ANSOFF’S

MATRIX
 IGOR ANSOFF’s MATRIX
Market

Produ EXISTING NEW

ct
EXIST
MARKET MARKET
PENETRATION DEVELOPMENT
•Increase sales to existing market •Existing products sold to new
•Penetrate existing market more markets
deeply

NEW
NEW PRODUCT DIVERSIFICATION
•New Products sold to new
DEVELOPMENT markets
•New products developed for existing
markets
 IGOR ANSOFF MATRIX
MKT

PROD EXISTING NEW

UCT

EXIST MARKET PENETRATION MARKET

•Little risk DEVELOPMENT
•Moderate Risk

NEW NEW PRODUCT DIVERSIFICATION

DEVELOPMENT •High Risk
•Moderate Risk
 IGOR ANSOFF MATRIX – Growth
of TESCO
MKT

PROD EXISTING NEW

UCT
EXIST MARKET PENETRATION MARKET DEVELOPMENT
•Increase in share of grocery •Move into convenience
business at the expense of store market
Sainsbury •Expansion abroad

NEW NEW PRODUCT DEVELOPMENT DIVERSIFICATION

•Expansion into Petrol Sales •High Risk
•Development of financial services
Market Penetration
 Maintain increase market share in current
market with current products
 Selling more of the same to the same people
 In saturated market - Difficult
 In stagnant market – grab market share from
others – intense competition
Market Penetration
 Increase usage by existing customers
 Encourage increase in frequency of use
 Attract customers away from rivals / Gain
market share at expense of rivals
 Devise and encourage new applications
 Encourage non-users to buy
Market Penetration
Use Market Penetration when -
 When the market is not saturated
 When there is potential of growth
 When competitors share is falling
 When increase in volume leads to economies
of scale
 When there is scope to sell more to existing
users
Market-Penetration Strategy
 Why ? To dominate market
 How ? To increase usage or get new
customers; reduce price; expand distribution or
increase promotional activities
 When ? When market is growing
 What to look out for ? Competitive reaction;
cost of conversion
 Example: Airlines used reduced fares &
promotion various family travel packages to
penetrate market
PRODUCT-MARKET STRATEGIES

A product- (new offering-) development

strategy dictates that an organization create
new offerings  existing markets.
PRODUCT-DEVELOPMENT STRATEGY

This strategy involves:

Product
Developing totally new offerings.
Innovation

Product Enhancing the value to customers

Augmentation of existing offerings.

Product Adding different features, sizes, etc. to broaden the

Line Extension existing line.
Product Development Strategy
 New product to replace old product
 New innovative products
 Product improvements
 Product line-extensions
 New products to complement existing
 Products at a different quality level from
existing product
PRODUCT-DEVELOPMENT STRATEGY

Factors to consider when adopting this strategy:

 The market size and volume needed for profitability.

 The magnitude and timing of competitors’ responses.

 The impact of the new product on the sales of

existing offerings (cannibalization).
 The capacity of the organization to deliver the
offerings to the market(s).
Product-Development
Strategy
 Why ? To satisfy buyer’s need
 How ? New or improved product; innovate or
augment product
 When ? Customer has a need or a problem
 What to look out for ?
 Market size/volume
 competitor reaction
 effect on existing products
 resources to deliver new products
 IGOR ANSOFF MATRIX
MKT

PROD EXISTING NEW

UCT
EXIST MARKET PENETRATION MARKET
•Little risk DEVELOPMENT
•Moderate Risk

NEW PRODUCT DEVELOPMENT DIVERSIFICATION

•Moderate Risk •High Risk
PRODUCT-MARKET STRATEGIES

A market-development strategy
dictates that an organization introduce its
existing offerings to markets other than
those it is currently serving
(existing offerings  new markets).
Market Development Strategy
 Selling the same product to different market
 Entering new markets, segments with existing
products
 Gaining new customers, new segments, new
markets
 Requires changes in marketing
strategy, distribution, pricing
policy, promotional strategy
Use market development when
 Untapped market is beckoning
 The firm has excess capacity
 Attractive channels to access new markets
MARKET-DEVELOPMENT STRATEGY

This strategy involves:

