Ansoff Product Market Growth Matrix Marketing Essay

Ansoff Product Market Growth Matrix Marketing EssayA useful planning beam in respect of tradeplaces and harvests is the ground substance developed by Igor Ansoff (H Igor Ansoff, 1918-2002), who is regarded by some as the Father of Strategic Management. Fully titled the Ansoff Product-Market Growth Matrix, the implement was head start published in Harvard Business Review, 1957, in Ansoffs paper Strategies for Diversification.The Ansoff product- foodstuff matrix helps to understand and assess marketing or championship growth strategy. Any short letter, or surgical incision of a line of reasoning can choose which strategy to employ, or which mix of strategical options to use.This is a fundamentally simple and effective way of looking at strategic development options. alive productsnew productsexisting marketsmarket penetrationproduct developmentnew marketsmarket developmentdiversificationEach of these strategic options holds different opportunities and d consumesides for d ifferent organizations, so what is right for one bloodline wont necessarily be right for another. Think about what option offers the best electromotive force for your own business and market. Think about the strengths of your business and what type of growth strategy your strengths will enable some naturally. Generally bewargon of diversification this is, by its nature, un cognisen territory, and carries the tallest risk of failure.Here argon the Ansoff strategies in summaryMarket penetration Developing your sales of existing products to your existing market(s). This is fine if there is flowerpot of market share to be had at the expense of your competitors, or if the market is growing fast and largish enough for the growth you need. If you already live with large market share you need to consider whether investing for further growth in this area would produce diminishing returns from your development action. It could be that you will append the profit from this activity more(prenominal) by reducing costs than by actively seeking more market share. Strong market share suggests there are likely to be better returns from extending the range of products/services that you can offer to the market, as in the next option.Product development Developing or finding new products to take to your existing market(s). This is an attractive strategy if you have strong market share in a particular market. Such a strategy can be a suitable reason for acquiring another company or product/service capability provided it is relevant to your market and your distri thoion route. Developing new products does not mean that you have to do this yourself (which is normally very(prenominal) expensive and frequently results in simply re-inventing someone elses wheel) oft there are potential manufacturing partners out there who are looking for their own distribution partner with the sort of market presence that you already have. notwithstanding if you already have good market share across a wide range of products for your market, this option may be one that produces diminishing returns on your growth investment and activities, and instead you may do better to seek to develop new markets, as in the next strategic option.Market development Developing new markets for your existing products. New markets can besides mean new sub-sectors within your market it helps to stay reasonably close to the markets you go to sleep and which know you. Moving into completely different markets, even if the product/service fit looks good, holds risks because this will be unknown territory for you, and almost certainly will hold working through new distribution channel, routes or partners. If you have good market share and good product/service range then pitiable into associated markets or segments is likely to be an attractive strategy.Diversification taking new products into new markets. This is extravagantly risk not only do you not know the products, but neither do you know the new market(s), and again this strategic option is likely to entail working through new distribution channels and routes to market. This sort of activity should generally be regarded as additional and supplementary to the core business activity, and should be rolled out carefully through blotto testing and piloting.Consider also your existing products and services themselves in terms of their market development opportunity and profit potential. Some will offer very high margins because they are relatively new, or specialised in some way, perhaps because of special distribution arrangements. Other products and services may be more mature, with little or no competitive advantage, in which case they will produce lower margins. The Boston Matrix is a useful way to understand and assess your different existing product and service opportunitiesboston matrix modelproduct/service develeopmentThe Boston Matrix model is a tool for assessing existing and development products in terms of their market potential, and thereby implying strategic action for products and services in each category.low market sharehigh market sharegrowing marketproblem child(rising) starmature marketdog cash in cowCash cow The quite a crude metaphor is based on the idea of milking the returns from previous investments which established good distribution and market share for the product. Products in this quadrant need livelihood and protection activity, together with good cost management, not growth effort, because there is little or no additional growth available.Dog This is any product or service of yours which has low market presence in a mature or stagnant market. There is no point in growth products or services in this quadrant. Many organizations discontinue products/services that they consider fall into this category, in which case consider potential impact on knock cost recovery. Businesses that have been starved or denied development find themselves with a high or enti re proportion of their products or services in this quadrant, which is plainly not very funny at all, except to the competitors.Problem child These are products which have a big and growing market potential, but existing low market share, normally because they are new products, or the application has not been spotted and acted upon yet. New business development andproject management principlesare required here to ensure that these products potential can be realised and disasters avoided. This is likely to be an area of business that is quite competitive, where the pioneers take the risks in the entrust of securing good early distribution arrangements, image, reputation and market share. Gross profit margins are likely to be high, but overheads, in the form of costs of research, development, advertising, market education, and low economies of scale, are normally high, and can cause initial business development in this area to be loss-making until the product moves into the rising s tar category, which is by no means assured many problem children products remain as such.rising star Or star products, are those which have good market share in a strong and growing market. As a product moves into this category it is commonly known as a rising star. When a market is strong and still growing, competition is not yet fully established. Demand is strong saturation or over-supply do not exists, and so determine is relatively unhindered. This all means that these products produce very good returns and profitability. The market is receptive and educated, which optimises selling efficiencies and margins. Production and manufacturing overheads are established and costs minimised due to high volumes and good economies