risks
To Summarize
Market Penetration
Advertise - to encourage more people within your existing market to choose your product, or to use more of it
Introduce a loyalty scheme Launch a price or other special offer
promotions Increase your sales force activities Buy a competitor company (particularly
in mature markets)
Product Development
Extend your product by producing different variants, or packaging existing products it in new ways
Develop related products or services In a service industry, shorten your time
to market, or improve customer service or quality
Market Development
Target different geographical markets at home or abroad
Use different sales channels, such as online or direct sales if you are currently selling through the trade
Target different groups of people, perhaps with different age, gender or demographic profiles from your normal customers.
Modified Ansoff Matrix – 9 Box Grid
Product –
Market
Existing Modified New
ExistingMarket
PenetrationProduct
Extension
Product Developme
ntModified
Market Expansion
Limited Diversificati
on
Partial Diversificati
on
New Market Developme
nt
Partial Diversificati
on
Diversification
Strategy Selection
Product-market strategies are evaluated based on:
The organization’s business definition, mission, and capabilities.
Market capacity and behavior.
Environmental forces.
Competitive activities.
STRATEGY SELECTION
Product-market strategies are chosen based on:
Costs and benefits of a strategy.
Analysis of competitive structure, market dynamics, and opportunity costs.
Probabilities of success for a strategy.
The product itself.
STRATEGY SELECTION
Action Response Outcome
O1
O2
O3
O4
R1
R2
R1
R2
A2
A1
EXHIBIT 1.3: DECISION-TREE FORMAT
Estimated profit of $1 million
Estimated profit of $4 million
Action Response Outcome
Estimated profit of $2 million
Estimated profit of $3 million
Market-development
strategy
Aggressive competition
Passivecompetition
Aggressive competition
Passivecompetition
Market-penetration
strategy
EXHIBIT 1.4: SAMPLE DECISION-TREE
Aggressive competition
Passivecompetition
Aggressive competition
PriceStrategy
Communication Strategy
ProductStrategy
ChannelStrategy
Customer
THE MARKETING MIX
Estimated profit of $4 million
Estimated profit of$3 million
Aggressive competition
PriceStrategy
Communication Strategy
ProductStrategy
ChannelStrategy
Kind of product, service, or idea offered.
How the product, service, or idea will be communicated to buyers. Informs and assures buyers that the offering will meet their needs.
Method for distributing the product or service to buyers. Satisfies buyers’ shopping patterns and purchase requirements. Provides information and offering availability.
Amount buyers will pay for the offering. Represents the value or benefits provided.
THE MARKETING MIX
Estimated profit of $4 million
Estimated profit of$3 million
Aggressive competition
Delivers customer value in marketspace, the new interactive capabilities of the Internet.
Depends on the success requirements of the market.
Must be consistent with both the needs of the markets and the organization’s capacity.
Is as much art and science.
FORMULATING THE MARKETING MIX
BUDGETING MARKETING, FINANCIAL, AND
PRODUCTION RESOURCES
CHAPTER 1: FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENT
A budget is a formal, quantitative expression of an organization’s planning and strategy initiatives expressed in financial terms.
BUDGETING
A master budget consists of:
Focuses on the income statement.Also referred to as a pro forma income statement or profit plan.
Focuses on the effect the operating budget has on the organization’s cash position.
BUDGETING
OperatingBudget
FinancialBudget
SpecialBudgets
Focuses on developing advertising,sales, and other budgets that supportthe master budget.
DEVELOPING REFORMULATION AND
RECOVERY STRATEGIES
CHAPTER 1: FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENT
A marketing audit is a comprehensive, systematic, and periodic examination of a firm’s or business unit’s marketing environment, objectives, strategies, and activities to determine problem areas and opportunities and recommend a plan of action to improve the firm’s marketing performance.
MARKETING AUDIT
Addresses the following questions:
Are we doing the right things?
Are we doing things right?
MARKETING AUDIT
Strategic
Operational
Have the following purposes:
Forces marketing managers to ask“What if…?” questions.
Allows for contingency plans, preplanning of reformulation and recovery strategies that lead to faster reaction time in implementing remedial action.
REFORMULATION AND RECOVERY STRATEGIES
DRAFTING AMARKETING PLAN
CHAPTER 1: FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENT
A marketing plan is a formal, written document that describes the context and scope of an organization’s marketing effort to achieve defined goals or objectives within a specific future time period.
MARKETING PLAN
Consists of:
Each has these time dimensions:
Focuses on a 1-year period.
Focuses on a 3- to 5-year period.
MARKETING PLAN
ProductPlan
BusinessPlan
MarketingPlan
Short-term
Long-term