What is the Ansoff Matrix?

The Ansoff Matrix, also known as the Product/Market Expansion Grid, is a strategic planning tool used by firms to analyse and plan their strategies for growth. 

It was developed by Russian-American mathematician Igor Ansoff in 1957 and is used to identify opportunities for a company to grow its business. The Ansoff Matrix comprises four strategies: market penetration, market development, product development, and diversification. 

  • Market penetration involves increasing sales of existing products or services in existing markets. 
  • Market development involves introducing existing products or services into new markets. 
  • Product development involves creating new products or services for existing markets. 
  • Diversification involves creating new products or services for new markets. 

Each strategy has its own risks and rewards associated with it. For example, market penetration carries the least risk but also offers the least potential reward; while diversification carries the highest risk but also offers the highest potential reward. As a result, the matrix can be used to help executives and marketers understand how they can best use their resources to achieve their desired goals. 

The Ansoff Matrix is invaluable for businesses looking to expand their operations and increase their profits. By analysing each strategy carefully, companies can make informed decisions about which strategy best suits their needs and provide them with the greatest return on investment.

Ansoff Matrix

Further reading:

Related Terms:

  • Horizontal Diversification. Adding a related product to an existing line for the same target market.
  • Vertical Diversification. Adding different processes from the same core industry.
  • Concentric Diversification. Moving into adjacent areas that are related and may leverage similar resources or personnel. Or partnerships with third parties.
  • Consolidation Strategy. Merging, purchasing, and/or partnering with companies with similar goals and products.
  • Backward Integration. Pursuing activities such as production or procurement closer to home instead of outsourcing them.
See also  What is Minimum Viable Knowledge?

Free Ansoff Matrix Downloads:

Ansoff Matrix Checklist. This checklist is designed to assist with the discovery phase of a new product development project by providing a comprehensive list of stimulating questions that can be used to explore product and market opportunities.
Ansoff Strategy Decision Tree. This decision tree helps you to determine which of the four Ansoff Growth Strategies is most suitable for your needs.
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