of scale. These are great products and worthy of continuing investment provided good growth potential continues to exist. When it does not these products are likely to move down to cash cow status, and the company needs to have the next rising stars developin g from its problem children.After considering your business in terms of the Ansoff matrix and Boston matrix (which are thinking aids as much as anything else, not a magic solution in themselves), on a more detailed level, and for many businesses just as significant as the Ansoff-type-options, what is the significance of your major accounts do they offer better opportunity for growth and development than your ordinary business? Do you have a high quality, specialised offering that delivers better business benefit on a large scale as contend to small scale? Are your selling costs and investment similar for large and small contracts? If so you might do better concentrating on developing large major accounts business, rather than taking a sophisticated product or service solution to smaller companies which do not appreciate or require it, and cost you just as much to sell to as a large organization.Customer Matrix-This client matrix model is employ by many companies to understand an d determine strategies according to customer types.good productsnot so good productsgood customersdevelop and find more customers like these allocate your best resources to these existing customers and to potential customers matching this profileeducate and convert these customers to good products if beneficial to them, failing which, maintain customers via account managementnot so good customersinvest cautiously to develop and improve relationship, failing which, maintain customers via account managementassess feasibility of moving these customers left or up, failing which, withdraw from supplying sensitivelyAssessing product type is helped by reference to the Boston matrix model. There is a lot of flexibility as to what constitutes good and not so good customers use your own criteria. A good way to do this is to devise your own grading system utilise criteria that mean something to your own situation. Typical criteria are size, location, relationship, credit-rating and payment terms, is the customer growing (or not), the security of the supply contract, the service and support overhead required, and so on This kind of customer profiling tool and exercise is often overlooked, but it is a critical aspect of marketing and sales development, and of optimising sales effectiveness and business development operation and profitability. Each quadrant requires a different sales approach. The type of customer also implies the type of sales person who should be responsible for managing the relationship. A true view needs to be taken before committing expensive field-based sales resources to not so good customers. Focus prospect development (identifying and contacting new prospective customers) on the profile which appears in the top left quadrant. Identify prospective new customers who fit this profile, and allocate your business development resources (people and advertising) to this audience.Consider also What are your competitor weaknesses in terms of sectors, geographical territory and products or services, and how might these factors affect your options? Use for assessing each competitor as well as your own organization or department.Many organizations issue a marketing budget from the top down (a budget issued by the Centre/HQ/Finance Director), so to speak, in which case, what is your marketing budget and how can you use it to produce the best return on investment, and to help the company best to meet its overall business aims? Use the models described here to assess your best likely returns on marketing investment.The best way to begin to model and plan your marketing is to have a record of your historical (say last years) sales results (including selling and advertising costs if appropriate and available) on a spreadsheet.The level of detail is up to you new-fangled spreadsheets can organize massive amounts of information and make very complex analysis quick easy. Data is vital and will enable you to do most of the analysis you ne ed for marketing planning. In simple terms you can use last years results as a basis for planning and mold the next years sales, and the marketing expenditure and activities required to achieve them.Simple business plan or sales plan tools examples-These templates examples help the planning process. disordered and analyse your business or sales according to your main products/services (or revenue streams) according to the profit drivers or levers (variables that you can change which affect profit), eg., beat or volume, medium sales value or price, % arrant(a) margin or profit. Add different columns which reflect your own business profit drivers or levers, and to provide the most relevant measures.quantity score sales valueaverage value% crude(a) margintotal sales or gross marginproduct 1product 2product 3product 4totalsDo the same for each important aspect of your business, for example, fail by market sector (or segment)quantitytotal sales valueaverage value% gross margintotal sales or gross marginsector 1sector 2sector 3sector 4totalsAnd, for example, split by distributor (or route to market)quantitytotal sales valueaverage value% gross margintotal sales or gross margindistributor 1distributor 2distributor 3distributor 4totalsThese simple split analysis tools are an extremely effective way to plan your sales and business. Construct a working spreadsheet so that the bottom-right cell shows the total sales or gross margin, or profit, whatever you need to measure, and by changing the figures within the split (altering the mix, average prices, quantities, etc) you can carry out what if? analysis to develop the best plans.If you are a competent working with spreadsheets it is normally possible to assemble all of this data onto a single spreadsheet and then show different analyses by sorting and graphing according to different fields.When you are happy with the overall totals for the year, convert this into a phased monthly plan, with as many lines and column s as you need and are appropriate for the business. Develop this spreadsheet by showing inputs as well as sales outputs the quantifiable activity (for example, the numbers of enquiries necessary to produce the planned sales levels) required to produce the planned performance. Large businesses need extensive and multiple page spreadsheets. A business plan needs costs as well as sales, and will show profit as well as revenue and gross margin, but the principle is the same plan the detailed numbers and values of what the business performance will be, and what inputs are required for incorporating these factors and financials into a more formal phased business trading plan, which also serves as a business forecasting and reporting tool too. Adapt it to suit your purposes. This plan example is also available as a PDF, see The numbers could be anything ten times less, ten times more, a hundred times more the principle is the same.Consider also indirect activities that affect sales and b usiness levels, such as customer service. Identify key performance indicators here too, such as customer complaints solution and resolution levels and timescales. Internal lead referral schemes, strategic partnership activity the performance of other direct sales activities such as sales agencies, distributorships, export activities, licensing, etc. These performance factors wont normally appear on a business plan spreadsheet, but a separate plan should be made for them, other they wont happen.