Steps to make Ansoff Matrix and its Use

The 1957 Ansoff Matrix, developed by Igor Ansoff, helps firms analyse and plan growth plans. It describes four growth strategies: Market Penetration, Market Development, Product Development, and Diversification. Market Penetration involves offering more products or services to current markets to increase market share. Market Development is entering new markets with existing products or services to increase the client base. Product Development meets changing client needs by generating new items or services for current markets. Diversification, the riskiest method, involves entering new markets with new products or services to grow and diversify revenue. Businesses can use the Ansoff Matrix to evaluate the risks and benefits of each strategy and make decisions that match their goals and market conditions.

Geeky Takeaways:

• Market Penetration involves increasing the sales volume of established products in existing markets.
• Market Development includes the introduction of established products into new markets.
• Product Development involves the introduction of novel products into established markets.
• Diversification involves the introduction of fresh products or services into unexplored markets.
• The Ansoff Matrix facilitates the evaluation of development strategy risks and rewards.

What is Ansoff Matrix?

The Ansoff Matrix, also known as the Product-Market Expansion Grid, is a strategic planning tool that helps businesses evaluate and plan their growth strategies. It was introduced by Russian-American mathematician and business theorist Igor Ansoff in 1957. The matrix is designed to guide companies in making decisions about their product and market growth based on two key dimensions: products and markets.

6 Steps to make an Ansoff Matrix

Creating an Ansoff Matrix involves a straightforward process that requires you to analyze your business’s current products and markets to determine growth strategies. Here’s a step-by-step guide on how to make an Ansoff Matrix:

Step 1: Identify Current Products and Markets

• List Existing Products: Identify and list all the products or services your business currently offers.
• Define Current Markets: Outline the markets or customer segments that products currently target.

Step 2: Understand Growth Strategies

• Market Penetration: Assess how you can increase market share for existing products in existing markets. Consider pricing strategies, promotional activities, or product enhancements to achieve this.
• Market Development: Explore opportunities to introduce existing products into new markets. Identify potential geographic expansions, new customer segments, or distribution channels.
• Product Development: Evaluate possibilities for introducing new products into existing markets. Look at product innovation, enhancements, or diversification with the current product category.

Step 3: Create The Matrix

• Draw the Matrix: Create a simple two-by-two matrix, with the vertical axis representing products (existing vs. new) and the horizontal axis representing markets (existing vs. new).
• Label the Quadrants: Label the four quadrants as follows:

Top-left	Market Penetration
Top-right	Product Development
Bottom-left	Market Development
Bottom-right	Diversification

Step 4: Place Products and Markets on the Matrix

• Place Existing Products and Markets: Locate your existing products on the “existing products” axis and current markets on the “existing markets” axis within the matrix.
• Identify Growth Strategies:

Market Penetration	Existing products in existing markets.
Product Development	New products in existing markets.
Market Development	Existing products in new markets.
Diversification	New products in new markets.

Step 5: Analyze and Plan

• Assess Viability and Risks: Evaluate the feasibility and risks associated with each growth strategy. Consider factors such as resource requirements, market dynamics, and competitive landscape.
• Develop Action and Adjust: Create detailed action plans for implementing the chosen growth strategy. Outline specific steps, resource allocation, and timelines for each strategy.

Step 6: Review and Adjust

• Regularly Review and Update: Periodically review the Ansoff Matrix to assess progress and make adjustments based on changing market conditions or business goals.

How to use the Ansoff Matrix?

The Ansoff Matrix, or the Product/Market Expansion Grid, is a strategic planning tool that helps organizations identify growth opportunities. It was developed by Igor Ansoff in 1957 and is widely used to analyze and plan business growth strategies.

1. Identify your Current Position: Assess your current products and markets. Understand where your business stands in terms of existing products and the current base.

2. Determine your Growth Objectives: Clearly define your growth goals. Do you want to increase market share, expand into new markets, introduce new products, or diversify your business?

3. Evaluate each Quadrant: Analyze the four quadrants (Market Penetration, Market Development, Product Development, and Diversification) and consider the potential benefits and risks associated with each strategy.

4. Select the most Suitable Strategy: Choose the growth strategy that aligns with your business goals and capabilities. Consider factors such as market conditions, competition, resources, and risk tolerance.

5. Develop an Action Plan: Create a detailed action plan once you’ve selected a growth strategy. Define the specific steps, resources, and timeline needed to implement the chosen strategy.