The market is always changing and evolving. For example, if you believed knowing your regular customers, you can be sure that they are not the same ones you had ten years ago or more. But not everything changes rapidly with time; there are tools, calculations, strategies and methodologies that are still valid and can be applied in the volatile business market, they just have to be adapted to the needs of each company.
In 1957, the Russian mathematician and economist Igor Ansoff, an expert in strategic business management, created the Ansoff matrix with the intention of helping organisations to find growth opportunities, putting the emphasis on the products and services that these businesses offered in the market.
Let’s take a look below at what the so-called Ansoff matrix is and how companies apply it.
What is the Ansoff matrix?
It is a method for analysing and evaluating the market situation of a business. It was created by Igor Ansoff in 1957 and serves to identify new opportunities for the company, as well as providing a route to achieve a good position in the market and reach the established goals.
The Ansoff matrix is also known as the product/market matrix or growth vector. It is a tool that has been widely used over the years by thousands of companies to make decisions and achieve business growth. In addition, it helps an organisation visualise all possible directions it can take to move forward.
Variables of the Ansoff matrix
The Ansoff matrix takes into account two fundamental aspects to propose strategies to companies. The first is the products or services offered by the organisation and the second is the markets, whether current or traditional.
Let’s take a closer look at the variables of the Ansoff matrix that are applied to grow and analyse the possible problems and risks of a company:
Market penetration
This includes all the best performing and most popular products. No surprises are expected from them and, when starting market penetration, the company focuses on increasing sales volume in the already established segments: they sell more through promotions or by attracting new customers.
It is important to emphasise that markets are not different from products, there are traditional and new markets, which must be well known, and there is the creation and innovation to reach territories unexplored by the company.
Product development
Consists of including products or services that require a higher level of risk. It aims to expand the product portfolio or make changes to an existing one.
An example of expansion could be a zero-calorie version of a beverage and a more profound change could be a new flavour of a beverage. The advancement of technology goes hand in hand with innovation so that new products emerge from time to time and there is constant product development.
Market development
Market development is the combination of existing products with a new customer segment. The way this strategy works is to take the company’s existing products to other markets by identifying new segments or distribution channels.
For example, opening a new shop in a different province or city, or business internalisation. This section also includes sales through online channels, or business with other distributors.
Diversification
This is about including a new product in a new market. It sounds simple, but it is one of the most difficult strategies because it arises when a company has run out of ideas and has exhausted the strategies mentioned above.
New products in new markets always mean a lot of work and risk because they require more investment, however, if successful, the income is much higher than with the previous strategies.
By creating a new product or service, you diversify your company and it is a way to test the trust of your customers. It offers the opportunity to explore new markets and make alliances with other companies.
Examples of Ansoff’s matrix
After analysing the Ansoff matrix, here are some examples of companies that applied this strategy and achieved great success:
Coca-Cola: staying in the market
The world-famous Coca-Cola company has ensured its permanence in the market thanks, among other strategies, to the variant of market penetration, introducing traditional products in traditional markets. It has done this with captivating advertising and themed packaging.
Apple: constantly evolving
Apple is known worldwide for its constant innovation; it is constantly developing products and introducing new products in traditional markets. One example is the new annual release of its highly coveted iPhone, which offers new accessories, upgrades, and internal and external features.
Netflix: subscribers worldwide
Netflix applies market development by introducing its traditional products to new niches. The company aims to have subscribers all over the world, and it is achieving this through its various strategies, one of which is selling the streaming service to new markets.
And in terms of its product development, Netflix creates new content for its more than 203 million subscribers and, thanks to its profits, produces original series and movies with unique, innovative and highly entertaining elements.
Do you need to apply the Ansoff Matrix to your business?
At EPBS we provide you with the tools you need to respond to constantly changing markets. You can create your own Ansoff matrix to help your company achieve the growth you have always wanted. With us you will be able to visualise the route to follow and the different strategies to implement to consolidate the position of your organisation.
We offer you our knowledge, skills and experience, contact us!
