In the process of building and developing, surely every business has had to face two choices: developing products or expanding the market. So which option have businesses chosen, why did they choose it, and is it really good for them? To answer these questions, businesses have had to rely on the help of the powerful assistant, the Ansoff Matrix. Together 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 (Ansoff Matrix) is also known as the product-market matrix. This matrix is often used by businesses to analyze changes in the scale of product and market strategies. It indicates 4 different growth options by combining existing products and new products with current markets and new markets. From there, you will see the differences of each strategy as you move from one part to another of the matrix.
The Ansoff Matrix is a sharp tool for businesses to increase sales and optimize profits based on 4 strategies:
Strategy | Meaning |
| Market penetration strategy | Penetrate deeper into the current market with existing products, helping to increase market share for the business. |
| Market development strategy | Expand the market for existing products by leveraging the business's production strengths. |
| Product development strategy | Develop new products for the current market by utilizing marketing strengths. |
| Diversification strategy | Develop new products for new markets to diversify business operations 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 business because it has the following superior advantages:
- Ansoff Matrix helps businesses identify the most suitable business strategy based on resources, infrastructure, budget,…
- Decide on the optimal implementation method by breaking it down into different strategies.
- Shows the level of risk when the business decides to change strategy, thereby helping strategic managers come up with contingency plans as well as the best management.
Guide to using the Ansoff Matrix effectively
Market penetration strategy
The market penetration strategy is applied when the business wants to increase the number of products sold to the current customer group. To achieve this goal, the business needs to find ways to increase customer loyalty. From there, effectively extend the customer lifetime value.
Some ways businesses can apply to make this strategy achieve the best results are:
- Improve the distribution process so that the product reaches customers faster and easier.
- Enhance communication activities communication so that customers know more about the product.
- Organize promotional programs and special offers.
- Improve the quality of the sales team.
According to experts, this strategy should only be applied in the early period when the enterprise's product is being sold stably in the existing market or when there are not too many competitors.
>>> READ MORE: Understand Correctly from A-Z About Market Penetration
Market development strategy
In the Ansoff matrix, the market development strategy is used to exploit and find additional potential new customers for the business. Managers will research and analyze data on demographics, geographic location, business industry, enterprise size... to determine if this market is suitable for development.
This strategy is suitable when the current business market is saturated and no longer favorable for the enterprise's product.
Product development strategy
When the current product no longer adequately meets market demand, it is time for the business to change and improve the product.
To create a new product that customers welcome, the business needs to put customer needs first. The business needs to research what advantages and disadvantages the old product has, what customers want in the new product.
You can refer to some of the following methods when implementing the product strategy:
- Expand the product by improving quality, increasing or decreasing the product price; producing products with different models and types; changing the packaging of old products...
- Develop related products/services... For example, a company specializing in providing various types of light bulbs can add repair services, install lighting systems for construction projects.
Diversification strategy
Diversification is the strategy with the most risks among the 4 strategies in the Ansoff matrix. The reason is that the business has to sell new products into new markets. Therefore, you should only apply this strategy when the business has certain advantages in expertise or scale and wants to test 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 established in 1939 in South Korea. Initially, Samsung was a trading company, then expanded its business and became a multi-industry conglomerate. To achieve the success it has today, 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 the following measures to sell more products to existing customers:
- Price reduction: Before launching a new product version, Samsung often implements a price reduction policy to push the product to the market; helping to increase sales, expand market share, and reduce inventory.
- Provide related products: Samsung also promotes consumption by producing accompanying accessories such as headphones, watches, software updates...
- Launch new products simultaneously in various markets: This policy helps increase entry barriers for competitors.
- Marketing: The company often forms strategic alliances with local brands to promote products and brands. Samsung also actively uses diverse marketing channels such as newspapers, television, social media... or sponsors technology events to promote the brand image for the business.
Market development according to the Ansoff Matrix
To expand the market, the Samsung corporation has used the following methods:
- When launching products into new markets, the company invested in unique, attractive packaging design.
- Collaborate with local celebrities and athletes to advertise products.
- Utilize diverse distribution channels such as retail, online sales...
Product development according to the Ansoff Matrix
Samsung's consumer electronics division is noted for always leading the market in researching and developing new products. While Apple only produces a single smartphone model, Samsung offers a diverse range of smartphone models and frequently launches new versions with innovative features and technical specifications.
Diversification
Samsung has implemented a diversification strategy for the corporation. The company has expanded into unrelated industries multiple times and achieved much success. Before deciding to enter a new industry, the company conducts detailed research to determine if the industry has development potential. Thanks to this, Samsung has become a multinational corporation serving major markets and providing diverse products and services.
Summary
The Ansoff Matrix is a simple, easy-to-apply model that brings great effectiveness to business development. I hope through this article, you have a clearer understanding of this model as well as 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 to DPS Media get answers. Follow us to update more useful marketing knowledge!
