IB Business and Management

1.6 Ansoff Matrix

Learning Outcome

• Explain the value of the Ansoff Matrix as a decision-making tool

• Apply the Ansoff Matrix to a given situation

Who is Ansoff?

• H. Igor Ansoff (December 12, 1918 – July 14, 2002) was a Russian American, applied mathematician and business manager.

• He is known as the father of Strategic management.

Ansoff Matrix

• The Ansoff Growth matrix is another marketing planning tool that helps a business determine its product and market growth strategy.

• Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets.

•Ansoffs matrix consists of four ‘cells’ that provide a company with a range of options or strategic choices, each with a different degree of risk involved

Ansoffs Matrix

Market Penetration

Consolidation

Withdrawal

Do Nothing

Product Development

Market Development

Diversification

Existing

MARKETS

New

Increasing risk

Increasing risk

PRODUCTSExisting New

Market Penetration:Existing Products, Existing Markets Strategies in this cell are usually referred to as:•MARKET PENETRATION means promoting growth in existing markets with existing products. •What type of things could this involve?Although also involves:•CONSOLIDATION by concentrating activities on those areas where the firm has established a competitive advantage or competence and focussing its attention on maintaining its market share•WITHDRAW through the sale of all or part of the business

This is a low risk strategy- why?What would be the down side of this strategy?

Market Development:Existing Products, New MarketsThis means taking the companies existing

product and selling them to new customers. This could be:

• New geographical areas• New uses being promoted for the product• Entering new market segments

Why could this strategy be considered as risky?

What can a firm do to minimise the risk?

Product Development:New products, Existing

markets• This strategy is known as Product

Development• It involves substantial modifications or

new additions to the product range.• The business targets the same target

markets as its existing products• Investment in R&D will be needed

• Is this a risky strategy?• What must firms do to minimise the risk?

Diversification:New Products, New Markets

This could be a move into a completely different market or new but related markets by:•vertical backward integration•vertical forward integration•horizontal integrationDiversification is a high risk strategyHow could a business reduce the risks of a diversification strategy?What are the benefits of a diversification strategy?

Which of Ansoff’s strategies have these firms used?

For each one…. Enter onto the matrix

Innocent

Innocent was founded in 1999. It sold individual smoothie drinks through supermarkets, cafes and independent retailers:•Innocent launches larger pack sizes•Innocent starts exporting it’s products to other European countries•Innocent introduces ‘Veg Pots’•Innocent introduces it’s innovative ‘Tweet and eat’ campaign

Reggae Reggae SauceLevi Roots started selling the original Reggae Reggae sauce through Sainsbury’s after an appearance on Dragons Den:•A range of flavoured ketchups is launched•A range of cooking sauces is introduced•The company starts selling Reggae Reggae sauce to Subway and JD Wetherspoon who include it on their menus•A partnership with Birdseye sees the launch of Reggae Reggae frozen chicken grills •A range of branded soft drinks is launched

StarbucksStarbucks was launched in Seattle in 1971 with one store:•Starbucks originally expanded by opening more stores in the USA•Starbucks expanded internationally and is now in 55 countries around the world• Starbucks sells merchandise such as branded mugs and t-shirts through it’s stores•Starbucks started to sell its drinks bottled through retailers•Starbucks introduce promotional Christmas drinks•Starbucks sells coffee beans and ice cream through supermarkets and convenience stores

Virgin• 1970 - Starts selling records by mail-order• 1971 - Opens his first record shop on Oxford

Street• 1985 - Branson starts Virgin Holidays• 1987 - Branson takes Virgin Records to the

United States• 1987 - Richard Branson launched Mates condoms

in the UK to promote condoms to young adults• 1996 - Virgin Brides launches• 1996 - Virgin Trains is launched• 1997 - Virgin Cosmetics launches• 1998 - Virgin Mobile launches Virgin's first

telecoms venture• 1999 - Virgin Active Launches in South Africa, UK

and Italy• 2006 - Virgin Active Spain is Launched• 2007 - Virgin Active Portugal is Launched

Task

• Complete the ‘Ansoff- Cadbury’ Sheet

Ansoff matrix in the IB exam….

• Often the IB will include questions which directly ask you to refer to Ansoff Matrix

However…..• They also expect you to refer to Ansoff

Matrix in other questions where growth strategies are being evaluated.

So….. Don’t assume that they will mention Ansoff directly in the question

IB Question time….15 mins

Answer the 9 minute ‘Yum!’ IB question.