TOOLKIT: Ansoff matrix

Exclusive content on Boosty, video classes on YouTube, summaries and notes on Instagram, units 1~5 content in the best free textbook, class extracts on TikTok, text preview below. Have fun!

The main purpose of Ansoff matrix is to assess the risk of different growth strategies: market penetration, product development, market development, diversification.

Just a reminder to keep a record of all the tools in the table below. As long as you can fill in all the cells of the table, you will be able to write a successful IA.

Ansoff matrix is a strategic planning tool that helps managers to formulate growth strategies and assess their risk. If I had to give a name to this tool, I would call it “risk assessment matrix” because the main purpose of it is to assess risk of growth strategies, as mentioned above. Ansoff matrix looks like this:

As you can see from the picture, there are four growth strategies in Ansoff matrix: market penetration, product development, market development and diversification (related and unrelated). Let’s see what these strategies mean. As always, I will try to keep you busy and ask you to fill in the table below. If you can fill in the table, you can understand Ansoff matrix.

Market penetration is a low-risk growth strategy of selling existing products in existing markets (see the picture in Figure 1 above again). So, if organisations do market penetration, they are not creating any new products and they are not trying to sell in new markets, they just do things to improve the current situation with products that they already offer in the markets where they already work. That is why, this strategy implies low risk.

Some examples of market penetration are decreasing the price, increasing promotion, hiring more staff, improving distribution. As you can see, all these actions do not involve creating new products or approaching new markets.

Product development is a medium-risk growth strategy of selling new products in existing markets (again, have a look at Figure 1 above to make sense of it). So, with product development, firms do not enter new markets but develop new products, which implies more risks, compared to market penetration. That is why, this strategy implies medium risk.

Some examples of product development are investment in R&D of new products, purchasing the intellectual property (IP) rights to produce someone else’s products, mergers and acquisitions (M&As) with organisations that can sell their products using current distribution channels.

Market development is another medium-risk growth strategy of selling existing products in new markets (you might want to have...