8.1 Strategic direction

Ansoff matrix- strategic direction

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

ADV market pentration

• low risk – uses what the business already knows

• quick results – easier to increase sales to current customers

• builds brand loyalty – strengthens position in the market

• efficient use of resources – no need for new product development

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

ADV market development

• expands customer base – reaches new regions or demographics

• increases revenue potential – opens up new sales opportunities

• spreads risk – not dependent on one market

• can be cost-effective – if using the same product with small changes

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

ADV product development

• meets changing customer needs – keeps business relevant

• builds on existing relationships – easier to sell to loyal customers

• can increase customer spend – offering more to the same audience

• improves brand image – seen as innovative

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

ADV diversification

• high growth potential – taps into entirely new opportunities

• spreads risk – not tied to one product or market

• can boost brand reach – if successful, increases visibility

• can take advantage of trends – enters fast-growing areas

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

strategic direct

the markets a business chooses to compete in and the products/services it offers

factors effecting which markets a business should compete in

• market size and growth potential – bigger or growing markets offer more opportunities

• customer needs and behaviour – must match what the business can offer

• level of competition – high competition may reduce chances of success

• economic conditions – stable economies are often safer for investment

• cultural factors – values, habits, and preferences must align

• accessibility – includes transport, communication, and distribution channels

factors that influence which products to offer

• customer demand – products should solve a real need or problem

• company strengths and resources – products must match what the business can do well

• profitability – should have good profit margins and sales potential

• competition – must offer something better or different than rivals

• technology trends – products should keep up with or use new technologies

• cost of production – must be affordable to make and sell

• brand fit – products should match the company’s image and values