 Adjusting the marketing mix, such as:
• Modifying the basic product offering

• Using different distribution outlets

• Changing the sales effort or advertising

 Analyzing competitors’ strengths,

weaknesses, and potential for retaliation.
MARKET-DEVELOPMENT STRATEGY

This strategy involves (continued):

 Identifying the number, motivation, and
buying patterns of new buyers.
 Determining the organization’s ability to
adapt to new markets to evaluate success.
MARKET-DEVELOPMENT STRATEGY

Internationally, this strategy has four forms:

Exporting Licensing

Joint Venture/ Direct

Strategic Alliance Investment
MARKET-DEVELOPMENT STRATEGY

Involves marketing the same offering in another

Exporting
country through sales offices or intermediaries.

Is a contract where one firm (licensee) is given the

Licensing rights to patents, trademarks, etc. by the owner
(licensor) in turn for a royalty or fee.

Involves investment by both a foreign firm and a

Joint Venture/ local company to create a new entity in the host
Strategic Alliance country. The two forms share ownership, control,
and profits of the entity.

Involves investing in a manufacturing and/or

Direct
assembly facility in a foreign market. Is the most
Investment
risky and requires the most commitment.
Market-Development Strategy

 Why ? To venture into new markets

 How ? Sell existing products in new markets;
modify product; use different distribution; use
different advertising/sales strategy
 When ? Present market is saturated
 What to look out for ? Competitive reaction;
understand new buyers; adaptability
 IGOR ANSOFF MATRIX
MKT

PROD EXISTING NEW

UCT
EXIST MARKET PENETRATION MARKET
•Little risk DEVELOPMENT
•Moderate Risk

NEW PRODUCT DEVELOPMENT DIVERSIFICATION

•Moderate Risk •High Risk
Diversification
 New products sold to new markets
 New products sold to new customers
 Select based on growth prospects which the
two new variables offer that the present
product-market does not
Diversification Types
 Related  Unrelated
 Beyond present  Entirely new product
product –market, but and market
within present  Conglomerate
industry diversification
 Synergistic
diversification
 Lesser risk
Related Diversification
 Horizontal – new products introduced to
current markets (new product development)
 Vertical – when an organization moves into its
supplier’s or customer’s business
 Concentric – when new products closely
related to existing products are introduced in
new markets
Diversification Strategy (cont’d)

 Three types of diversification

 Concentric, horizontal and conglomerate
 Three essential tests of success
 Attractiveness
 Cost-of-entry
 Better-off
 Vertical Integration
 Why?
 To gain operating economies i.e. to lower costs
 To gain access to or control supply demand

 To enhance technological innovation

 How? Integrate backward and forward

 When? Basic industry is in a growth stage
 What to look out for? Problems in managing
very different businesses; increase risk, reduced
flexibility; cost of excessive in-growing
Example of Vertical Integration

 Airlines integrate backward to in-flight

kitchens; forward to travel agencies
Related Diversification
 Development beyond present product market
mix but within the broad confines of the
industry
Diversification Strategy
 Why ? Growth opportunities outside current
business
 How ? New products for new markets
 When ? Distinctive competencies available
 What to look out for ? High risks, resources
required, need to understand new markets, fit with
distinctive competencies
Uses of Ansoff’s Matrix
 A framework to explore directions for strategic
growth
 Most commonly used model for strategic
growth
 Identify and analyze growth opportunities
 Considers expected returns and risks
To Summarize
Market Penetration
 Advertise - to encourage more people within
your existing market to choose your
product, or to use more of it
 Introduce a loyalty scheme
 Launch a price or other special offer
promotions
 Increase your sales force activities
 Buy a competitor company (particularly in
mature markets)
Product Development
 Extend your product by producing different
variants, or packaging existing products it in
new ways
 Develop related products or services
 In a service industry, shorten your time to
market, or improve customer service or quality
Market Development
 Target different geographical markets at home
or abroad
 Use different sales channels, such as online or
direct sales if you are currently selling through
the trade
 Target different groups of people, perhaps with
different age, gender or demographic profiles
from your normal customers.
Modified Ansoff Matrix – 9 Box Grid
Product – Existing Modified New

