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-date = 2019-12-03
-title = "The Ansoff Matrix"
-description = ""
-draft = false
-+++
-
-# 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"(2019).
-
-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(2019). 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 [Ansoff
-Matrix](https://en.wikipedia.org/wiki/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(2019).
-
-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.
-
-# 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(2019). 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(2019).
-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"(2019).
-
-## Product Development
-
-Product development uses existing markets to introduce new products so that the
-firm can better meet customer needs(2019). 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(2019).
-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(2019).
-
-## 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(2019).
-
-## 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 [paralysis by
-analysis](https://en.wikipedia.org/wiki/Analysis_paralysis) 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.