Which of the following is not the four growth options of the ansoff growth matrix?

Do you want to grow your company? Due to personal ambition, because an opportunity has presented itself, or simply to increase your turnover? Whatever your motivation, there are various ways to grow a company.

The Ansoff model

These ways are clearly presented in the Ansoff model, a strategic tool used during the development of a growth strategy. It is a good basis for considering the strategic development of your company.

The Ansoff growth matrix is comprised of two axes

• Products:
  Which products do you currently offer, and which new products would you like to offer in the future?

• The market:
  Which markets do you currently serve, and which markets would you like to serve in the future?

The four growth strategies

Four types of growth strategies are proposed on this basis. The four main growth strategies are as follows:

• Market penetration

  The aim of this strategy is to increase sales of existing products or services on existing markets, and thus to increase your market share.  To do this, you can attract customers away from your competitors and/or make sure that your own customers buy your existing products or services more often. This can be accomplished by a price decrease, an increase in promotion and distribution support; the acquisition of a rival in the same market or modest product refinements.

• Market development

  This means increasing sales of existing products or services on previously unexplored markets. Market expansion involves an analysis of the way in which a company's existing offer can be sold on new markets, or how to grow the existing market. This can be accomplished by different customer segments ;  industrial buyers for a good that was previously sold only to the households; New areas or regions about of the country ; Foreign markets

• Product development

  The objective is to launch new products or services on existing markets. Product development may be used to extend the offer proposed to current customers with the aim of increasing their turnover. These products may be obtained by: Investment in research and development of additional products; Acquisition of rights to produce someone else's product; Buying in the product and "branding" it;  Joint development with ownership of another company who need access to the firm's distribution channels or brands.

• Diversification

  This means launching new products or services on previously unexplored markets. Diversification is the riskiest strategy. It involves the marketing, by the company, of completely new products and services on a completely unknown market.
  Diversification may be divided into further categories:

  • Horizontal diversification

    This involves the purchase or development of new products by the company, with the aim of selling them to existing customer groups.  These new products are often technologically or commercially unrelated to current products but that may appeal to current customers. For example, a company that was making notebooks earlier may also enter the pen market with its new product.

  • Vertical diversification

    The company enters the sector of its suppliers or of its customers.For example, if you have a company that does reconstruction of houses and offices and you start selling paints and other construction materials for use in this business.

  • Concentric diversification

    Concentric diversification involves the development of a new line of products or services with technical and/or commercial similarities to an existing range of products. This type of diversification is often used by small producers of consumer goods, e.g. a bakery starts producing pastries or dough products.

  • Conglomerate diversification

    Is moving to new products or services that have no technological or commercial relation with current products, equipment, distribution channels, but which may appeal to new groups of customers. The major motive behind this kind of diversification is the high return on investments in the new industry. It is often used by large companies looking for ways to balance their cyclical portfolio with their non-cyclical portfolio.

Conclusion

Based on the strategies used and its ambitions, a company can choose one of these four strategies. This choice especially depends on the approach of a company's product/market and the latter's taste for risk.

The Ansoff Model is a matrix that helps marketing leaders identify business growth opportunities for their marketing strategies in a challenging market

What is the Ansoff Model?

Also referred to as the Ansoff matrix, due to its grid format, the Ansoff Model helps marketers identify opportunities to grow revenue for a business through developing new products and services or "tapping into" new markets. So it's sometimes known as the ‘Product-Market Matrix’ instead of the ‘Ansoff Matrix’.

The Ansoff Model's focus on growth means that it's one of the most widely used marketing models. It is used to evaluate opportunities for companies to increase their sales through showing alternative combinations for new markets (i.e. customer segments and geographical locations) against products and services offering four strategies as shown.

How to use the Ansoff Matrix

Strategic questions that can be answered using the matrix include:

• Market Penetration: How to sell more of your existing products or services to your existing customer base?
• Market Development: How to enter new markets?
• Product and Development: How to develop existing products or services.
• Diversification: How to move into new markets with new products or services, increase your sales with your existing customer base as well as acquisition.

You may be executing more than one of these strategies depending on the stage in your business,

My best practice tip is to use Ansoff at least once a year in strategic planning for your business to identify potential new markets, new products as well as product development opportunities.

To evaluate the suitability of these strategies, issues to consider for each of these:

1. Market Penetration: change your opening hours of your store, reduce order processing times, showcase entire product portfolio etc.
2. Market Development: Does your research on your market share in your existing sectors back up potential demand for you to considering entering new markets? Considering search intent for services in different markets, for example, using Google Keyword Planner or Ubersuggest can also inform this. Can your company support this with existing resources?
3. Product and Development: Can you you develop new products, perhaps using cheaper manufacturers, improved quality, updated packaging. Again market research to ask potential customers and influencers for feedback can help here.
4. Diversification:  Assess expertise, technical know-how. Can you move into a new market with a new product offer using the skills in your business? Do you have a strong management team to support it.

Essential marketing models

In our free, illustrated guide to 16 classic planning models diagrams we explain what they are and give examples of why and how to apply them in business.

Access the Essential marketing models for business growth

 Examples of how the Ansoff Matrix can be applied to recession digital marketing strategy

The Ansoff matrix is useful for developing online strategies too, for example...

• For Market Development strategy. RS Components a supplier of a range of MRO (maintenance, repair and operations) items, found a new online market when they launched their site, with 10% of their web-based sales to individual consumers rather than traditional business customers. It also uses the website to offer additional facilities for customers placing large orders online.The UK retailer Argos found the opposite was true with 10% of website sales being from businesses when their traditional market was consumer-based. EasyJet also has a section of its website to serve business customers.
• Product development: – e.g. online trade magazine Construction Weekly diversified to a B2B portal Construction Plus which had new revenue streams. Similarly, music and book publishing companies have found new ways to deliver products through a new development and usage model such as subscription and pay-per-use. Retailers can extend their product range and provide new bundling options online also.
• Diversification: Ryanair offers it customers discounts if they book car hire with Hertz car rentals.  

To find out more how to review these strategies, read our free Models Guide which explains how to use the strategies for some of the following objectives.

• 1. Market Penetration: market share growth, customer loyalty improvement and customer value improvement.
• 2. Market Development: use of online channels to sell into new markets at low cost. Sell existing products to new market segments and different types of customers.
• 3. Product development: Use the web to add value to or extend existing products or services.
• 4. Diversification: into related business, unrelated business, upstream integration with suppliers, downstream integration with intermediaries.

What to watch for?

For fairly new businesses, perhaps it's wise to focus on no more than two strategies, which could be Market Penetration and over time move to Market Development.

The RACE Framework

Looking for a data-driven marketing strategy to help you acquire and retain more high-value customers? Our popular RACE Framework empowers marketers and managers with a step-by-step strategic marketing planning structure. Integrated across plan - reach - act - convert - engage, you can break down your marketing activities to set objectives and measure your results at each stage of your marketing funnel.

The RACE Framework is all about making the most of your customers' experiences of your business, whether that's new or existing markets, new or existing products, planning your marketing strategy around the customer journey makes sense. Find out more.

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The Original Reference Source for the Ansoff Model

Ansoff, H. I. (1957). Strategies for Diversification. Harvard Business Review. (Vol. 35 Issue 5, Sep/Oct).  p113-124.

What are the four growth options of ansoff growth matrix?

What are the 4 growth strategies?

What are the four types of growth?

Which of the 4 strategies of the Ansoff Matrix is considered the riskiest?