There are 2 dimensions in Ansoff Matrix:
One is the Market that the organization wishes to enter, the other one is the products that the organizations wishes to offer to customers in the prevailing market.
The 4 quadrant are as follow:
Market Penetration = An organization enters/penetrates a current market with a current products. The product is in the market already and therefore the most crucial thing to do is to penetrate (getting into) the target market to gain market share. Calculations of market share can be found here. The key here is to gain market share by developing strategies to do it. Examples might be price penetration, aggressive advertisement etc.
Market Development = An organization is entering a new market with their current portfolio of products. Company will try to compete for an established marketing share in the new market. The key decision making elements will include marketing mix to develop strategies.
Product Development = An organization is enters a current market with new product. The new products can be a form of product line extension, newly developed products or an Product Life Cycle extension products. Often, piggybacking on current products will introduce the new products into the market. Having said that, alot more other strategies can be implemented for this quadrant.
Diversification = An organization is venturing into a new market with a new product This is the most risky strategy as here are no experience curve and precise knowledge on the market. Therefore building primary demand will be important in this aspect for a start. Accordingly, there are 3 types of diversification: Concentric diversification, Horizontal diversification and conglomerate diversification.
- Concentric diversification means that the organization has similar technological knowledge with the new market, therefore can leverage the knowledge in the new market.
- Horizontal diversification means that the organization has no previous knowledge or similar technological and competencies as the market.
- Conglomerate diversification means that the company develops new products that is not similar to their own current products but has the potential for developing the new market.
Therefore, as we can see from the different characteristics of the quadrants, it is vital to understand where your product fit into the quadrant and use this information to devise new strategies to develop the market. For more of Ansoff Matrix, please visit their official website: www.ansoffmatrix.com
