Igor Ansoff Product matrix Session 6 Prof: Yasmin.
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Transcript of Igor Ansoff Product matrix Session 6 Prof: Yasmin.
Background
• Long-term business strategy is dependant on planning for their introduction
• Ansoff Matrix represents the different options open to a marketing manager when considering new opportunities for sales growth
Variables in the matrix
Two variables in Strategic marketingDecisions:
– The market in which the firm was going to operate– The product intended for sale
In terms of the market, managers had two options:
– Remain in the existing market– Enter new ones
Existing PRODUCTS New
INCREASING RISK
INC
RE
AS
ING
RIS
K
Existing
MARKETS
New
MARKET PENETRATION
Sell more in existing Markets
MARKET EXTENSION
Achieve higher sales/market share of existing products in new markets
PRODUCT DEVELOPMENT
Sell new products in existing markets
DIVERSIFICATION
Sell new products in new markets
IGOR ANSOFF MATRIX
MARKETPRODUCT
EXISTING NEW
EXIST MARKET PENETRATION
•Little riskMARKET DEVELOPMENT
•Moderate Risk
NEW NEW PRODUCT DEVELOPMENT
•Moderate Risk
DIVERSIFICATION•High Risk
Existing PRODUCTS New
INCREASING RISKIN
CR
EA
SIN
G R
ISK
Existing
MARKETS
New
MARKET PENETRATION
Sell more in existing Markets
MARKET PENETRATION
• This is the objective of higher market share in existing markets
– E.g. in 2000, Mitsubishi announced a 10% reduction in prices in the UK in order to encourage purchases
MARKET PENETRATION
• Maintain increase market share in current market with current products
• Selling more of the same to the same people
• In saturated market - Difficult
• In stagnant market – grab market share from others – intense competition
MARKET PENETRATION
• Increase usage by existing customers
• Encourage increase in frequency of use
• Attract customers away from rivals / Gain market share at expense of rivals
• Devise and encourage new applications
• Encourage non-users to buy
Use Market Penetration when -
• When the market is not saturated
• When there is potential of growth
• When competitors share is falling
• When increase in volume leads to economies of scale
• When there is scope to sell more to existing users
MARKET-PENETRATION STRATEGY
Why ? To dominate market
How ? To increase usage or get new customers; reduce price; expand distribution or increase promotional activities
When ? When market is growing
What to look out for ? Competitive reaction; cost of conversion
Example: Airlines used reduced fares & promotion various family travel packages to
penetrate market
Existing PRODUCTS New
INCREASING RISKIN
CR
EA
SIN
G R
ISK
Existing
MARKETS
New
MARKET PENETRATION
Sell more in existing Markets
MARKET EXTENSION
Achieve higher sales/market share of existing products in new markets
MARKET EXTENSION/ DEVELOPMENT
• This is the strategy of selling an existing product to new markets. This could involve selling to an overseas market, or a new market segment
– Nintendo are making hand held games consoles (e.g. DS) appeal to the adult/grey market by introducing games such as Brain Train
MARKET DEVELOPMENT STRATEGY
• Selling the same product to different market• Entering new markets, segments with
existing products• Gaining new customers, new segments,
new markets• Requires changes in marketing strategy,
distribution, pricing policy, promotional strategy
Use market development when
• Untapped market is beckoning
• The firm has excess capacity
• Attractive channels to access new markets
MARKET DEVELOPMENT STRATEGY
This strategy involves:
Adjusting the marketing mix, such as:
Analyzing competitors’ strengths, weaknesses, and potential for retaliation.
• Modifying the basic product offering
• Using different distribution outlets
• Changing the sales effort or advertising
MARKET DEVELOPMENT STRATEGY
This strategy involves (continued): Identifying the number, motivation, and
buying patterns of new buyers.
Determining the organization’s ability to adapt to new markets to evaluate success.
Internationally, this strategy has four forms:
LicensingLicensing
Joint Venture/Strategic Alliance
Joint Venture/Strategic Alliance
ExportingExporting
DirectInvestment
DirectInvestment
MARKET-DEVELOPMENT STRATEGY
LicensingLicensing
ExportingExporting
DirectInvestment
DirectInvestment
Involves marketing the same offering in another country through sales offices or intermediaries.
Is a contract where one firm (licensee) is given the rights to patents, trademarks, etc. by the owner (licensor) in turn for a royalty or fee.
Involves investment by both a foreign firm and a local company to create a new entity in the host country. The two forms share ownership, control, and profits of the entity.
Involves investing in a manufacturing and/or assembly facility in a foreign market. Is the most risky and requires the most commitment.
Joint Venture/Strategic Alliance
Joint Venture/Strategic Alliance
MARKET-DEVELOPMENT STRATEGY
MARKET-DEVELOPMENT STRATEGY
Why ? To venture into new markets
How ? Sell existing products in new markets; modify product; use different distribution; use different advertising/sales strategy
When ? Present market is saturated
What to look out for ? Competitive reaction; understand new buyers; adaptability
Existing PRODUCTS New
INCREASING RISK
INC
RE
AS
ING
RIS
K
Existing
MARKETS
New
MARKET PENETRATION
Sell more in existing Markets
MARKET EXTENSION
Achieve higher sales/market share of existing products in new markets
PRODUCT DEVELOPMENT
Sell new products in existing markets
PRODUCT DEVELOPMENT
• Least risky of all four strategies• This involves taking an existing product
and developing it in existing markets– E.g. Coca-Cola. This has been developed to
have vanilla, lime, cherry and diet varieties (amongst others) in the SOFT DRINKS market
PRODUCT-DEVELOPMENT STRATEGY
• This strategy involves:
ProductAugmentation
ProductAugmentation
ProductInnovationProduct
Innovation
ProductLine Extension
ProductLine Extension
Developing totally new offerings.
Adding different features, sizes, etc. to broaden the existing line.
Enhancing the value to customersof existing offerings.
Product Development Strategy
• New product to replace old product
• New innovative products
• Product improvements
• Product line-extensions
• New products to complement existing
• Products at a different quality level from existing product
PRODUCT-DEVELOPMENT STRATEGY
• Factors to consider when adopting this strategy:
The market size and volume needed for profitability.
The magnitude and timing of competitors’ responses.
The impact of the new product on the sales of existing offerings (cannibalization).
The capacity of the organization to deliver the offerings to the market(s).
Product-Development Strategy
Why ? To satisfy buyer’s need How ? New or improved product; innovate
or augment product When ? Customer has a need or a problem What to look out for ?
– Market size/volume– competitor reaction– effect on existing products– resources to deliver new products
Existing PRODUCTS New
INCREASING RISK
INC
RE
AS
ING
RIS
K
Existing
MARKETS
New
MARKET PENETRATION
Sell more in existing Markets
MARKET EXTENSION
Achieve higher sales/market share of existing products in new markets
PRODUCT DEVELOPMENT
Sell new products in existing markets
DIVERSIFICATION
Sell new products in new markets
DIVERSIFICATION
• This is the process of selling different, unrelated goods or services in unrelated markets
• This is the most risky of all four strategies
– E.g. the Virgin group
Diversification
• New products sold to new markets
• New products sold to new customers
• Select based on growth prospects which the two new variables offer that the present product-market does not
Diversification Types
• Related• Beyond present
product –market, but within present industry
• Synergistic diversification
• Lesser risk
• Unrelated• Entirely new product
and market• Conglomerate
diversification
Related Diversification
• Horizontal – new products introduced to current markets (new product development)
• Vertical – when an organization moves into its supplier’s or customer’s business
• Concentric – when new products closely related to existing products are introduced in new markets