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Introduction to Ansoff Matrix
You must have heard about the Ansoff Matrix. But, do you know the Ansoff Matrix is one of the important strategic planning tools that help the organization to determine the potential future growth opportunities. This model is also known as the Product/ Market Expansion Grid that helps your organization to evaluate and plan various strategies for future growth. The Ansoff Matrix involves four different strategies i.e. Market Penetration, Market Development, Diversification, And Product Development that can be used by the organizations to grow.
The need for the Ansoff Matrix
We all know that growth is the primary concern of all business organizations. But, do you know how the organizations can achieve growth? Do you know that business development and growth can occur in different forms?
The simple answer to this question is the Ansoff Matrix. The use of the Ansoff Matrix can help the organization to determine the best ways to expand. The key opportunities available to the organization include entry into new markets, the launch of new products, etc. The organization can select the best strategy for the organization on the basis of the Ansoff Matrix as it is a strategic tool that helps to determine the best strategies for the organization. Thus, Ansoff Matrix can help to develop and decide upon different strategies for business growth. In addition, this model also helps the organization to consider four strategic options along with the risks associated with each strategic option when choosing the business strategy.
How to apply an Ansoff Matrix?
Till now, you must have got the idea that Ansoff Matrix offers the opportunity for business growth by considering different opportunities available to the organization. The Ansoff Matrix comprises 4 different options which include Market Penetration, Product Development, Market Development, and Diversification.
To use the Ansoff Matrix, you first need to analyze the four different options. However, it is a must to keep in mind that each option has its own level of risk. For instance, the Market Diversification Strategy involves the highest level of risk as it focuses on new Product Development as well as the entry of firms in new markets whereas the Market Penetration Strategy is least risky as there is no new Product Development or entry in the new market.
After considering all the four options, the organization needs to determine what actions will be taken under each option. Along with this, the organization also needs to consider the specific risks that are involved in each strategy. After performing a careful analysis of the key options, strategies to be adopted, and risks in each option, the best available option is chosen on the basis of the organization’s situation. Moreover, the Rule of Thumb is to adopt one strategy.
Ansoff Matrix real example
To consider the application of the Ansoff Matrix, let us take the example of Apple Inc. Ansoff Matrix. The use of the Ansoff Matrix helps Apple Inc. to determine product and market strategies by considering the four strategic options i.e. Market Penetration, Product Development, Market Development, and Diversification available to the organization.
One of the good opportunities available to Apple Inc. is to use the Market Penetration Strategy which involves selling the existing products in the existing market. Further, Apple Inc. applies a Market Penetration Strategy by selling its iPhones and iPads in its existing markets in North America. For this purpose, Apple Inc. provides various promotional offers and discounts to customers to encourage a large number of customers to buy Apple products.
The Market Development Strategy is associated with the sale of existing products in the new markets. Apple Inc. also uses the Market Development Strategy by offering its products in different market segments which include Europe, Greater China, etc. In addition to this, Apple also enters the new markets by authorizing the retailers and third parties to sell Apple products in new markets where the company does not have established its presence.
The Product Development Strategy refers to the organization’s approach to developing new products in the existing markets. It is one of the important growth strategies being pursued by Apple Inc. to increase its market share and customer attractiveness. Further, Apple is also coming up with various new products in 2022 which include iPhone SE 3, MacBook Air 2022, Mac mini Pro, Updated 27-inch iMac, AirPods Pro 2, iPhone 14, etc. which shows that continuous improvement in the existing products is undertaken by Apple Inc. The new Product Development Strategy helps Apple Inc. to earn higher sales and revenue. Along with this, Apple Inc. also launched various new category products such as AR/VR headsets, etc. This also helps to increase the overall sales and reputation of the organization.
The Diversification Strategy involves launching new products in the new markets which makes this strategy the riskiest. Diversification is one of the least used strategies by Apple Inc. However, the key opportunity available to Apple Inc. is to adopt the Diversification Strategy where the company can enter the new markets with the launch of the new products. However, it is a must to keep in mind that Apple Inc. needs to consider various risks involved in this strategy. Along with this, the implementation of this strategy also requires new skills and expertise among the staff members in terms of marketing and other operations which can result in increased investment. For this purpose, the organization can also acquire some other firm to operate in the new market.
On the basis of the above analysis, it is seen that Apple has adopted Market Penetration, Market Development and Product Development Strategies and lacked implementation of Diversification Strategy as it is one of the riskiest strategies for the organization. Further, it is found that the organization can implement this strategy by partnering with the organization in the new market to effectively manage the operation in the new market. However, the Ansoff Matrix supports that organizations should adopt one out of four strategies by considering the benefit as well as the risk associated with each strategy.