According to Cleberg (2019), the Ansoff matrix is used by business organisations to analyse the strategies planned for growth and the risks associated with it. The matrix focuses on two approaches to develop a strategy for growth. The first one focuses on the product that is sold, and the second one analyses the market’s growth, that is, who the product is being sold to. The matrix is developed using four strategic actions that have different levels of risks associated with it. The four aspects are as follows.
Market penetration: This is a strategic option that focuses on selling the already existing products to the existing market of the company. As it focuses on selling known products in the known market, the risks associated with the strategy are competitively low. According to this strategy, the company already knows their customers well and are aware of the channels that can be used to reach them. The company can effectively decrease their rates or give out discounts in order to attract more new customers.
Product development: In this strategy, as the name suggests, the company will focus on developing new products for the company’s existing market. Since the company is developing a new product, the risks associated with the option are comparatively high. The company has to come up with new and innovative ideas that are effective enough to cater to the needs and expectations of the customers.
Market development: This strategy focuses on its ability to enter a new market with its already existing products. The new market can be anything from geography, new customer segments, channels, etc. Since it deals with completely new market penetration, the risk associated with this strategy is extremely high and needs extensive planning and research.
Diversification: This strategy focuses on a completely new and different approach to developing a new product for an entirely new market. The risks associated with this strategy are higher among the previously mentioned strategies. These risks can be mitigated with two approaches, namely related diversification and unrelated diversification. The former focuses on developing a product related to an older product, whereas the latter is based on developing a completely new product with no relation to the existing one (Yu, 2019).
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