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diff --git a/blog/2019-12-03-the-ansoff-matrix.org b/blog/2019-12-03-the-ansoff-matrix.org deleted file mode 100644 index c791edd..0000000 --- a/blog/2019-12-03-the-ansoff-matrix.org +++ /dev/null @@ -1,135 +0,0 @@ -#+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.cleberg.net/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. |