During the process of building and developing, every business has surely faced the choice between developing products or expanding the market. So which option did businesses choose, why did they choose it, and was it really good for them? To answer these questions, businesses have had to rely on the powerful assistant known as the Ansoff Matrix. Let's DPS delve deeper into the concept, uses, and how to effectively apply the Ansoff Matrix in the article below!
What is the Ansoff Matrix?
The Ansoff Matrix, also known as the product–market matrix, is often used by businesses to analyze changes in scale within product and market strategies. It identifies four different growth options by combining existing and new products with current and new markets. Through this, you will see the differences of each strategy as you move from one part of the matrix to another.
The Ansoff Matrix is a sharp tool for businesses to increase sales and optimize profits based on four strategies:
|
Strategy |
Meaning |
| Market penetration strategy | Penetrate deeper into the current market with existing products, helping to increase market share for the business. |
| Market expansion strategy | Expand the market for existing products by leveraging the company's production strengths. |
| Product development strategy | Develop new products for the current market by utilizing marketing strengths. |
| Diversification strategy | Developing new products for new markets helps diversify business activities in both products and markets. |
Benefits of applying the Ansoff Matrix
In business operations, managers often use the Ansoff Matrix to exploit potential and discover new perspectives for the company because it possesses the following outstanding advantages:
- The Ansoff Matrix helps businesses identify the most suitable business strategy based on resources, infrastructure, budget, etc.
- Decide on the most optimal implementation method by breaking it down into different strategies.
- Shows the level of risk when a business decides to change strategy, thereby helping strategic managers come up with contingency plans and manage most effectively.
Guide to using the Ansoff Matrix effectively
Market penetration strategy
The market penetration strategy is applied when a business wants to increase the number of products sold to its current customer group. To achieve this goal, the business needs to find ways to increase customer loyalty. From there, effectively extend the customer lifecycle value.
Some ways that businesses can apply to achieve the best results with this strategy are:
- Improve the distribution process so that products reach customers more quickly and easily.
- Enhance activities media so that customers become more aware of the product.
- Organize special promotions and incentive programs.
- Improve the quality of the sales team.
According to experts, this strategy should only be applied in the early stages when the company's products are being sold stably in the current market or when there are not too many competitors.
>>> READ MORE: Understand Market Penetration from A-Z
Market expansion strategy
In the Ansoff Matrix, the market expansion strategy is used to exploit and seek out new potential customers for the business. Managers will research and analyze data on demographics, geographic location, business sector, company size, etc. to determine whether this market is suitable for development.
This strategy is suitable when the current business market is saturated and no longer favorable for the company's products.
Product development strategy
When the current product is no longer able to meet market demands, it is time for the business to change and improve the product.
To create a new product that is well received by customers, businesses need to prioritize customer needs. Businesses should research the strengths and weaknesses of the old product and find out what customers expect from the new product.
You can refer to some of the following methods when implementing a product strategy:
- Expand the product by improving quality, increasing or decreasing the price; producing products with various designs and types; changing the packaging of old products, etc.
- Develop related products/services... For example, a company specializing in supplying various types of light bulbs can add repair and installation services for lighting systems in projects.
Diversification strategy
Diversification is the riskiest strategy among the four strategies in the Ansoff matrix. The reason is that the business has to sell new products in a new market. Therefore, you should only apply this strategy when your business has certain advantages in expertise or scale and wants to challenge itself with a new product and market. Or when the current product and market show signs of decline, this is the right time to implement a breakthrough strategy to revive the business.
Samsung and the strategy of using the Ansoff Matrix
Samsung is a multinational corporation founded in 1939 in South Korea. Initially, Samsung was a trading company, later expanding its business and becoming a multi-industry conglomerate. To achieve today's success, the company has applied various development measures corresponding to each quadrant in the Ansoff matrix.
Market penetration
For the market penetration strategy, Samsung has applied several measures to sell more products to existing customers:
- Price reduction: Before launching a new version of a product, Samsung often implements a price reduction policy to push products into the market; helping to increase sales, expand market share, and reduce inventory.
- Providing related products: Samsung also boosts sales by producing accompanying accessories such as headphones, watches, software updates, etc.
- Launching new products simultaneously in different markets: This policy helps increase market entry barriers for competitors.
- Marketing: The company often forms strategic alliances with local brands to promote products and brand image. Samsung also actively uses various marketing channels such as newspapers, television, social networks, or sponsors technology events to promote the brand image for the business.
Market development according to the Ansoff Matrix
To expand the market, Samsung Group has used several methods:
- When launching products in new markets, the company has invested in designing unique and attractive packaging.
- Collaborating with local celebrities and athletes to advertise products.
- Utilizing a variety of distribution channels such as retail, online sales, etc.
Product development according to the Ansoff Matrix
Samsung's consumer electronics division is considered a market leader in researching and developing new products. While Apple only produces a single smartphone model, Samsung offers a wide range of smartphone models and regularly launches new versions with updated features and technical specifications.
Diversification
Samsung has implemented a diversification strategy for the group. The company has expanded into unrelated industries multiple times and achieved much success. Before deciding to enter a new industry, the company will conduct detailed research and determine whether the industry has development potential. Thanks to this, Samsung has become a multinational corporation serving large markets and providing a wide range of products and services.
Summary
The Ansoff Matrix is a simple, easy-to-apply model that brings great effectiveness to business development. Hopefully, through this article, you have understood this model better and know how to apply it in the process of building and developing your business.
If you have any questions about the Ansoff matrix, please leave a comment so we can DPS Media answer them. Follow us to update more useful marketing knowledge!
