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+#+date: 2019-12-03
+#+title: The Ansoff Matrix
+
+* Overview
+
+As the world of business evolves, managers must approach business planning and
+strategy with a contemporary mindset. According to Dess, McNamara, Eisner, and
+Lee, managers must be willing to adapt to the modern business environment by
+going beyond "'incremental management', whereby they view their job as making a
+series of small, minor changes to improve the efficiency of the firm's
+operations"[fn:1].
+
+One reason that strategic management is crucial is because most businesses that
+fail in the United States each year fail due to a lack of strategic focus or
+direction[fn:2]. The rate of failure for businesses with poor strategies shows
+that strategic planning and management are crucial to a business's strength and
+longevity, injecting the critical factors of growth and direction into a
+company's business plan.
+
+One of the most significant strategic planning and management frameworks that
+companies can use is the [[https://en.wikipedia.org/wiki/Ansoff_matrix][Ansoff Matrix]]. While this framework has unique purposes
+and use-cases, it can effectively help an organization grow and
+compete. Specifically, the Ansoff matrix is one of the most effective frameworks
+for companies who want to focus on increasing sales revenue or
+profitability[fn:3].
+
+This framework uses a two-by-two figure to show the four strategic options for
+companies to use in this framework: market penetration, market development,
+product development, and diversification (see *Figure 1*). The x-axis of the
+matrix focuses on the firm's markets and also determines if the firm is looking
+to enter new markets or innovate in its current markets. The y-axis of the
+matrix focuses on the firm's products and determines if the firm wants to pursue
+strategies around their existing products or explore new products.
+
+#+CAPTION: The Ansoff Matrix by JaisonAbeySabu, Own work, CC BY-SA 3.0
+[[https://img.0x4b1d.org/blog/20191203-the-ansoff-matrix/ansoff_matrix-min.png]]
+
+* Strategic Options
+
+** Market Penetration
+
+The most straightforward strategy in the Ansoff matrix is to focus on existing
+products in existing markets, also known as market penetration[fn:3]. Companies
+such as Coca-Cola have used market penetration successfully by investing a lot
+of money to get further value out of their current markets. Coca-Cola does this
+by introducing new features such as Christmas-themed bottles, personal names on
+the bottles, and other marketing schemes.
+
+** Market Development
+
+Market development extends existing products into new markets in an attempt to
+increase the number of buyers. One interesting way that Coca-Cola used this
+strategy comes from the stigma that Diet Coke is a woman's drink[fn:4]. Coca-Cola
+introduced Coca-Cola Zero, which contained the same nutritional content as Diet
+Coke, but was packaged in a dark black can to appear more "manly"[fn:4].
+
+** Product Development
+
+Product development uses existing markets to introduce new products so that the
+firm can better meet customer needs[fn:4]. The extreme end of diversification is
+home to companies such as Johnson & Johnson, a healthcare company that has
+developed a business portfolio of more than 60,000 different products[fn:5].
+Johnson & Johnson's dedication to continuous diversification has led them to a
+balance sheet rating of "AAA", industry recognition for diversification, and
+increases in their investor dividends for 57 consecutive years[fn:6].
+
+** Related Diversification
+
+Diversification, the final strategy of the Ansoff Matrix, is more difficult than
+the others since it involves exploring both new markets and new products.
+Related diversification is a diversification strategy that closely relates to
+the firm's core business. Coca-Cola's best example of related diversification is
+its acquisition of Glaceau and Vitamin Water, which expanded their drinking
+lines of business[fn:4].
+
+** Unrelated Diversification
+
+Unrelated diversification is a diversification strategy that does not really
+relate to the firm's core business but still diversifies their business
+portfolio. A good example of this would be a coffee company who has decided to
+enter the market for bicycle sales. The main purpose of this strategy is to an
+extremely diverse company that will not go bankrupt if one market goes through
+difficult times. However, this requires a lot of independent skills and heavy
+investments since the company most likely cannot easily transfer knowledge
+between the markets they compete in.
+
+* Requirements for Success
+
+To use the Ansoff Matrix framework, managers need to formulate corporate goals
+and objectives. Without goals and direction, management frameworks do not
+present much practical utility. Further, the Ansoff Matrix requires the managers
+involved to make tactical decisions and create a path for the company to take
+toward their goals. Lastly, both the Ansoff Matrix needs to consider both
+internal and external perspectives throughout the strategy formulation process.
+
+One interesting probability is that companies will be using multiple strategic
+planning and management frameworks at the same time. While this may sound like
+it could crowd the management process, there are numerous reasons to do so. For
+example, the Ansoff Matrix and the Balanced Scorecard are relatively popular,
+and they cover entirely different parts of a company's strategy. Using the 
+results from the Balanced Scorecard could inform a company of the potential 
+product and market demands, such as from customer or supplier survey results,
+to help the company determine which Ansoff Matrix strategy to pursue. 
+However, a combined approach at this level would require mature frameworks 
+and focused managers who are able to strategize at a high level.
+
+Lastly, it should be noted that the author of the Ansoff matrix, Igor Ansoff,
+often used the term [[https://en.wikipedia.org/wiki/Analysis_paralysis][paralysis by analysis]] to explain the mistake of companies
+who overuse analysis and spend too much time planning. Companies need to
+understand the utility of a strategic management framework while ensuring that
+the company is poised to execute as efficiently as they have planned.
+
+* Footnotes
+
+[fn:1]: Dess, G. G., McNamara, G., Eisner, A. B., Lee, S. H. (2019). Strategic 
+management: Text & cases, ninth edition. New York, NY: McGraw-Hill Education.
+
+[fn:2]: Juneja, P. (n.d.). Benefits of strategic management. Management Study 
+Guide. Retrieved from 
+https://www.managementstudyguide.com/strategic-management-benefits.htm.
+
+[fn:3]: Meldrum M., McDonald M. (1995) The Ansoff matrix. In: Key Marketing 
+Concepts. London: Palgrave.
+
+[fn:4]: Oakley, T. (2015). Coca-Cola: The Ansoff matrix. The Marketing Agenda. 
+Retrieved from 
+https://themarketingagenda.com/2015/03/28/coca-cola-ansoff-matrix/.
+
+[fn:5]: Lemke, T. (2019). The most diversified companies in the stock market. The 
+balance. Retrieved from 
+https://www.thebalance.com/the-most-diversified-companies-in-the-stock-market-4169730.
+
+[fn:6]: Johnson & Johnson. (2018). 2018 Investor Fact Sheet. [PDF file]. Retrieved
+from
+http://www.investor.jnj.com/\_document/2018-investor-fact-sheet-4-19'id=0000016a-5681-d475-a17f-d78db54a0000.