The Ansoff Matrix – a powerful four grid technique for growing your business

Ansoff matrix

The Ansoff Matrix helps businesses to determine the best strategies for growth and profitability, by assessing themselves against four growth options and the risks involved:

  • Market penetration
  • Product development
  • Market development
  • Diversification

Market penetration

This growth strategy presents the lowest level of risk. The business will concentrate on increasing sales of its existing product to the same market either by cutting prices or increasing marketing activity.

However, any further growth potential in the market may already be exhausted and cutting prices may result in a price war with a bigger competitor. Therefore it may be necessary to look at other growth options.

Product development

Developing and launching a new product will carry a higher level of risk, but the business does have the advantage of knowing the market well and will already have an established brand and distribution channels in place.

Market development

Selling the same product to a new market will help the business to avoid the costs of new product development, although it will need to invest in the development of the brand and new distribution channels, especially if the new market is based abroad.

Diversification

This is the most risky growth strategy, where the business develops a new product for a new market. In both cases the business will have little experience, so it is important that the extra risk will generate a significant pay-back, either financially or strategically.

More resources

Who was Igor Ansoff?

How Enterprise Rent-A-Car used the Ansoff Matrix to grow their business

Detailed guide on using the Ansoff Matrix

Video tutorial explaining how to use the Ansoff Matrix:

SlideShare presentation on utilising the Ansoff Matrix:

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