One of the basic objectives of most companies is to consistently pursue profitable growth and increase market share. However, many businesses, irrespective of size can be stuck in a rut about how to proceed.

There are various models that offer strategic alternatives for an organization’s growth trajectory. One of these basic models is the Ansoff Matrix or the product/market expansion growth. What the Ansoff Matrix does is to present a simple framework that makes strategic growth options immediately apparent.

This article seeks to explain the model and illustrate how it can be applied.

The Ansoff Matrix

Igor Ansoff in a 1975 Havard Review article argued that organizations can pursue growth by focusing on a combination of the products and markets they serve or can serve. He developed what is termed the Ansoff matrix as a means of providing organizations with various strategic growth options. These strategic options are; Market Penetration, Product Development, Market Development and Diversification.

Market Penetration

Ansoff proposes that the most fundamental way an organization can pursue growth is to critically assess the current market it serves as well as its current product or service offerings. The next step is to determine ways of selling more of its current products to its existing market or target audience.

With this basic strategy a company does not need to develop new products or look for new markets to serve but focus on maximizing its effectiveness in order to milk any inherent opportunity offered by its current product/market quadrant. This is the least riskiest of all the strategic options since an organization is dealing with a market and product for which it has some level of knowledge and experience.

The next key issue is how can an organization effectively execute market penetration strategy?

• Organizations can encourage their customers to use more of the service through aggressive marketing communications drive. Examples include sales promotional campaigns aimed at encouraging customers to increase their deposits by maintaining certain minimum balances etc.
• Another example involves using cross-selling to encourage customers to use more of a company’s other products. For example encouraging a Current Account holder to invest in a high yielding investment account, Savings Account  or any other product or service the Bank has.
• Other strategies include using more targeted advertising to communicate more effectively with your target audience to inspire them to act.
• Telecom firms for example usually find ways of stimulating customers to use more data by sending them links to some videos, news or music, encouraging them to subscribe to certain services like ringback tones, attracting them with promotions where they answer series of questions at premium rates with the chance of winning prizes etc.

An assessment of market penetration strategies indicate that they are largely driven by marketing communications tools like advertising, sales promotions, personal selling and direct marketing.

Product Development

Product development is a notch riskier than market penetration and it involves developing new products to serve the needs of an organization’s current target market. An example will include rolling out cash and cheque deposit ATMs to make it convenient for customers to deposit cash/cheques into their bank accounts without having to visit the banking hall. In other parts of the world, cheques can even be deposited using mobile banking apps.

The development of G-Money, for example can be classic example.

Telcos for example, developed solutions like mobile money to serve the needs of their customers and also provide an avenue for them to enter into the burgeoning financial services market.

In general, the focus of product development strategy is to re-assess the needs of an organization’s current customers and think of ways of developing new solutions to solve their needs. It’s deemed riskier than market penetration due to the investment in research, development costs and the fact that the solution may not be accepted despite favourable research findings.

Market Development Strategy

Market development strategies involve pursuing growth by using the company’s current products to serve new markets or markets the company does not currently serve with its current product/service offerings.

These markets could either be in the form of new market segments or new geographical markets.

Some years ago, Fidelity Bank aggressively pursued market development strategy by leveraging the wide branch network of Ghana Post to establish branches in various post offices to ensure rapid geographical market coverage. As explained, branch opening in places where a bank has no presence are all examples of geographical market development strategy.

Another example of segment focused growth is that of beauty and grooming outlets like Aloette who have traditionally focused on attracting females for facial treatment but are currently focusing on attracting the modern Ghanaian man who might need facial treatment or other grooming.

Therefore, the core objective of market development involves accessing your current products or services and identifying new market segments or new geographical markets that you can serve with those same offerings.

Diversification

Diversification refers to pursuing growth by developing completely new products for a new market (a market that the company does not currently serve). This growth strategy is deemed the riskiest of all the strategic options.

There are two types of diversification strategies: related and unrelated diversification. concentric or related diversification involves developing new products that are related to the company’s core competences or current market offerings.

For example, McDan Group entered the airline industry with McDan Aviation. This strategic move can be termed as Concentric Diversification (related) since the organization currently operates in the transportation industry with McDan Shipping.

Conglomerate or Unrelated diversification is when a company enters into a market that is unrelated to its core business. This is riskier than concentric diversification. A classic example is Telecos deploying Mobile Money to enter the financial services market. A market unrelated to its core business of providing communication services.  Let me add that now Telcos have practically even blurred the lines between financial services and telecommunications. Some telcos in Nigeria for example, have been granted a licence to operate a payment service bank.

Conclusion

The basic objective of a model like the Ansoff Matrix is to provide a structured framework which can be a starting point for developing various strategic options for pursuing growth. It illuminates one’s strategic path and makes it easier for one to see his or her way clear.