Market

Existing
Market Product Product
Penetration Extension Development
Modified Partial
Limited
Market Diversificatio
Diversificatio
Expansion n
n
New Partial
Market Diversificatio
Diversificatio
Development n
n
Strategy Selection
STRATEGY SELECTION

Product-market strategies are evaluated

based on:
 The organization’s business definition,
mission, and capabilities.
 Market capacity and behavior.
 Environmental forces.
 Competitive activities.
STRATEGY SELECTION

Product-market strategies are chosen based

on:
 Costs and benefits of a strategy.
 Probabilities of success for a strategy.
 Analysis of competitive structure, market
dynamics, and opportunity costs.
 The product itself.
EXHIBIT 1.3: DECISION-TREE FORMAT

Action Response Outcome

R1 O1
A1
R2 O2

R1 O3
A2
R2 O4
EXHIBIT 1.4: SAMPLE DECISION-TREE

Action Response Outcome

Aggressive Estimated profit

Market- competition of $2 million
penetration
strategy Passive Estimated profit
competition of $3 million

Aggressive Estimated profit

Market- competition of $1 million
development
strategy Passive Estimated profit
competition of $4 million
THE MARKETING MIX

Communication
Aggressive
Strategy
competition

Product Channel
Customer
Strategy Aggressive Strategy
competition
Passive
competition

Price
Strategy
THE MARKETING MIX

Product
Kind of product, service, or idea offered.
Strategy

How the product, service, or idea will be profit

Estimated
Communication
communicated to buyers. Informsof$3 and assures
million
Strategy
buyers that the offering will meet their needs.
Method for distributing the product or service to
Channel buyers. Satisfies buyers’ shopping patterns and
Aggressive
Strategy competition
purchase requirements. Provides information and
offering availability.
Estimated profit
Price of $4 million
Amount buyers will pay for the offering.
Strategy Represents the value or benefits provided.
FORMULATING THE MARKETING MIX

 Depends on the success requirements of the

market.

 Delivers customer value in Estimated profit

marketspace, the
of$3 million
new interactive capabilities of the Internet.
Aggressive
 Must be consistent with both the needs of the
competition

markets and the organization’s capacity.

Estimated profit
of $4 million

 Is as much art and science.

CHAPTER 1: FOUNDATIONS OF STRATEGIC
MARKETING MANAGEMENT

BUDGETING MARKETING,
FINANCIAL, AND
PRODUCTION RESOURCES
BUDGETING

A budget is a
formal, quantitative expression
of an organization’s planning
and strategy initiatives
expressed in financial terms.
BUDGETING

A master budget consists of:

Focuses on the income statement.
Operating
Also referred to as a pro forma income statement or profit
Budget
plan.

Financial Focuses on the effect the operating budget has on the

Budget organization’s cash position.

Focuses on developing advertising,

Special
sales, and other budgets that support
Budgets
the master budget.
CHAPTER 1: FOUNDATIONS OF STRATEGIC
MARKETING MANAGEMENT

DEVELOPING
REFORMULATION AND
RECOVERY STRATEGIES
MARKETING AUDIT

A marketing audit is a comprehensive,

systematic, and periodic examination of a
firm’s or business unit’s marketing
environment, objectives, strategies, and
activities to determine problem areas and
opportunities and recommend a plan of
action to improve the firm’s marketing
performance.
MARKETING AUDIT

Addresses the following questions:

Strategic Are we doing the right things?

Operational Are we doing things right?

REFORMULATION AND RECOVERY
STRATEGIES

Have the following purposes:

 Forces marketing managers to ask
“What if…?” questions.
 Allows for contingency plans, preplanning of
reformulation and recovery strategies that lead
to faster reaction time in implementing
remedial action.
CHAPTER 1: FOUNDATIONS OF STRATEGIC
MARKETING MANAGEMENT

DRAFTING A
MARKETING PLAN
MARKETING PLAN

A marketing plan is a formal,

written document that describes the
context and scope of an
organization’s marketing effort to
achieve defined goals or objectives
within a specific future time period.
MARKETING PLAN

 Consists of:
Business Marketing Product
Plan Plan Plan

 Each has these time dimensions:

Short-term Focuses on a 1-year period.

Long-term Focuses on a 3- to 5-year period.