Ansoff Matrix (Cambridge International A-Level Business)

An introduction to the Ansoff Matrix

• Ansoff’s Matrix is a tool for businesses who want to grow quickly and have a growth objective

• It is used to identify an appropriate strategic direction and identify the level of risk associated with the chosen strategy

• The model considers four elements, which are broken down into two categories

  • The market- existing and new markets
  • The product - existing and new products

Ansoff's strategic matrix

Ansoff’s strategic matrix identifies strategies for growth, depending on whether the product and market already exist or are new

Market penetration

• Market penetration is the least risky strategy to achieve growth

  • It involves selling more products to existing customers by encouraging

    • More regular use of the product
    • Increased usage of the product
    • Brand loyalty of customers

Case Study Coca-Cola’s 'Share a Coke' campaign

Instead of launching a new drink, Coca-Cola ran its “Share a Coke” campaign in existing markets (e.g. the USA, UK, Australia) which involved printing popular first names on Coke bottles

Why it worked

1. Increased purchase frequency

• Customers looked for bottles with their own name or their friends’ names, so they bought more Coke than before

1. Free publicity and excitement

• People shared pictures of personalised bottles on social media, drawing in even more buyers without extra advertising costs

1. Stronger brand loyalty

• Customers felt a personal connection to the brand, which made them choose Coke over other drinks more often

Outcome

• Coca-Cola achieved double-digit growth in mature markets

Market development

• Market development involves finding and exploiting new market opportunities for existing products by

  • Entering new markets abroad

  • Repositioning the product by selling to different customer profiles (selling to other businesses as well as direct to consumers)

  • Seeking complementary locations

    • E.g. M&S Food has achieved significant growth since teaming up with fuel retailers such as BP and Applegreen and providing express retail outlets

Case Study Netflix expanding into new countries

In 2016, Netflix launched its video-streaming service in over 130 new countries at once, using the same platform and content library it had in the US

Why it worked

1. Known brand and proven model

• Customers in new markets trusted a familiar name and understood how streaming worked

1. Local partnerships

• Netflix struck deals to use regional payment systems and worked with local internet providers to ensure smooth playback

1. Subtitle and dubbing

• By adding subtitles and voice-overs in many languages, Netflix made its existing shows accessible to viewers around the world

Outcome

• Within a year, Netflix gained millions of subscribers outside the US, turning international customers into a major source of revenue with limited changes to its product

Product development

• Product Development involves selling new or improved products to existing customers by

  • Developing new versions or upgrades of existing successful products

  • Redesigning packaging and aesthetic features

  • Relaunching heritage products at commercially convenient intervals

    • E.g. Lindt relaunches Christmas-themed products each year, often with a subtle design change, to recapture the interest of customers

Case Study Lego launches Lego Boost

After many families already bought classic Lego bricks, Lego introduced a robotics kit that lets children build and programme moving models using the familiar Lego system

Why it worked

1. Existing customer base

• Parents and children who already own Lego sets were eager to try a new, technology-driven Lego product

1. Complementary features

• Boost combines traditional building with coding lessons, making it both a toy and an educational tool

1. Brand trust

• Lego’s reputation for quality and creativity encouraged buyers to choose Boost over other robotics kits

Outcome

• Lego Boost sold strongly to families who already purchased standard Lego sets, increasing overall revenue without needing to find new customers

Diversification

• Diversification is the most risky growth strategy as it involves targeting new customers with entirely new or redeveloped products

  • Examples of diversification include

    • UK supermarket Tesco launching a range of financial products including current accounts and credit cards
    • Café chain Greggs launching a range of themed clothing products

Case Study Tesco goes mobile

In 2003, after becoming a leading supermarket chain, Tesco created Tesco Mobile, a mobile phone network that offers pay-as-you-go and contract plans

Why it worked

1. Trusted brand

• Shoppers who already liked Tesco felt comfortable signing up for a mobile service under the same name

1. Convenience for customers

• Tesco Mobile bills and top‐ups can be managed online or at any Tesco store
• This made it easy for customers to handle both groceries and phone service in one place

1. Cross‐promotion

• Tesco used Clubcard points to reward mobile customers, encouraging supermarket shoppers to try its phone plans

Outcome

• Tesco Mobile attracted millions of subscribers in the UK and became a successful new income stream from its existing customer base