Ansoff Matrix – Product-Market Growth Matrix – Igor Ansoff
Ansoff Matrix – Igor Ansoff – Contents
- Igor Ansoff – Big Idea:
- Ansoff Matrix – Product-Market Growth Strategies
- Igor Ansoff Biography
- Interesting Facts and Insights about Igor Ansoff
- Advice Quotes by Igor Ansoff
- Books by Igor Ansoff
- Questions about Igor Ansoff
- Ansoff Matrix – Igor Ansoff – Videos
Igor Ansoff – Big Idea:
Ansoff Matrix – Product-Market Growth Strategies
The Ansoff Matrix is a strategic planning tool that provides a framework to help devise strategies for growth. Igor Ansoff, in 1957 described four growth alternatives for growing an organization in existing or new markets, with existing or new products. Each growth option attracts different levels of risk for an organization.
The Ansoff Matrix, also known as the Product-Market Growth Matrix, describes four broad growth options:
- Market Penetration
- Market Development
- Product Development
- Diversification
Market Penetration
The Market Penetration strategy is focused on using its existing products and services into existing markets. It aims to increase its market share in the current market scenario. This growth strategy seeks to increase sales for its existing offerings in its present markets through more aggressive promotion and distribution. This growth strategy is the least risky growth strategy.
Market Penetration can be accomplished by:
- Price decrease,
- Increase in promotion and distribution support,
- Acquisition of a rival in the same market,
- Small product improvements.
Market Development
The Market Development strategy is focused on expand into new geographic markets using its existing offerings. This growth strategy can be accomplished by:
- Targeting different customer segments,
- Target Industrial or Commercial customers with offerings that have only been sold to Consumers,
- Target Consumers with offerings that were previously sold only to Industrial or Commercial customers,
- New areas or regions of the country or foreign markets.
This strategy is more likely to be successful, where:
- The organization has a unique technology it can leverage in the new market,
- It can leverage economies of scale if it increases output,
- The new markets are not too different from the existing market assumptions,
- The existing market is profitable.
This quadrant move increases uncertainty and thus increases the risk.
Product Development
The Product Development strategy is focused on creating new products and services targeted at its existing markets. This growth strategy requires extending the product range available to the firm’s existing markets. These new products may be delivered by:
- Investment in research and development,
- Acquisition of rights to produce a third-party’s product,
- Reselling third party products under its own brand,
- Joint -venture with a third-party company that needs access to the organization’s distribution channels or brands.
This strategy is riskier than Market Penetration but may have a similar risk as Market Development.
Diversification
The Diversification strategy is focused on growing market share by the introduction of new offerings in new markets. It is the riskiest growth strategy because both new product and new market development are required. Diversification is considered the riskiest growth option.
- Related Diversification is when there are relationships and potential synergies between the organization’s existing business and the new product or market.
- Unrelated Diversification is when there is no relationship in markets or offers. Conglomerate growth is a collection of businesses without any links to one another. This strategy requires a startup operation or the acquisition of an existing business outside the organization’s current products or market portfolios.
Igor Ansoff Biography
Igor Ansoff (1918 – 2002) was an applied mathematician and business manager. Ansoff is known as the father of Strategic Management. As a Professor of Management, he is known for his research in the following areas:
- The concept of environmental turbulence;
- The contingent strategic success paradigm, a theory that has been validated by numerous doctoral dissertations;
- Real-time strategic management.
Ansoff also classified management decision making into three core areas:
- strategic,
- administrative and
- operating.
This classification system became popular in management teaching. Marketing students are familiar with his Ansoff Matrix, a tool he created strategies for growing a business, via existing or new products, in existing or new markets.
“In order to be irreplaceable, one must always be different.”
– Coco Chanel
Interesting Facts and Insights about Igor Ansoff
- Born: Igor Ansov (рус. Игорь Ансов ) was born in Vladivostok, Russia in 1918.
- Parents: Igor Ansoff’s father was an American born Russian, and his mother was a Russian from Moscow.
- U.S.A.: The Ansoff family left Russia in 1936 and arrived in New York.
- Engineering: Igor Ansoff was offered a scholarship at the Stevens Institute of Technology, one of the best engineering schools in the country.
- Physics: Ansoff achieved a Master’s degree in Modern Physics.
- WWII: During World War II, Ansoff was a member of the U.S. Naval Reserve and an instructor in physics at the U.S. Naval Academy.
- Doctorate: Igor Ansoff went to Brown University to get a Doctoral degree in Applied Mathematics in 1946.
- RAND: Igor Ansoff joined RAND Corporation, becoming a Project Manager in large-scale projects focused on technology and weapon systems.
- Lockheed: In 1957, Igor joined the Corporate Planning Department of the Lockheed Aircraft Corporation.
