8.1 Strategic direction

Ansoff matrix picture

Market penetration

selling more of an existing product to an existing market

low risk low reward

approaches

• gain MS from competitors

• encourage customers to buy or consume more

• changes to marketing mix

• extension strategies

DIS market penetration

• competitors reactions

• short term

• market may already be saturated

• may not be cost effective

Market development

attracting new markets to buy existing products

approaches

• enter a new international markets (risky)

• move from B2B to retail

• move to a new market segment

DIS market development

• lack of knowledge of customers

• product may not be accepted, desired or understood

• business may not understand new market

• alienation of current customers (separation)

Product development

selling new products to existing customers

• must be a proactive market leader for this

approaches

• launch improved version of existing product

• introduce complementary product to develop a range

• adapt product to suit a target market within a market

DIS product development

• high R and D cost

• competitor reactions

• risk of cannibalisation (decreased in demand for a company’s original product in favour of its new product)

• may shorten product life cycle

Diversification

selling new products to a new market

high risk high reward

related diversification - potential synergies

unrelated diversification - no relation between markets

approaches

• R and D into new products and market research

• take over of another business

DIS diversification

• high risk as 2 elements are unknown

• relies on heavy investment

• cultural differences may exist

• brand image diluted

limitations of Ansoff

• some categories are grey areas

• assumes 2 diagonal strategies have equal risk

• may not take external factors into account