Overcoming the Market Confusion
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Overcoming the Market Confusion
Fremont: A matrix developed by Igor Ansoff, "The Ansoff Matrix", or the "Product/Market Expansion Grid", is a framework for identifying corporate growth opportunities. It is a two-dimensional figure which determines the scope of the options, namely products and markets. The matrix suggests growth strategies that set the direction for the business strategy. So how can businesses master the matrix which helps business grow, through existing and/or new products in existing and/or new markets? The matrix considers four ways to grow a business: market penetration which is based on providing more of the same product to the existing customers; market development, which includes getting new customers for the existing products; product development, which includes developing new products for the existing customers; and diversification, which includes developing new products for new customers. Samsung stealing the market of Nokia is a classic example of market penetration, where more of the existing product is provided to existing customers. Google coming up with a new segment for SMEs is a reflection of product development. Taco Bell launching in Libya reflects the characteristics of market development, while the NASA launching a hi-tech tablet PC for the common man reflects the traits of diversification. The Ansoff matrix shows the risk that a particular strategy will expose you to, which shows that each time you move to a new quadrant, you increase the risks that your company has to face. For a startup, market penetration and market development are the two strategies which can lead them to success, while large corporations can reap the benefits from product diversification and diversification. Market penetration would help startup cash in on their loyal customers by selling them more of the same product, which would ensure that the customers are coming back to you. You can also pay more attention to the products that didn?t do well in the beginning and try to fix them up, so that you can build on your failures. Startups are always on the lookout to expand their market, so why not take your unique offering to the newer markets and create a mark on them? Diversification stands out from the remaining three strategies, as it requires companies to acquire new skills, new techniques, and new facilities. Larger corporations are always on the lookout on how to increase their profits, how to increase their customer base, and how to make their brand the numero uno in the market. This leads to tough competition between rival brands and also lead to innovations so as to create newer products, which would cash in on the already existing goodwill of your company. Diversification is the most riskiest of the strategies, as it involves venturing out to strange lands with new products, which might backfire and lead the company to wind up its business, but it might teach many valuable lessons in the process. There are companies like ITC, which have moved out of their core business (tobacco) and ventured into a totally new sphere (hospitality, retail and others); at the same time, there are companies like Intel, which still stick to their core strength--microchips. They come up with newer versions of the product, which has made it the reigning market leader. While moving between quadrants, companies have to make sure that they research the move carefully, build the capabilities required to succeed in the new quadrant, learn the in and out of the product and the market, and be prepared for the worst case scenario. In order to master the Ansoff matrix, companies need to have a thorough knowledge of their products and the markets that they serve, which will give them a framework to dwell upon. Depending on the short-term or the long-term vision, the companies can come up with strategies which would help them reinvent their products and make them better, as well as go on to stranger tides.

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