- Carnegie Mellon: Igor Ansoff joined The Graduate School of Industrial Administration at the Carnegie Mellon University.
- Professor: Igor Ansoff served as Professor of Industrial Administration in the Graduate School at Carnegie Mellon University from 1963 until 1968.
- Founding Dean: In 1969, Igor Ansoff became the Founding Dean of the new Owen Graduate School of Management at Vanderbilt University in Nashville, Tennessee.
- Strategic Management: In 1983, Igor Ansoff joined the U.S. International University (now Alliant International University), where he created the school’s Strategic Management Program.
- Ansoff Matrix: Igor Ansoff created the Product-Market Growth Matrix, a tool to plot strategies for growing business via existing or new products in existing or new markets.
- Consulting: Igor Ansoff provided consulting services to hundreds of multinational corporations including, Philips, General Electric, IBM, and Westinghouse.
- Honorary Degrees: Igor Ansoff was awarded five honorary doctorate degrees over the years.
- Death: Igor Ansoff died in 2002.
“Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different.”
– Michael Porter
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Advice Quotes by Igor Ansoff
“I begged, borrowed and stole concepts and theoretical insights from psychology, sociology and political science. And I attempted to integrate them into a holistic explanation of strategic behavior.”
“A natural companion to the competitive advantage is the synergy component of strategy. This requires that opportunities within the scope possess characteristics which will enhance synergy.”
“The triplet of specifications – the product-market scope, the growth vector, and the competitive advantage – describes the firm’s product-market path in the external environment.”
“By searching out opportunities which match its strengths the firm can optimize the synergistic effects.”
The objectives of the firm should be derived by balancing the conflicting claims of the various ‘stakeholders’ in the firm: managers, workers, stockholders, suppliers, vendors.”
“The firm has a responsibility to all of these and must configure its objectives so as to give each a measure of satisfaction. The profit which is a return on investment to the stockholder is one of such satisfactions, but does not receive special predominance in the objective structure.”
“We shall approach practical objectives through a series of approximations. Keeping the maximization of the rate of return as the central theoretical objective, we shall develop a number of subsidiary objectives (which the economists call proxy variables) which contribute in different ways to improvement in the return and which are also measurable in business practice.”
“A firm that meets high performance in most of its subsidiary objectives will substantially enhance its long-term rate of return. (The defect in our approach is that we cannot prove that the result will be a ‘‘maximum’’ possible overall return.) As will be seen, this road has its own obstacles: the difficulties of long term maximization are replaced by the problem of reconciling claims of conflicting objectives.”
“The triplet of specifications – the product-market scope, the growth vector, and the competitive advantage – describes the firm’s product-market path in the external environment.”
“A natural companion to the competitive advantage is the synergy component of strategy. This requires that opportunities within the scope possess characteristics which will enhance synergy.”
“You have to be fast on your feet and adaptive or else a strategy is useless.”
– Charles de Gaulle
Books by Igor Ansoff
- Implanting Strategic Management by Igor Ansoff, 1984
- The New Corporate Strategy by Igor Ansoff, 1988
- Corporate Strategy by Igor Ansoff, 1965
- Strategic Management by Igor Ansoff, 1975
- The Secrets of Strategic Management: The Ansoffian Approach by Igor H.Ansoff and Peter H. Antoniou, 2006
- Business Strategy: Selected readings by Igor Ansoff, 1969
- Acquisition Behavior of U.S. Manufacturing Firms, 1946-1965 by Igor Ansoff, 1971
Questions about Igor Ansoff
- What is the Ansoff Matrix used for?
- The Ansoff Matrix is a strategic planning tool that provides a framework to devise strategies for future growth. It is also known as the Product-Market Growth Matrix
- Who is Ansoff?
- Igor Ansoff (1918 – 2002) is known as the father of strategic management. Marketing and Management students are familiar with his Ansoff Matrix, a tool he created strategies for growing a business, via existing or new products, in existing or new markets.
- What are some Ansoff matrix examples?
- The four strategies of the Ansoff Matrix are:
- Market Penetration: Increase sales of existing products to an existing market.
- Product Development: Introduce new products to an existing market.
- Market Development: Enter a new market using existing products.
- Diversification: Enter a new market with new products.
- The four strategies of the Ansoff Matrix are:
“By searching out opportunities which match its strengths the firm can optimize the synergistic effects.”
– Igor Ansoff
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The Ansoff Matrix
“The objectives of the firm should be derived by balancing the conflicting claims of the various ‘stakeholders’ in the firm: managers, workers, stockholders, suppliers, vendors.”
– Igor Ansoff
Image Credit: Mieremet, Rob / Anefo [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)]
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